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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1998
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 33-6967
HALTER MARINE GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 75-2656828
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(STATE OR OTHER JURISDICTION OF INCORPORATION
OR ORGANIZATION) (IRS EMPLOYER IDENTIFICATION NO.)
13085 SEAWAY ROAD, GULFPORT, MISSISSIPPI 39503
(ADDRESS OF PRINICIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (228) 896-0029
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, $.01 par value American Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the
past 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 [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definite proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
The aggregate market value of the Common Shares held by nonaffiliates of the
Registrant as of June 1, 1998 was approximately $528,000,000 - based on the
closing price per share as reported by the American Stock Exchange.
Common Shares outstanding as of June 1, 1998: 28,823,158
Portions of the Proxy Statement with respect to the 1998 annual Meeting of
Shareholders are incorporated by reference in Part III, Items 10, 11, 12 and
13 of this report.
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PART I
ITEMS 1 AND 2: BUSINESS
GENERAL
Halter Marine Group, Inc. and subsidiaries (collectively, the "Company") is
a provider of design, construction, conversion, and repair services for
offshore drilling rigs, vessels, and engineered products servicing the
offshore energy, government and commercial markets. The Company, which
conducts its operations in three business segments (Vessels, Rigs, and
Engineered Products), meets its customer requirements through multiple
production facilities, and a current workforce of more than 7,400 skilled
craftsmen, engineers and administrative personnel.
Halter Marine Group, Inc. is a Delaware corporation incorporated on June 24,
1996 to serve as the parent of a new consolidated group. The Company formerly
conducted the business of construction, repair and conversion of primarily
ocean-going vessels for the governmental and commercial markets as a division
of Trinity Industries, Inc. ("Trinity"). On September 26, 1996, the Company
completed an initial public offering of 18.7% of its stock. On March 31, 1997,
Trinity distributed all of the remaining stock of the Company to its
stockholders.
OVERVIEW OF OPERATIONS
Vessels
The Company is the fourth largest shipbuilder, and the largest builder of
small to medium sized ocean-going vessels in the United States. The Company,
which has built more than 2,600 vessels in the past 40 years, specializes in
the new construction of vessels under 400 feet in length for the offshore
energy, government and commercial markets. The Company's Vessels segment
operates nine shipyards principally dedicated to the new construction of
marine vessels, although several of the Company's facilities also perform work
for the Rigs and Engineered Products segments. All of the Company's new vessel
construction yards are strategically located along the Gulf Coast in Florida,
Mississippi and Louisiana. The Company's multiple shipyards employ advanced
manufacturing techniques, including modular construction and zone outfitting
methods, and provide the Company significant flexibility and efficiency in
manufacturing a wide variety of vessels. The Company believes that these
factors, together with its large and experienced engineering team and work
force, position it to be a versatile and cost efficient domestic shipbuilder.
The Company also is a provider of repair and conversion services for small
to medium-sized ocean-going vessels and barges that service the offshore
energy and commercial markets. The Company operates six shipyards along the
Gulf Coast from Louisiana to Texas dedicated to the repair and conversion of
vessels and barges.
Rigs
As a result of the acquisition of Texas Drydock, Inc. ("TDI") which was
completed in May 1997 (the "TDI Acquisition"), the Company became a leading
industry participant providing new construction, conversion and repair
services for mobile offshore rigs in the drilling industry. The Company
operates six shipyards in southeast Texas where it performs repair and
conversion work on jackup, submersible and semi-submersible drilling rigs. In
connection with TDI's acquisition of Trinity Marine Orange, Inc. in May 1998,
the Company acquired a facility in Orange, Texas that will be dedicated to the
construction of new offshore rigs. In addition to the yards dedicated to the
Rigs segment, facilities in the Vessels segment also support the fabrication
requirements of the Rigs segment.
Engineered Products
The Company entered the engineered products market during fiscal 1998 with
the acquisitions of AmClyde Engineered Products, Inc., Utility Steel
Fabrication, Inc., Fritz Culver, Inc., and McElroy Machine & Manufacturing
Co., Inc. These companies, which now comprise the newly-formed Engineered
Products Group, design, manufacture and market cranes, derricks, winches,
hoists, windlasses, jacks, linear winches, fairleads, capstans, tuggers,
locking devices, turret bearings, control systems, and other related products
used in the marine, offshore and construction industries. The companies
comprising the Engineered Products Group have an international reputation as
designers and builders of the world's largest cranes, mooring systems, and
towing winches.
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BUSINESS STRATEGY
The Company's strategy is to position itself as a cost efficient marine
manufacturer, making it a low-cost provider of a wide variety of products to
diversified global markets. The Company has taken steps to increase the number
of products and services it offers to the offshore energy industry through
internal growth, acquisitions, and international expansion and it plans to
continue to provide products and services for government and commercial
customers. The Company intends to consider, in the future, business
opportunities that it believes promote this business strategy.
ACQUISITIONS
Since its separation from Trinity, the Company has acquired, through either
stock or asset purchase, 10 companies including the acquisition of Trinity
Marine Orange, Inc. in May 1998. The aggregate purchase price for acquisitions
was approximately $152 million, of which approximately $109 million was paid
in cash and the balance in approximately 1,135,000 shares of the Company's
common stock. These acquisitions are described below.
TDI Acquisition
On April 4, 1997, the Company acquired a 51% interest in Texas Drydock, Inc.
("TDI") and obtained an option to acquire the remaining 49% of the company, a
provider of new construction, modification and repair services for mobile
offshore rigs used for oil and gas drilling and production. On May 16, 1997,
the Company acquired the remaining 49% interest in TDI.
In connection with the TDI Acquisition, the Company entered into various
consulting agreements and employment agreements with certain officers of TDI.
Rick S. Rees and Don O. Covington became executive officers of the Company.
See "Management--Directors and Executive Officers."
McDermott Acquisitions
In June 1997, the Company acquired from McDermott International, Inc.
("McDermott") two shipyard properties near the Company's existing Gulfport,
Mississippi facility, now operated as part of the Gulfport facility, which are
used to build components for various vessels. In July 1997, the Company
acquired from McDermott a third shipyard in Sabine Pass, Texas which is now
dedicated to the conversion and repair of mobile offshore rigs.
Bludworth Bond Acquisition
In August 1997, the Company acquired all of the outstanding stock of
Bludworth Bond Shipyard, Inc. ("Bludworth Bond"), which owns and operates two
Texas shipyards specializing in drydock and dockside repair and conversion of
vessels and barges. The Company believes that the acquisition of Bludworth
Bond has enhanced the Company's presence in the vessel repair and conversion
market.
Engineered Products Group Acquisitions
In October and December, 1997, the Company acquired four companies that
formed the basis for its Engineered Products Group: AmClyde Engineered
Products, Inc. of St. Paul, Minnesota; Utility Steel Fabrication, Inc. of
Slidell, Louisiana; Fritz Culver, Inc. of Covington, Louisiana; and McElroy
Machine & Manufacturing Co., Inc. of Gulfport, Mississippi. These companies
design, manufacture and market cranes, derricks, winches, fairleads, capstans,
tuggers, locking devices, turret bearings, control systems, and other related
products used in the marine, offshore and construction industries.
Calcasieu Shipyard Acquisition
In February 1998, the Company acquired all of the outstanding capital stock
of three companies comprising the operations of Calcasieu Shipyard
("Calcasieu") of Sulphur, Louisiana. Calcasieu is a full-service shipyard
providing repair and conversion services, vessel and barge gas freeing and
cleaning services, and specialized new construction.
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Trinity Marine Orange, Inc. Acquisition
On May 29, 1998, the Company acquired all of the outstanding common stock of
Trinity Marine Orange, Inc. ("Orange") of Orange, Texas. Orange is an 88-acre
facility on the deep water Sabine River channel. The facility will be used to
build mobile offshore drilling and production units as well as components for
rigs under construction at other Company shipyards.
PRODUCTS AND MARKETS
The Company specializes in the construction, repair, and conversion of a
wide variety of vessels, rigs and engineered products for government, energy,
commercial and other markets as described below. See Part II, Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for further information regarding offshore vessels, mobile
offshore rigs, and engineered products. See Part II, Item 8, "Financial
Statements and Supplementary Data," Note 8 for additional financial
information regarding the Company's business segments.
Vessels
The Company's Vessels segment builds small to medium sized ocean-going
vessels for a wide variety of customers including offshore energy service
companies (including offshore support vessels (OSV's) and double hull fuel
barges), domestic and foreign governments (including oceanographic research
and survey ships, high speed patrol boats and ferries), and other commercial
enterprises (including tug boats, tow boats and offshore barges). In addition,
the Company builds luxurious megayachts under the name "Trinity Yachts."
The Company also provides a wide variety of repair and conversion services
for vessels and barges that service the offshore energy and commercial
markets.
Revenue from vessels amounted to $476 million in fiscal 1998, and at March
31, 1998 the Company's construction backlog for vessels was $529 million or
65% of total backlog.
Rigs
The Company's Rigs segment engages in the construction, conversion and
repair of mobile offshore rigs for drilling companies servicing the offshore
energy industry. Services provided include converting jackup drilling rigs
from a slot design to a cantilever design, lengthening legs on jackup drilling
rigs, conversion of jackup drilling rigs into production units, conversion of
submersible rigs into deepwater semi-submersible rigs and conversion of early
generation semi-submersible rigs to provide the enhanced capabilities
associated with later generation semi-submersible rigs.
Revenue from mobile offshore rigs was $160 million in fiscal 1998, and at
March 31, 1998 the Company's rig backlog was $229 million or 28% of total
backlog.
Engineered Products
The Company's Engineered Products segment designs, manufactures and markets
cranes, derricks, winches, hoists, windlasses, jacks, linear winches,
fairleads, capstans, tuggers, locking devices, turret bearings, control
systems, and other related products used in the marine, offshore and
construction industries. Brand names include American, AmClyde, Clyde, Wiley,
Lucker, Sauerman, Unit Mariner, J & B, McElroy, Fritz Culver, and Hepburn.
Revenue from engineered products, included from the dates of acquisition,
was $34 million in fiscal 1998, and at March 31, 1998, the Company's
engineered products backlog was $60 million or 7% of total backlog.
OPERATIONS
The Company conducts its new construction operations for vessels and rigs at
10 shipyards located along the Gulf Coast. The Company's new construction
shipyards employ advanced manufacturing techniques, including modular
construction methods,
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advanced welding techniques, panel line fabrication, computerized plasma arc
metal cutting and automated sandblasting and painting. The Company conducts
its vessel and rig repair and conversion operations at 12 shipyards which
utilize 18 dedicated drydocks, including one of only two drydocks in the
United States capable of docking large semi-submersible rigs. The Company's
multiple shipyards, combined with its large engineering team, provide
significant flexibility in the construction, repair and conversion of a wide
variety of vessels. The Company believes that, together with its skilled and
experienced work force, it is positioned to be a versatile and cost efficient
domestic shipbuilder. In addition to its domestic operations, the Company's
operations include four international ventures in Bahrain, Argentina, China,
and the Philippines.
The Company's shipyards are well-maintained facilities. The Company spent
approximately $36 million on capital improvements for its existing shipyard
facilities during fiscal 1998, and has budgeted approximately $47 million for
capital improvements (excluding acquisitions) for these facilities during
fiscal 1999.
The Company's Engineered Products Group conducts its operations at six
office facilities and four manufacturing facilities.
ENGINEERING
Engineering is a key component of the products and services offered by the
Company. The Company maintains a large engineering department which has been
instrumental in helping it maintain its reputation as an innovative
shipbuilder. The Company's engineering force consists of approximately 225
employees, 107 of whom are engineers or naval architects. In addition, the
Company has an arrangement with Zentech Consulting Engineers, a firm in which
the Company owns a minority interest, under which Zentech has agreed to
provide consulting services for construction, conversion and repair of mobile
offshore rigs. On occasion, the Company subcontracts to other engineering
firms some of its engineering requirements.
MATERIALS AND SUPPLIES
The principal materials used by the Company in its shipbuilding, conversion
and repair, and engineered products businesses are standard steel shapes,
steel plate and paint. Other materials used in large quantities include
aluminum, steel pipe, electrical cable and fittings. The Company also
purchases component parts such as propulsion systems, boilers, generators and
other equipment. All of these materials and parts are currently available in
adequate supply from domestic and foreign sources. The Company's Equitable and
Gulfport shipyards are located on rail lines and typically obtain materials
and supplies by rail, truck or barge. The remainder of the Company's shipyards
ordinarily obtain materials and supplies by truck. The Company seeks to obtain
favorable pricing and payment terms for its purchases by coordinating
purchases among all of its shipyards and buying in large quantities. The
Company has not engaged, and does not presently intend to engage, in hedging
transactions with respect to its purchase requirements for materials.
Management believes that the Company will continue to be able to obtain steel
at relatively favorable prices.
In addition to the above materials, the Company's Engineered Products
segment uses machined steel castings, hydraulic cylinders and electrical
control systems that are available on an international basis. The worldwide
sourcing of these materials minimizes the reliance on any one geographic
region.
SALES AND MARKETING
The Company's marketing efforts for its Vessels segment are coordinated at
the Company's headquarters in Gulfport, Mississippi. The Company coordinates
the efforts of its Rigs segment from a sales office in Houston, Texas. The
Engineered Products segment conducts its sales efforts from St. Paul,
Minnesota with satellite offices in Houston, Texas, Metairie, Louisiana, and
Slidell, Louisiana. The Company's sales and marketing force consists of
approximately 68 employees. The Company has contractual arrangements in
certain countries to assist it with its international marketing efforts.
COMPETITION
The Company's Vessels segment competes for domestic commercial shipbuilding
contracts principally with six to 10 U.S. shipbuilders based in the United
States. The number and identity of competitors on particular projects vary
greatly, depending
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upon the type of vessel and size of project. The Company competes for foreign
commercial shipbuilding contracts principally with numerous shipyards based
outside the United States, many of which are heavily subsidized by their
governments.
The Company's Rigs segment has two principal domestic competitors for the
conversion and repair of mobile offshore rigs that operate in the Gulf of
Mexico and at least three domestic competitors for the new construction of
rigs. In international markets, the Company primarily competes with at least
two additional companies located in Europe and in the Far East.
The Company's Engineered Products segment competes primarily with five
domestic and four foreign manufacturers in the market for offshore marine
cranes, and with three domestic and two foreign companies in shipyard gantry
cranes. The competition for mooring systems and deck equipment includes
approximately five domestic and eight foreign suppliers. In addition, there
are several other companies, both domestic and foreign, which occasionally
compete in the engineered products market.
CONTRACT STRUCTURE AND PRICING
The Company's contracts are generally obtained through a competitive bid
process. Most of the contracts for new construction executed by the Company,
whether commercial or governmental, are fixed-price contracts under which the
Company retains all cost savings on completed contracts but is also liable for
the full amount of all cost overruns. A limited number of the Company's
contracts with the U.S. Navy are fixed-price incentive contracts, which
provide for sharing between the government and the Company of cost savings and
cost overruns based primarily on a specified formula that compares the
contract target cost with actual cost. In addition, such fixed-price incentive
contracts generally provide for payment of escalation of costs based on
published indices relating to the shipbuilding industry. Although all cost
savings are shared under fixed-price incentive contracts, costs overruns in
excess of a specified amount must be borne entirely by the Company. Under
government regulations, certain costs, including certain financing costs,
portions of research and development costs and certain marketing expenses, are
not allowable costs under fixed-price incentive contracts. The Company's only
current U.S. Navy fixed-price incentive contracts relate to two oceanographic
survey and research ships.
Contracts with the U.S. Navy are subject to termination by the government
either for its convenience or upon default by the Company. If the termination
is for the government's convenience, the contracts provide for payment upon
termination for items delivered to and accepted by the government, payment of
the Company's costs incurred plus the costs of settling and paying claims by
terminated subcontractors, other settlement expenses and a reasonable profit.
The Company's contracts for repair and conversion services include both
fixed price and time and materials contracts. Time and materials contracts are
based on the Company's costs for labor and materials plus a specified profit
percentage.
INSURANCE
The Company's activities involve the fabrication and refurbishment of large
steel structures, the operation of cranes and other heavy machinery and other
operating hazards that can cause personal injury or loss of life, severe
damage to and destruction of property and equipment and suspension of
operations. The Company maintains insurance against such hazards as it
considers economically prudent. The Company also maintains general liability
and product liability insurance in amounts it deems appropriate for the
Company's business.
Some of the Company's contracts require a performance bond. The Company has
arranged a facility with a group of insurance companies to provide these bonds
when required.
EMPLOYEES
As of March 31, 1998, the Company had 6,744 employees of whom 1,140 were
salaried and 5,604 were employed on an hourly basis. None of the Company's
employees is represented by any collective bargaining unit. Total employees at
March 31, 1998 included contract labor of approximately 800 employees.
REGULATION
Environmental Regulation
The Company is subject to extensive and changing environmental laws,
including laws and regulations that relate to air and water quality, impose
limitations on the discharge of pollutants into the environment and establish
standards for the treatment,
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storage and disposal of toxic and hazardous wastes. Stringent fines and
penalties may be imposed for non-compliance with these environmental laws.
Additionally, these laws require the acquisition of permits or other
governmental authorizations before undertaking certain activities, limit or
prohibit other activities because of protected areas or species and impose
substantial liabilities for pollution related to Company operations or
properties. The Company's operations are potentially affected by the federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended ("CERCLA"). CERCLA (also known as the "Superfund" law) imposes
liability (without regard to fault) on certain categories of persons for
particular costs related to releases of hazardous substances at a facility
into the environment that causes natural resource damages. Because the Company
and previous owners and operators have conducted industrial operations at some
of the Company's properties for many years, various materials from these
operations might have been disposed of at such properties. This could result
in obligations under Environmental Laws, such as requirements to remediate
environmental impacts. In addition, the Company performs tank cleaning and
gas-freeing operations at its Gretna and Calcasieu facilities that involve
removal of residual fumes from vapor spaces in barges. There are risks
associated with the operation, including possible explosion and emission of
hazardous substances to the environment. The Company has taken actions deemed
by it to be appropriate to minimize these risks.
The federal Resource Conservation and Recovery Act ("RCRA") and similar
state laws regulate the generation, treatment, storage, disposal, and other
handling of solid wastes, with the most stringent regulations applying to
solid wastes that are considered hazardous wastes. RCRA also may impose
stringent requirements on the closure, and the post-closure care, of
facilities where hazardous waste was treated, disposed of or stored. The
Company generates solid waste, including hazardous and non-hazardous waste, in
connection with its routine operations. Management believes that the Company's
wastes are handled properly under RCRA.
Amendments to the federal Clean Air Act in 1990 resulted in numerous changes
which the Environmental Protection Agency and similar state agencies fully
implemented by regulations. The Company does not expect these Clean Air Act
amendments to result in material expenses at its properties, but the amount of
increased expenses, if any, resulting from such amendments is not presently
determinable.
Health and Safety Matters
Laws and regulations, including the federal Occupational Safety and Health
Act, relating to worker health and workplace safety govern the Company's
facilities and operations. The Company believes that appropriate precautions
are taken to protect employees and others from workplace injuries and harmful
exposure to materials handled and managed at its facilities.
Jones Act
The Jones Act requires that all vessels transporting products between U.S.
ports must be constructed in U.S. shipyards, owned and crewed by U.S. citizens
and registered under U.S. law, thereby eliminating competition from foreign
shipbuilders with respect to vessels to be constructed for the U.S. coastwise
trade. Many customers elect to have vessels constructed at U.S. shipyards,
even if such vessels are intended for international use, in order to maintain
flexibility to use such vessels in the U.S. coastwise trade in the future. In
1996 a legislative bill seeking to substantially modify the provisions of the
Jones Act mandating the use of ships constructed in the United States for U.S.
coastwise trade was introduced in Congress; however it did not pass. Similar
bills seeking to rescind or substantially modify the Jones Act and eliminate
or adversely affect the competitive advantages it affords to U.S. shipbuilders
have been introduced in Congress from time to time and are expected to be
introduced in the future. Any recission or material modification of the Jones
Act could adversely affect the Company's future prospects because many foreign
shipyards with which the Company competes are heavily subsidized by their
governments.
OPA '90
Demand for double hull carriers has been created by the Oil and Pollution
Act of 1990 ("OPA '90"), which generally requires U.S. and foreign vessels
carrying fuel and certain other hazardous cargos and entering U.S. ports to
have double hulls by 2015. OPA '90 established a phase-out schedule that began
January 1, 1995 for all existing single hull vessels based on the vessel's age
and gross tonnage. The Company estimates that OPA '90 will require 66 barges
engaged in domestic trade to be retrofitted or replaced by 2005 and another 22
such barges to be retrofitted or replaced by 2010.
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Title XI Loan Guarantee Amendments and OECD
In late 1993, Congress amended the loan guarantee program under Title XI of
the Merchant Marine Act of 1936 ("MARAD"), to permit MARAD to guarantee loan
obligations of foreign vessel owners who construct new vessels in the United
States. As a result of these amendments, MARAD was authorized to guarantee
loan obligations of foreign owners for foreign-flagged vessels that are built
in U.S. shipyards on terms generally more advantageous than available under
guarantee or subsidy programs of foreign countries. Under the OECD Accord,
which was negotiated in December 1994, among the United States, the European
Union, Finland, Japan, Korea, Norway and Sweden (which collectively control
over 75% of the market share for worldwide vessel construction), the Title XI
guarantee program will be required to be amended, once the OECD Accord is
ratified by the United States, to eliminate the competitive advantages
provided by the 1993 amendments to Title XI. In December 1995, a subcommittee
of the Ways and Means Committee of the U.S. House of Representatives passed a
bill providing for the implementation of the OECD Accord and elimination of
the competitive advantages provided by the 1993 amendments to Title XI. To
date, such bill has not been approved by either the U.S. House of
Representatives or the U.S. Senate. If the OECD Accord is ratified by the U.S.
(the only remaining party to the OECD Accord that has not yet ratified the
OECD Accord), the OECD Accord would virtually eliminate all direct and
indirect governmental shipbuilding subsidies by the party nations. Despite the
fact that the OECD Accord will require the elimination of the competitive
advantages provided to U.S. shipbuilders by the 1993 amendments to Title XI,
management believes that the OECD Accord should significantly improve the
ability of U.S. shipbuilders to compete successfully for international
commercial contracts with foreign shipbuilders, many of which currently are
heavily subsidized by their governments. Governmental subsidies to foreign
shipbuilders currently range up to 19% of the vessel construction cost.
FORWARD-LOOKING STATEMENTS AND FACTORS AFFECTING FUTURE PERFORMANCE
All statements (other than statements of historical fact) contained in the
Company's Annual Report, including the President's Letter to Stockholders and
in this Form 10-K, including statements in Item 7, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" concerning the
Company's financial position and liquidity; results of operations; prospects
for commercial or government contracts; ability to take advantage of new
vessel construction and conversion opportunities; labor supply and costs;
selling, general and administrative costs; and other matters, are forward-
looking statements. Forward-looking statements in this document generally are
accompanied by words such as "anticipate," "believe," "estimate" or "expect"
or similar words or phrases. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable; no
assurance can be given that such expectations will prove correct. Certain of
the factors that could cause the Company's results to differ materially from
the results discussed in such forward-looking statements are discussed below.
All forward-looking statements in this document are expressly qualified in
their entirety by the cautionary statements in this paragraph, and by the
following discussion.
Competition
The shipbuilding and offshore rig construction and conversion industries are
highly competitive. During the 1990's the U.S. shipbuilding industry has been
characterized by substantial excess capacity because of the significant
decline in U.S. Navy shipbuilding spending and the difficulties experienced by
U.S. shipbuilders in competing successfully for international commercial
projects against foreign shipyards, many of which are heavily subsidized by
their governments. As a result of these factors, competition by U.S.
shipbuilders for domestic commercial projects has increased significantly.
Such increased competition has resulted in substantial pressure on pricing and
profit margins.
Dependence on Individual Customers
Revenue derived from the construction of U.S. Navy vessels accounted for
approximately 17.1%, 37.4%, and 47.3% of the Company's consolidated revenue in
fiscal 1998, 1997, and 1996, respectively. There can be no assurance that the
Company will be successful in obtaining new U.S. Navy contracts, all of which
are competitively bid.
Revenue derived from one customer for offshore support vessels accounted for
approximately 11% of the Company's consolidated revenue in 1998. Revenue
generated from this customer during fiscal 1997 and 1996 comprised less than
10% of the Company's revenue. There can be no assurance that the Company will
be successful in obtaining new contracts with this customer, all of which are
competitively bid.
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Conditions in the Offshore Oil and Gas Industry
A significant portion of the Company's current contracts relate to the
construction of offshore support vessels, and the construction, repair and
conversion of mobile offshore rigs and equipment for vessels, rigs and
offshore construction. Customer demand for offshore support vessels, mobile
offshore rigs, and some of the Company's engineered products is dependent
upon, among other things, the level of activity in offshore oil and gas
exploration, development and production, particularly in the Gulf of Mexico
where many of the offshore support vessels manufactured by the Company and the
substantial majority of the mobile offshore rigs modified or repaired by the
Company have been put into service. The level of activity in offshore oil and
gas exploration, development and production is affected by such factors as
prevailing oil and gas prices, expectations about future prices, the cost of
exploring for, producing and delivering oil and gas, the sale and expiration
dates of available offshore leases, the discovery rate of new oil and gas
reserves in offshore areas, local and international political and economic
conditions, technological advances and the ability of oil and gas companies to
generate or otherwise obtain funds for capital expenditures. Although the
Company believes there will be an increase in demand for offshore support
vessels and mobile offshore rigs, the Company cannot predict future levels of
activity in offshore oil and gas exploration, development and production.
Availability of Shipyard Workers
While the Company's shipyards are not currently experiencing severe labor
shortages, shortages of skilled labor could limit the Company's ability to
increase production to an extent that the Company might otherwise desire. No
assurances can be given regarding whether severe shortages will be experienced
at one or more of the Company's shipyards in future.
Integration of Acquisitions and Management of Growth
The Company's growth strategy has emphasized the acquisition of other
offshore marine construction businesses and assets. There can be no assurance,
however, that the Company will be able to continue to identify attractive
acquisition opportunities, acquire additional companies on favorable terms and
conditions or successfully acquire identified targets. In addition, no
assurance can be given that the Company will be successful in integrating
those businesses already acquired into its existing operations, and such
integration may result in unforeseen operational difficulties or require a
disproportionate amount of management's attention. Furthermore, there can be
no assurance that competition for acquisition opportunities in the industry
will not escalate, thereby increasing the cost to the Company of making
further acquisitions or causing the Company to refrain from making further
acquisitions.
Contract Bidding Risk
Most new construction contracts entered into by the Company, whether
governmental or commercial, are fixed priced contracts under which the Company
retains all cost savings on completed contracts but is also liable for the
full amount of all cost overruns. Although the Company attempts to anticipate
any increases through its estimation process which would be reflected in the
contract's pricing, there can be variation in the total costs as estimated and
the total costs as realized based upon a number of factors, including changing
job conditions, variations in labor and equipment productivity and
inefficiencies due to other work under construction during the life of the
contract. Depending on the nature and size of the fixed price contract,
variations from estimated contract performance could have a significant effect
on the Company's operating results in any particular fiscal quarter or year.
Many of the Company's contracts contain provisions requiring the payment by
the Company of liquidated damages in the event that the Company fails to meet
specified performance deadlines. There can be no assurance that the Company
will not be required to make payments under such liquidated damage provisions
or that the requirement to make such payments will not have a material adverse
effect on the Company's operating results.
Percentage of Completion Accounting
The Company uses the percentage of completion method to account for its new
construction contracts in process. Under the percentage of completion method,
revenue from contracts is measured by the percentage of labor hours incurred
as compared to estimated total labor hours for each contract. The timing of
recognition of revenues and expenses for financial reporting purposes may
differ materially from the timing of actual cash flows from contract payments
received and expenses paid. Provisions for
9
<PAGE>
estimated losses on uncompleted contracts are made in the period in which such
losses are determined. To the extent that such provisions result in a loss or
a reduction or elimination of previously reported profits with respect to a
project, the Company would recognize a charge against earnings for the total
amount of the expected loss, which could be material.
Backlog
The Company's backlog of new construction projects for vessels, rigs and
engineered products includes only the remaining contract values not previously
recognized as revenue in any prior accounting period for signed contracts on
which the Company has received a down payment. In many cases the amounts
included in backlog for the Company's rig conversion and repair contracts are
management's estimate of the total remaining contract values of such jobs.
Many of the Company's rig repair and conversion contracts are a combination of
fixed price, time and materials and unit pricing. To the extent that contracts
have a time and materials or unit pricing component, management estimates the
remaining value of such work to be performed. If management's estimates of the
remaining value is incorrect, amounts included in the Company's backlog could
increase or decrease.
Dependence on Key Personnel
The Company believes that its success to date is attributable to, and its
future performance will depend to a significant extent upon, the efforts and
abilities of John Dane III, the Company's Chairman, President and Chief
Executive Officer and its other current executive officers. Additionally, John
Dane III and Daniel J. Mortimer, the Company's Chief Operating Officer, have
entered into noncompetition agreements with the Company. In connection with
the TDI acquisition and certain of the assets of AmClyde Engineered Products,
Inc., the Company entered into employment agreements with the chief executive
officers of each of the respective companies.
PROPERTIES
Corporate Headquarters
The Company's corporate headquarters is located in Gulfport, Mississippi, at
the same site as the Company's Gulfport shipyard, in two buildings that,
together, occupy approximately 54,660 square feet of office space.
Vessels and Rigs
The Company's Vessels segment headquarters is located within the Company's
corporate headquarters in Gulfport, Mississippi. The engineering headquarters
for the Vessels segment is located one-half mile from the corporate
headquarters and contains approximately 33,600 square feet of office space,
including a separate secure space for classified work. The Vessels segment
operates nine shipyards principally dedicated to the new construction of
marine vessels, although several of these facilities also perform work for the
Rigs and Engineered Products segments. The Vessels segment operates six
shipyards dedicated to the repair and conversion of vessels and barges.
10
<PAGE>
The Company's Rigs segment is headquartered from offices located at one of
its shipyards in Orange, Texas. The Rigs segment operates six shipyards where
it performs repair and conversion work on jackup, submersible and semi-
submersible drilling rigs. With the acquisition of Trinity Marine Orange,
Inc., in May 1998, the Rigs segment acquired a seventh facility that will be
dedicated to the construction of new offshore rigs. In addition to the yards
dedicated to the Rigs segment, facilities included in the Vessels segment also
support the fabrication requirements of the Rigs segment.
The principal shipyards dedicated to new construction within the Vessels and
Rigs segments are summarized in the table below.
Shipyards Dedicated to New Construction:
<TABLE>
<CAPTION>
COVERED
FABRICATION AREA OWN OR EXPIRATION
PROPERTY NAME AND LOCATION (SQUARE FOOTAGE) LEASE DATE
-------------------------- ---------------- ------ ----------
<S> <C> <C> <C>
Vessels Segment
Equitable and Trinity Yachts Shipyards
New Orleans, Louisiana...................... 225,000 Lease 2016
Halter Moss Point Shipyard
Moss Point, Mississippi..................... 121,665 Own --
Lockport Shipyard
Lockport, Louisiana......................... 97,000 Own --
Moss Point Marine Shipyard
Escatawpa, Mississippi...................... 75,000 Own --
Gulfport Shipyard
Gulfport, Mississippi....................... 554,500 Own --
Panama City Shipyard
Panama City, Florida........................ 35,000 Own --
Gulf Coast Fabrication Shipyard
Pearlington, Mississippi.................... 15,000 Own --
Pascagoula Shipyard
Pascagoula, Mississippi..................... 142,000 Own --
Rigs Segment
TDI-Halter Orange Shipyard
Orange, Texas............................... 600,000 Own --
</TABLE>
11
<PAGE>
The principal shipyards dedicated to repair and conversion within the
Vessels and Rigs segments are summarized in the table below.
Shipyards Dedicated to Conversion and Repair:
<TABLE>
<CAPTION>
DRYDOCK FEATURES
-------------------------------------
MAXIMUM
NUMBER MAXIMUM LIFTING VESSEL OWN OR EXPIRATION
PROPERTY NAME AND LOCATION ACREAGE DRYDOCKS CAPACITY (TONS) WIDTH (FEET) LEASE DATE
- -------------------------- ------- -------- --------------- ------------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Vessels
Gretna Shipyard
Harvey, Louisiana...... 30 -- -- -- Own --
Halter Gulf Repair
Shipyard
New Orleans, Louisiana. 59 5 22,400 120 Own --
TDI-Halter Pier 1
Shipyard
Orange, Texas.......... 4 1 10,000 126 Lease Monthly
Bludworth Bond--Houston
Shipyard
Houston, Texas......... 4 4 2,000 65 Own --
Bludworth Bond--Texas
City Shipyard
Texas City, Texas...... 8 3 1,800 84 Own --
Halter-Calcasieu Shipyard
Sulphur, Louisiana..... 20 3 2,450 64 Own --
Rigs
TDI-Halter Childers Road
Orange, Texas.......... 9 -- -- -- Lease 2,000
TDI-Halter-North Yard
Port Arthur, Texas..... 17 -- -- -- Own --
TDI-Halter Dock Yard
Port Arthur, Texas
--Ship Mode........ 100 1 64,000 122 Lease 2,009
--Rig Mode......... 100 1 64,000 363
TDI-Halter Central Yard
Sabine Pass, Texas..... 32 -- -- -- Own --
TDI-Halter Sabine Yard
Sabine Pass, Texas..... 34 -- -- -- Own --
TDI-Halter South Yard
Sabine Pass, Texas..... 21 -- -- -- Own --
</TABLE>
Engineered Products
The Engineered Products Group headquarters in St. Paul, Minnesota is located
in two buildings that, together, occupy 47,000 square feet. The Engineered
Products Group also operates small sales offices in Houston, Texas, Metairie,
Louisiana, and Slidell, Louisiana.
The Company's Engineered Products segment utilizes four plants to
manufacture winches, cranes, mooring systems, jacks, locking devices,
windlasses, capstans, tuggers and other related products used in the marine,
offshore and construction industries. These manufacturing plants are
summarized in the table below.
<TABLE>
<CAPTION>
COVERED
FABRICATION AREA OWN OR EXPIRATION
PROPERTY NAME AND LOCATION (SQUARE FOOTAGE) LEASE DATE
-------------------------- ---------------- ------ ----------
<S> <C> <C> <C>
Engineered Products
Gulf Coast Manufacturing
Division (2 Locations)
Slidell, Louisiana.......................... 155,000 Own --
Covington Manufacturing Division
Covington, Louisiana........................ 46,000 Own --
Gulfport Manufacturing Division
Gulfport, Mississippi....................... 30,000 Own --
</TABLE>
12
<PAGE>
ITEM 3: LEGAL PROCEEDINGS
The Company is involved in various claims and lawsuits incidental to its
business. In the opinion of management, these claims and suits in the aggregate
will not have a material adverse effect on the Company's business, financial
condition, results of operations or liquidity.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of fiscal 1998.
ITEM 4A: EXECUTIVE OFFICERS OF THE REGISTRANT
Executive Officers of the Company
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------------------------------------------
<C> <C> <S>
John Dane III............... 47 Chairman, President and Chief Executive
Officer since September 1996. President of
the Company since 1987. Employed 1987.(1)
Daniel J. Mortimer.......... 51 Executive Vice President and Chief Operating
Officer since November 1997, Senior Vice
President of Operations from November 1994
until May 1996.(1) Director since April
1997. President of Gulf Coast Industries,
Inc. since 1988. Chairman and President of
Gulf Coast Fabrication, Inc., which was
acquired by the Company in 1994, from 1981
to 1994. Employed 1997.
Rick S. Rees................ 45 Executive Vice President since April 1997.
Director since September 1996. Chief
Financial Officer since November 1997.
President, Maritime Holdings, Inc. from
September 1996 to April 1997. President
Maritime Capital Corporation, 1989 to 1996.
Employed 1997.
Richard T. McCreary......... 42 Senior Vice President, Administration since
April 1997. From April 1995 to 1997,
President Gulf Division, Maritrans Operating
Partners. From 1990 to 1995 Vice President
Operations, Canal Barge Company, Inc.
Employed 1997.
Keith L. Voigts............. 54 Senior Vice President, Chief Accounting
Officer and Treasurer since November 1997.
Senior Vice President and Chief Financial
Officer from April-November 1997. Vice
President-Finance 1995 to 1996. Chief
Financial Officer, Healthcare
Communications, Inc. 1994 to 1995. From 1991
to 1994 owner of the KLV Group, an
accounting, consulting and investments firm.
Employed 1995.(1)
Maureen O'Connor Sullivan... 49 Senior Vice President, General Counsel and
Secretary since August 1997. In private
practice with the McGlinchey Stafford law
firm from 1979 to 1997, partner since 1984,
specializing in business law and commercial
litigation. Managing partner of the firm's
Dallas office and member of its Management
Committee from 1989 to 1997. Employed 1997.
Don O. Covington............ 63 Group President--TDI-Halter since April
1997. From 1986 to 1997, President and Chief
Executive Officer of Texas Drydock, Inc.,
which was acquired by the Company in 1997.
Employed 1997.
Richard J. Juelich.......... 47 Group President--Engineered Products Group
since April 1998. From 1995 to 1997,
President of AmClyde Engineered Products,
which was acquired by the Company in 1997.
Chief Operating Officer of AmClyde
Engineered Products since 1992. Employed
1997.
</TABLE>
- --------
(1) Employment includes employment with Trinity Marine Group, the predecessor
of the Company.
There are no family relationships among the officers of the Company. The
Company's officers are elected annually by the Board of Directors and serve
one-year terms or until their successors are elected.
13
<PAGE>
PART II
ITEM 5: MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The approximate number of holders of the Company's common stock as of a
recent date is incorporated herein by reference from "Voting Securities and
Stockholders" in the definitive proxy statement for the Company's 1998 Annual
Meeting of Stockholders. The following table sets forth the high and low
closing sales price of the Company's common stock (after adjustment for a
three-for-two stock split in October 1997) as reported on the American Stock
Exchange Composite Tape. The first day of trading for the Company's stock was
September 26, 1996.
Fiscal Year 1997
<TABLE>
<CAPTION>
QUARTER HIGH LOW
------- ---- ---
<S> <C> <C>
Second $ 8.17 $7.83
Third 10.00 7.67
Fourth 12.00 9.00
Fiscal Year 1998
<CAPTION>
QUARTER HIGH LOW
------- ---- ---
<S> <C> <C>
First $17.38 $9.83
Second 32.25 16.00
Third 40.81 23.44
Fourth 27.25 13.88
</TABLE>
The Company has paid no dividends and does not expect to pay dividends in
the foreseeable future.
RECENT SALES OF UNREGISTERED SECURITIES
The following information relates to all securities issued or sold by the
Company during its most recently completed fiscal year and not registered
under the Securities Act. Each of the transactions described below was
conducted in reliance upon the exemption from registration provided in Section
4(2) of the Securities Act and the rules and regulations promulgated
thereunder. Furthermore, each of the certificates representing the
Registrant's securities issued in connection with such transaction contained a
restrictive legend.
On September 15, 1997, the Company privately sold, pursuant to a Rule 144A
transaction, an aggregate principal amount of $185 million of 4 1/2%
Convertible Subordinated Notes (the "Notes") which mature on September 15,
2004. The Notes were issued under an Indenture (the "Indenture") which
provides that the Notes are convertible at the option of the holder into
shares of common stock of the Company at any time at a conversion rate of
$31.50 per share. The Company subsequently filed a shelf registration
statement covering such Notes.
In October 1997, the Company issued an aggregate of 835,484 shares of its
common stock in connection with the acquisition of the assets of AmClyde
Engineered Products, Inc. and Utility Steel Fabrication, Inc. The Company
subsequently filed a shelf registration statement covering such common stock.
In February 1998, the Company issued an aggregate of 299,997 shares of its
common stock in connection with the acquisition of all of the outstanding
capital stock of three companies comprising the operations of Calcasieu
Shipyard of Sulphur, Louisiana.
14
<PAGE>
ITEM 6: SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data for the
Company as of the dates and for the periods indicated. The selected
consolidated balance sheet data as of March 31, 1998, 1997, 1996 and 1995 and
consolidated income statement data for the fiscal years ended March 31, 1998,
1997, 1996, 1995 and 1994 have been derived from the audited consolidated
financial statements of the Company. The selected consolidated balance sheet
data as of March 31, 1994 was derived from unaudited financial information of
the Company but in the opinion of management includes all adjustments
necessary for a fair presentation of the financial information. The selected
consolidated financial data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and related notes
included elsewhere in this report.
-------------------------------------------------
YEAR ENDED MARCH 31,
-------------------------------------------------
1998 1997 1996 1995 1994
--------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
INCOME STATEMENT DATA: (5)
Contract revenue earned..... $ 670,238 $406,797 $254,294 $250,586 $275,310
Cost of revenue earned...... 589,579 355,209 214,559 207,398 228,833
--------- -------- -------- -------- --------
Gross profit................ 80,659 51,588 39,735 43,188 46,477
Selling, general and
administrative expenses.... 38,613 21,361 15,911 13,471 12,874
Amortization of excess of
cost over net assets
acquired................... 2,801 -- -- -- --
--------- -------- -------- -------- --------
Operating income............ 39,245 30,227 23,824 29,717 33,603
Interest expense............ 6,600 3,232 3,268 3,844 1,902
Other, net.................. 932 (8) (11) (5) (33)
--------- -------- -------- -------- --------
Income before income taxes.. 31,713 27,003 20,567 25,878 31,734
Provision for income taxes.. 9,197 10,887 8,102 10,170 12,227
--------- -------- -------- -------- --------
Net income.................. $ 22,516 $ 16,116 $ 12,465 $ 15,708 $ 19,507
========= ======== ======== ======== ========
Net income per share (pro
forma for 1996)(1)......... $ 0.80 $ 0.59 $ 0.46
========= ======== ========
Net income per share,
diluted (pro forma for
1996)(1)................... $ 0.78 $ 0.59 $ 0.46
========= ======== ========
NET CASH PROVIDED (REQUIRED)
BY: (5)
Operating activities........ $ 38,324 $ 12,488 $ 23,742 $ 14,803 $(28,175)
Investing activities........ $(107,697) $(14,491) $(15,687) $(10,443) $ (3,440)
Financing activities........ $ 113,440 $ 8,410 $ (7,907) $ (4,057) $ 31,300
OTHER DATA: (5)
EBITDA (2).................. $ 53,106 $ 38,134 $ 30,579 $ 35,136 $ 38,266
Depreciation and
amortization............... $ 15,217 $ 7,899 $ 6,744 $ 5,414 $ 4,630
Capital expenditures (3).... $ 40,988 $ 14,491 $ 5,568 $ 6,337 $ 3,529
--------------------------------------------
MARCH 31,
--------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
BALANCE SHEET DATA: (5)
Working capital.................... $151,057 $ 88,431 $ 36,601 $ 40,855 $ 31,296
Total assets....................... $499,601 $209,411 $141,374 $124,271 $120,784
Long-term debt (4)................. $218,215 $ 52,000 $ 25,000 $ 25,000 $ 25,000
Total equity....................... $151,103 $ 93,301 $ 66,743 $ 54,278 $ 38,570
Backlog data....................... $817,102 $478,803 $431,292 $244,229 $256,965
- --------
(1) Shares outstanding for 1996 have been assumed to be 27,000,000 (the total
number of shares issued to Trinity and the public as a result of the
initial public offering, exclusive of the underwriters' overallotment
option of 675,000 shares and adjusted for the three-for-two stock split)
for purposes of calculating pro forma net income per share.
(2) EBITDA (earnings before interest, taxes, depreciation and amortization
expense) is presented here not as a measure of operating results, but
rather as a measure of the Company's operating performance and ability to
service debt. EBITDA should not be construed as an alternative to
operating income (determined in accordance with GAAP), as an indicator of
the Company's operating performance or as an alternative to cash flows
from operating activities (determined in accordance with GAAP) as a
measure of liquidity. EBITDA measures presented herein may not be
comparable to similarly titled measures of other companies.
(3) Excludes payments for business acquisitions.
(4) Prior to March 31, 1997, long-term debt represented intercompany notes due
to Trinity.
(5) Consolidated financial data for fiscal 1998 reflects the impact of
companies acquired during the year from the dates of acquisition.
15
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
See, Part I, Items 1 and 2: Business, "Forward Looking Statements and
Factors Affecting Future Performance" for a discussion of forward looking
statements and factors affecting future performance contained in this report,
including but not limited to those contained in this Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
GENERAL
The Company is a leading provider of design, construction, conversion and
repair services for ocean-going vessels, offshore rigs and engineered products
servicing the offshore energy, government and commercial markets. The Company
classifies its business into three segments: Vessels, Rigs, and Engineered
Products. Operations within the Vessels segment include the new construction
and repair of a wide variety of vessels for the government, energy and
commercial markets. Products in this segment include offshore support vessels
and offshore double hull tank barges for energy markets; offshore and inland
tug boats, ocean going barges and oil spill recovery vessels for commercial
markets; and oceanographic survey and research ships, high-speed patrol boats
and ferries for government markets. Operations within the Rigs segment include
construction, conversion and repair of mobile offshore drilling rigs.
Operations within the Engineered Products segment include the design,
manufacture and marketing of cranes, derricks, winches, hoists, windlasses,
jacks, linear winches, fairleads, capstans, tuggers, locking devices, turret
bearings, control systems, and other related products used in the marine,
offshore and construction industries.
At March 31, 1998, the Company had 21 shipyards which are strategically
located along the Gulf Coast from Florida to Texas. Additionally, the Company
had four Gulf Coast manufacturing facilities dedicated to its Engineered
Products segment. On May 29, 1998, the Company acquired all of the shares of
common stock of Trinity Marine Orange, Inc., a shipyard based in Orange,
Texas. The shipyard will be utilized in the construction of new offshore rigs
as well as components for rigs under construction at other shipyards owned by
the Company.
As of March 31, 1998, the Company had firm contracts with an aggregate
remaining value of approximately $817 million (excluding unexercised options
held by customers), covering construction of a total of 102 vessels, the new
construction of six drill barges and one jackup drilling rig; the conversion
of two rigs into deepwater semi-submersible rigs and the repair or conversion
of eight jackup drilling rigs. The Company anticipates that approximately $726
million of the aggregate remaining value of the firm contracts as of March 31,
1998 will be filled during fiscal 1999.
Contracts for the construction of vessels, the construction, conversion and
repair of mobile offshore rigs, and the design and manufacture of engineered
products are usually awarded on a competitive bid basis. Although the Company
believes customers consider, among other things, the availability and
technical capabilities of equipment and personnel, efficiency, condition of
equipment, safety record and reputation, price competition is currently a
primary factor in determining which qualified bidder is awarded a contract.
Accordingly, the Company's strategy is to remain a leader in cost effective
marine construction.
The Company expects that substantial orders for new offshore support vessels
and mobile offshore rigs may be made in the next several years due to the
demand for larger vessels and rigs to support deep water oil and gas
exploration and production activities, as well as the substantial worldwide
fleet attrition over the past ten years and the aging of the remaining fleets.
At March 31, 1998, the Company had 30 offshore support vessels, three rigs and
six drill barges under contract. Although the Company believes there will be
an increase in demand for offshore support vessels and mobile offshore rigs,
the Company cannot predict future levels of activity in offshore oil and gas
exploration, development and production. Although the demand for vessels and
rigs may temporarily decrease as a result of short-term declines in oil
prices, the Company believes that the overall demand will increase in the
long-term.
16
<PAGE>
The Company also expects to capitalize on the anticipated increase in
offshore tank barge construction and conversion resulting from OPA '90 and the
aging of the worldwide fleet. The Company currently has one offshore double
hull tank barge under construction. In addition, the Company is bidding on a
number of other offshore barge construction projects.
Pursuant to the provisions of a separation agreement with Trinity, the
Company will be prohibited, for four years plus an additional period under
certain circumstances after the separation from Trinity, from engaging in
Trinity businesses, which include the construction of inland hopper barges and
inland tank barges. Under special arrangements with Trinity, the Company has
built a relatively small number of such vessels. Revenue related to this
business was $23.1 million, $19.9 million and $26.2 million for fiscal years
1998, 1997 and 1996, respectively. The Company's gross profit from such
activities was $2.0 million, $2.2 million and $3.1 million for fiscal years
1998, 1997 and 1996, respectively. The Company's management does not believe
that the restrictions imposed pursuant to the Separation Agreement will have a
material adverse effect on the Company's business, financial condition,
results of operations or liquidity.
The Company believes its current production labor force is at near optimum
levels and that its multiple yard strategy and aggressive recruiting of
personnel will protect it from labor shortfalls in any one market. The Company
has experienced a shift in the production labor force over the past year from
contract to permanently employed labor which it expects to result in lower
labor costs and production efficiencies which should improve gross margins.
The production labor force grew from 2,087 employees at March 31, 1997 to
5,604 employees at March 31, 1998, partially as a result of employees added
through the Company's business acquisitions.
RESULTS OF OPERATIONS
The following tables set forth certain statement of income information as a
percentage of the Company's revenue for the periods indicated:
--------------------------------------------
YEAR ENDED MARCH 31,
--------------------------------------------
1998 1997 1996
-------------- -------------- --------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
(IN MILLIONS)
Contract revenue earned by
business segment:
Vessels........................ $476.3 71.1% $406.8 100.0% $254.3 100.0%
Rigs........................... 159.9 23.9 -- -- -- --
Engineered Products............ 34.0 5.0 -- -- -- --
------ ----- ------ ----- ------ -----
$670.2 100.0% $406.8 100.0% $254.3 100.0%
====== ===== ====== ===== ====== =====
--------------------------------------------
YEAR ENDED MARCH 31,
--------------------------------------------
1998 1997 1996
-------------- -------------- --------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
(IN MILLIONS)
Contract revenue earned by
customer type:
Government: (1)
Vessels...................... $171.9 25.6% $215.8 53.1% $135.7 53.4%
Energy: (2)
Vessels...................... 180.1 26.9 86.1 21.1 54.4 21.4
Rigs......................... 159.9 23.9 -- -- -- --
------ ----- ------ ----- ------ -----
340.0 50.8 86.1 21.1 54.4 21.4
Commercial: (3)
Vessels...................... 62.8 9.4 81.4 20.0 49.4 19.4
Other: (4)
Vessels...................... 61.5 9.2 23.5 5.8 14.8 5.8
Engineered Products.......... 34.0 5.0 -- -- -- --
------ ----- ------ ----- ------ -----
95.5 14.2 23.5 5.8 14.8 5.8
------ ----- ------ ----- ------ -----
$670.2 100.0% $406.8 100.0% $254.3 100.0%
====== ===== ====== ===== ====== =====
17
<PAGE>
- --------
(1)Consists of revenue from the Company's government customers, including the
U.S. Navy, state and local governments and foreign governments.
(2)Consists of revenue from the construction or conversion of vessels and the
construction, conversion and repair of mobile offshore drilling rigs. Vessels
include offshore support vessels, offshore double-hull barges and tank barges.
(3)Consists of revenue from the Company's commercial customers and includes
vessels such as tugboats, hopper barges, inland tow boats and other vessels.
(4)Consists of revenue from customers for the construction of yachts, vessel
repairs and assorted marine products and the design and manufacture of
engineered products.
Fiscal 1998 Compared with Fiscal 1997
Contract revenue increased 64.8% to $670.2 million in the fiscal year ended
March 31, 1998 compared with $406.8 million in the fiscal year ended March 31,
1997. The increase was primarily attributable to $203.6 million in revenue
generated by companies acquired during fiscal 1998. The majority of this
increase in revenue is reflected within the Rigs and Engineered Products
segments of the Company. Growth was also experienced within the energy
customer group of the Vessels segment as a result of increased construction of
offshore support vessels and within the other customer group resulting from
increased vessel repair and yacht activity. The decline in government revenue
within the Vessels segment occurred as fiscal 1997 included revenue from a
major contract that was not replaced in fiscal 1998.
The gross profit margin decreased to 12.0% in fiscal 1998 compared to 12.7%
in fiscal 1997. Excluding newly acquired companies, the gross margin was 7.5%.
The decrease in gross margin was due to cost overruns on a ferry being
constructed for the State of Alaska and certain yachts and certain double hull
tank barges; increased costs on other contracts resulting from delays in the
production of engineering drawings; inefficiencies resulting from the rapid
buildup of the Company's labor force; use of more expensive contract labor;
and adverse weather conditions during the fourth quarter.
Gross profit margins, by segment, for fiscal 1998 were: Vessels, 8.2%; Rigs,
22.9%; and Engineered Products, 14.9%. The gross margin of the Company's
Vessels segment was also adversely impacted by the Company's construction of a
large number of new designs for the offshore supply vessel market during
fiscal 1998 which strained internal capacity and caused delays in the
production of engineering drawings, resulting in out of sequence work
performed at sub-optimal efficiencies. The Company has now developed a broad
range of industry and regulatory accepted designs that it will be able to use
to fill future orders in the Vessels segment which the Company believes will
contribute to higher margins in the future. During the year, the Company
initiated a project to review, evaluate, and improve all of its business
processes in the Vessels segment.
Selling, general and administrative expenses increased $17.2 million to
$38.6 million in fiscal 1998, or 5.8% of revenue, compared to $21.4 million or
5.3% of revenue in fiscal 1997. The increase is a result of the overall growth
of the Company during the current year. Newly acquired companies added
approximately $11.9 million in expenses. Other major increases in expenses
included: salaries and employee related expenses, $2.2 million; general fees
and services, including auditing, accounting, management and consulting, $1.7
million; and property and casualty insurance, $1.2 million. These increases
were offset by decreases in legal fees, $0.5 million, and research and
development expenses, $0.7 million. During fiscal 1998, the Company initiated
a project to review, evaluate and improve all of its business processes in the
Vessels segment committing approximately $2 million to the project during the
year, and it expects to commit additional resources during fiscal 1999. The
Company believes that it will realize cost savings from the project in future
periods.
18
<PAGE>
The Company's construction backlog increased 70.7% to $817.1 million at
March 31, 1998 compared to $478.8 million at March 31, 1997 and consisted of
the following as of March 31:
--------------------------------------
1998 1997
------------------------------ -------
ENGIN.
VESSELS RIGS PRODUCTS TOTAL VESSELS
------- ------ -------- ------ -------
(IN MILLIONS)
Backlog by customer type:
Government............................. $179.3 $ -- $ -- $179.3 $251.3
Commercial............................. 29.6 -- -- 29.6 49.4
Energy................................. 285.8 228.7 -- 514.5 155.9
Other.................................. 34.0 -- 59.7 93.7 22.2
------ ------ ----- ------ ------
$528.7 $228.7 $59.7 $817.1 $478.8
====== ====== ===== ====== ======
Interest expense, net of interest income, increased $3.4 million to $6.6
million for fiscal 1998 compared to $3.2 million for fiscal 1997 due to the
issuance, by the Company, of $185 million in 4 1/2% Convertible Subordinated
Notes in September 1997 and $30 million in Taxable Revenue Bonds in January
1998.
As a result of its acquisitions during fiscal 1998, the Company recorded
amortization of excess of cost over net assets acquired of $2.8 million.
The effective tax rate for fiscal 1998 was 29% compared to 40% for fiscal
1997 as the Company lowered its estimated annual effective tax rate to reflect
the anticipated benefit of research and experimentation credits.
Fiscal 1997 Compared with Fiscal 1996
Contract revenue increased 60.0% to $406.8 million in the fiscal year ended
March 31, 1997 compared with $254.3 million, all of which was in the Vessels
segment, in the fiscal year ended March 31, 1996. An increase in revenue from
all customer groups was experienced. Specifically, government revenue
increased by $80.1 million or 59.0%; energy revenue increased by $31.6 million
or 58.1%; commercial revenue increased by $32.0 million or 64.8%; and other
revenue increased by $8.7 million or 58.8%. Major new government contracts
added in fiscal 1997 included a large ferry for a state government and a U.S.
Navy oceanographic research vessel. The increase in energy revenue was
principally a result of increased construction of offshore support vessels.
The increase in other commercial revenue occurred in part from the
construction of five casino barges. The increase in other revenue was a result
of a $9.2 million increase in revenue from yacht construction as well as
increased repair and conversion business.
The gross profit margin decreased to 12.7% in fiscal 1997 compared to 15.6%
in fiscal 1996. This decrease is attributable, in part, to the favorable
margin received on a major contract in fiscal 1996. The Company did not
replace that contract with a similarly performing contract in 1997. Further,
fiscal 1997 gross profit was favorably impacted by a reduction in the workers
compensation reserve. This benefit was substantially offset by specific
writedowns in work in process inventory. In addition, in fiscal 1997,
contracts with energy customers had lower than normal margins reflecting the
Company's efforts to regain entry into a previously dormant market.
Selling, general and administrative expenses increased to $21.4 million in
fiscal 1997, an increase of $5.5 million over fiscal 1996. These expenses
amounted to 5.3% of revenue in fiscal 1997 compared to 6.3% of revenue in
fiscal 1996. The increase in dollar costs was attributed to the general
overall growth of the Company and the new and additional costs the Company
incurred as a result of becoming a stand alone enterprise. Specifically,
salaries and employee benefit costs increased by $2.6 million, primarily as a
result of increased personnel, and research and development costs increased by
$1.2 million resulting from lower billings to the U.S. Government for such
costs as compared to fiscal 1996.
The Company's construction backlog increased 11% to $478.8 million at March
31, 1997 compared to $431.3 million at March 31, 1996. Energy related backlog
increased by $108.6 million and other backlog increased by $9.0 million. The
increase in energy backlog was attributable to new contracts to build offshore
support vessels. The increase in other backlog was attributable to new
contracts to build megayachts. The above increases were offset by a decrease
in government related backlog of $59.0 million and
19
<PAGE>
commercial related backlog of $11.2 million. The decrease in government
backlog was primarily due to revenue recognition during fiscal 1997 on a U.S.
Navy contract to build two barracks barges and the State of Alaska contract to
build a 383-foot ferry. The decrease in commercial backlog was due primarily
to completion of a large coal barge in fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal needs for capital are the funding of ongoing
operations, capital expenditures and acquisitions. The Company's principal
sources of liquidity during fiscal 1998 were cash provided by operating
activities, borrowings from the Company's existing credit facility and the
issuance of convertible subordinated notes and taxable revenue bonds. Cash
flows during fiscal 1998 from these sources were $38 million from operating
activities, $185 million from the issuance of 4 1/2% Convertible Subordinated
Notes, and $30 million from the issuance of Taxable Revenue Bonds. These
sources were used primarily to fund the Company's working capital
requirements, capital expenditures, and acquisitions.
On September 15, 1997, the Company issued an aggregate principal amount of
$185 million of 4 1/2% Convertible Subordinated Notes (the "Notes") which
mature on September 15, 2004. The Notes were issued under an Indenture (the
"Indenture") which provided that the Notes are convertible at the option of
the holder into shares of common stock of the Company at a conversion rate
equivalent to $31.50 per share, subject to adjustment for certain events (as
defined in the Indenture). Interest on the Notes is payable semi-annually, in
arrears, on March 15 and September 15 of each year, commencing March 15, 1998,
with principal due at maturity. The Notes are unsecured. The Notes are
redeemable, in whole or in part, at the option of the Company, at any time on
or after September 15, 2000, at certain redemption prices (as defined), plus
accrued and unpaid interest and liquidated damages, if any, to, but excluding,
the redemption date. Holders of the Notes may, at their option, require that
the Company repurchase all or a portion of the Notes upon the occurrence of a
"change of control" (as defined in the Indenture) at a cash price equal to
100% of the principal amount, together with accrued and unpaid interest and
liquidated damages, if any, to the date of purchase.
On January 1, 1998, the Company issued an aggregate principal amount of $30
million of Mississippi Business Finance Corporation Taxable Revenue Bonds,
Series 1998 (the "Bonds") which mature on December 31, 2013. Interest on the
bonds is payable semi-annually, in arrears, on June 30 and December 31 of each
year, commencing June 30, 1998, at an annual interest rate of 6.39%. Principal
is due at maturity. The Bonds are subject to mandatory sinking fund redemption
requirements of $3 million annually. These payments, together with accrued
interest to the date of redemption and without premium or penalty, are due on
December 31 of each year commencing December 31, 2004 and continuing through
December 31, 2013. The Company has the option to redeem the Bonds, in whole at
any time, or in part on any payment date, in the inverse order of their
maturities at an amount equal to the principal amount together with accrued
interest through the redemption date.
During fiscal year 1998, the Company renegotiated its revolving credit
agreement ("the Credit Facility") with a group of banks, increasing the
maximum loan amount from $135 million to $150 million, to be used for general
corporate purposes and working capital. All amounts outstanding under the
Credit Facility will become payable on September 30, 2002. Letters of credit
are limited to $50 million. The interest rate is 0.75% to 1.75% over the
London Interbank Offering Rate ("LIBOR"), or the base rate (as defined),
depending on the Company's choice. The range of rates over LIBOR is set
quarterly, depending on the ratio of the Company's borrowed debt to EBITDA (as
defined). Under the Credit Facility, the Company is obligated to pay certain
fees, including an annual commitment fee in an amount of .2% to .5% of the
unused portion of the commitment. The loan agreement contains certain
restrictive covenants, including minimum net worth requirements and the
encumbering of assets. In addition, the Company, among other things, is
required to maintain certain financial ratios, including an interest coverage
ratio (as defined), a debt service coverage ratio (as defined) and a current
ratio (as defined). At March 31, 1998, the Company had no amounts outstanding
and $44 million available under the line of credit.
Prior to the separation from Trinity, a significant portion of the Company's
existing contracts for the construction, repair or conversion of vessels
required that the Company's performance be guaranteed by Trinity, by a surety
company or other third party pursuant to a contract bid or performance bond,
letter of credit or similar obligation. These guarantees, bonds, letters of
credit and similar obligations will remain in effect until they expire and
Trinity will remain liable for the obligations on the same basis as any other
guarantor. The Company has indemnified Trinity against any liability under
these obligations. For the protection of Trinity in the event Trinity is
called upon to satisfy any such obligations, Trinity has been granted security
interests in certain assets of the Company which relate to the Company's
contracts from which such obligations arise and possesses the rights to
complete performance of any such contract on behalf of the Company in the
event of nonperformance by the Company. Such rights and
20
<PAGE>
remedies are similar to the rights possessed by surety companies that have
issued performance bonds on behalf of the Company. The Company has arranged
its own contract bid and performance bonds, letters of credit and similar
obligations in connection with its business since September 26, 1996. The
Company believes that amounts available under the Credit Facility and bonding
commitment will be adequate to meet these obligations as they are required. As
of March 31, 1998, the total of all of the Company's outstanding performance
obligations was approximately $38 million.
The Company made capital expenditures, including construction-in-process, of
$41 million and $14 million in fiscal 1998 and 1997, respectively. During
fiscal 1998, the Company made extensive improvements at its Pascagoula
facility which were funded through the issuance of taxable revenue bonds. The
Company currently has budgeted, for fiscal 1999, approximately $70 million for
planned capital projects, which included the acquisition, on May 29, 1998, for
$15 million in cash, of a shipyard located in Orange, Texas which will be used
for the construction of new offshore rigs.
The Company believes that cash flow from operations, together with funds
available under the existing credit facility, and excess cash generated from
the issuance of the 4 1/2% Convertible Subordinated Notes and Taxable Revenue
Bonds will be sufficient to fund its requirements for working capital, capital
expenditures, acquisitions and other capital needs for at least the next 12
months.
INFLATION AND CHANGING PRICES
The Company does not believe that general price inflation has had a
significant impact on the Company's results of operations during the periods
presented. To the extent that the effects of inflation are not offset by
improvements in manufacturing and purchasing efficiency and labor
productivity, the Company generally has been able to take such effects into
account in pricing its contracts with customers. There can be no assurance,
however, that inflation will not have a material effect on the Company's
business in the future.
YEAR 2000 TECHNOLOGICAL ISSUES
The Company is currently working to assess the potential impact of the year
2000 on the processing of time-sensitive information by its computerized
information systems and equipment. Year 2000 issues may arise if computer
programs have been written using two digits (rather than four) to define the
applicable year. In such case, programs that have time-sensitive logic may
recognize a date using "00" as the year 1900 rather than the year 2000, which
could result in miscalculations or system failures. Management is in the
process of completing a review of significant software used in the Company's
operations, and, to the extent practicable, in the operations of its key
business relationships such as vendors, suppliers, and financial institutions,
in order to determine if any year 2000 risks exist that may be material to the
Company as a whole.
The Company has already begun implementing certain measures to alter,
validate or replace time-sensitive software prior to any anticipated material
impact on its computerized information systems and equipment. Costs of
addressing potential problems have not been material to date and, based on
preliminary information, are not currently expected to have a material adverse
impact on the Company's financial position, results of operations or cash
flows in future periods.
21
<PAGE>
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors............................................. 23
Consolidated Balance Sheets................................................ 24
Consolidated Income Statements............................................. 25
Consolidated Statements of Stockholders' Equity............................ 26
Consolidated Statements of Cash Flows...................................... 27
Notes to Consolidated Financial Statements................................. 28
</TABLE>
22
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Halter Marine Group, Inc.
We have audited the accompanying consolidated balance sheets of Halter
Marine Group, Inc. and Subsidiaries as of March 31, 1998 and 1997, and the
related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended March 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes 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, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Halter Marine
Group, Inc. and Subsidiaries at March 31, 1998 and 1997, and the consolidated
results of their operations and their cash flows for each of the three years
in the period ended March 31, 1998 in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
New Orleans, Louisiana
April 28, 1998
23
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
-----------------
MARCH 31,
-----------------
1998 1997
-------- --------
<S> <C> <C>
A S S E T S
-----------
Current Assets:
Cash and cash equivalents...................................... $ 51,146 $ 7,079
Contract receivables .......................................... 115,389 36,053
Due from former parent......................................... -- 11,513
Costs and estimated earnings in excess of billings on
uncompleted contracts......................................... 81,229 77,704
Inventories.................................................... 19,692 10,827
Other current assets........................................... 5,124 4,501
-------- --------
Total current assets......................................... 272,580 147,677
Property, plant and equipment, net............................... 125,962 61,449
Excess of cost over net assets acquired, net..................... 92,101 --
Other assets .................................................... 8,958 285
-------- --------
$499,601 $209,411
======== ========
<CAPTION>
L I A B I L I T I E S A N D S T O C K H O L D E R S' E Q U I T Y
- -------------------------------------------------------------------
<S> <C> <C>
Current Liabilities:
Accounts payable and accrued liabilities....................... $ 51,433 $ 30,594
Billings in excess of costs and estimated earnings on
uncompleted contracts......................................... 68,172 19,956
Notes payable and current portion of long-term debt............ 1,918 8,696
-------- --------
Total current liabilities.................................... 121,523 59,246
Long-term debt, less current portion............................. 218,215 52,000
Deferred income taxes ........................................... 7,025 2,897
Other noncurrent liabilities..................................... 1,735 1,967
-------- --------
Total liabilities............................................ 348,498 116,110
Stockholders' equity:
Common stock, $.01 par value; authorized 50,000 shares; issued
28,822 and 27,675 shares at
March 31, 1998 and 1997, respectively......................... 288 185
Preferred stock, authorized 50,000 shares; issued, none........ -- --
Additional paid-in capital .................................... 119,396 84,213
Retained earnings.............................................. 31,419 8,903
-------- --------
Total stockholders' equity................................... 151,103 93,301
-------- --------
$499,601 $209,411
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
----------------------------
MARCH 31,
----------------------------
1998 1997 1996
-------- -------- --------
Contract revenue earned......................... $670,238 $406,797 $254,294
Cost of revenue earned ......................... 589,579 355,209 214,559
-------- -------- --------
Gross profit.................................. 80,659 51,588 39,735
Selling, general and administrative expenses.... 38,613 21,361 15,911
Amortization of excess of cost over net assets
acquired....................................... 2,801 -- --
-------- -------- --------
Operating income.............................. 39,245 30,227 23,824
Other (income) expenses:
Interest expense, net......................... 6,600 3,232 3,268
Other, net.................................... 932 (8) (11)
-------- -------- --------
7,532 3,224 3,257
-------- -------- --------
Income before income taxes...................... 31,713 27,003 20,567
Provision (benefit) for income taxes:
Current ...................................... 10,253 5,125 15,785
Deferred...................................... (1,056) 5,762 (7,683)
-------- -------- --------
9,197 10,887 8,102
-------- -------- --------
Net income ..................................... $ 22,516 $ 16,116 $ 12,465
======== ======== ========
Net income per share (pro forma for 1996)....... $ 0.80 $ 0.59 $ 0.46
======== ======== ========
Net income per share, diluted (pro forma for
1996) ......................................... $ 0.78 $ 0.59 $ 0.46
======== ======== ========
Weighted average shares outstanding (pro forma
for 1996):
Basic......................................... 28,052 27,281 27,000
Diluted....................................... 29,008 27,339 27,000
See accompanying notes to consolidated financial statements.
25
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
-------------------------------------------------
ADDITIONAL STOCKHOLDER'S
COMMON PAID-IN RETAINED NET
STOCK CAPITAL EARNINGS INVESTMENT TOTAL
------ ---------- -------- ------------- --------
Balance at March 31, 1995... $ 54,278 $ 54,278
Net income................ 12,465 12,465
-------- --------
Balance at March 31, 1996... 66,743 66,743
Net income prior to
initial public offering.. 7,213 7,213
Debt assumed from former
parent................... (25,000) (25,000)
Proceeds from initial
public offering.......... $185 $ 35,257 -- 35,442
Transfer to additional
paid-in capital.......... -- 48,956 (48,956) --
Net income subsequent to
initial public offering.. -- -- $ 8,903 -- 8,903
---- -------- ------- -------- --------
Balances at March 31, 1997.. 185 84,213 8,903 -- 93,301
Issuances of common stock:
Stock split............. 92 (110) -- -- (18)
Employee stock options.. -- 90 -- -- 90
Acquired companies...... 11 35,203 -- -- 35,214
Net income................ -- -- 22,516 -- 22,516
---- -------- ------- -------- --------
Balances at March 31, 1998.. $288 $119,396 $31,419 $ -- $151,103
==== ======== ======= ======== ========
See accompanying notes to consolidated financial statements.
26
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
-----------------------------
YEAR ENDED MARCH 31,
-----------------------------
1998 1997 1996
--------- -------- --------
Operating activities:
Net income.................................... $ 22,516 $ 16,116 $ 12,465
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization............... 15,217 7,899 6,744
Deferred provision (benefit) for income
taxes...................................... (1,056) 5,762 (7,683)
Equipment transfers from former parent, net. -- -- (7,776)
Changes in operating assets and liabilities:
Increase in contract receivables.......... (42,255) (27,713) (1,053)
Decrease in due from former parent........ 11,513 -- --
(Increase) decrease in costs and estimated
earnings in excess of billings on
uncompleted contracts.................... 984 (9,799) 3,120
(Increase) decrease in inventories........ (771) (4,764) 455
(Increase) decrease in other current
assets................................... (105) (4,114) 107
Decrease in other assets.................. 707 -- --
Increase (decrease) in accounts payable
and accrued liabilities.................. (8,463) 35,491 420
Increase (decrease) in income taxes
payable to affiliate..................... -- (15,785) 5,949
Increase in billings in excess of costs
and estimated
Earnings on uncompleted contracts........ 40,269 7,428 10,994
Increase (decrease) in other noncurrent
liabilities.............................. (232) 1,967 --
--------- -------- --------
Total adjustments....................... 15,808 (3,628) 11,277
--------- -------- --------
Net cash provided by operating activities... 38,324 12,488 23,742
--------- -------- --------
Investing activities:
Capital expenditures.......................... (40,988) (14,491) (5,568)
Business acquistions, net of cash acquired.... (66,709) -- (10,119)
--------- -------- --------
Net cash required by investing activities... (107,697) (14,491) (15,687)
--------- -------- --------
Financing activities:
Net proceeds from sale and issuance of stock.. 72 35,442 --
Net borrowings from former parent............. -- (79,032) (7,907)
Issuance of long-term convertible subordinated
notes........................................ 185,000 -- --
Issuance of taxable revenue bonds............. 30,000 -- --
Debt issuance costs........................... (6,013) -- --
Principal payments on debt.................... (43,619) -- --
Net borrowings (repayments) under line of
credit....................................... (52,000) 52,000 --
--------- -------- --------
Net cash provided (required) by financing
activities................................. 113,440 8,410 (7,907)
--------- -------- --------
Net increase in cash and cash equivalents....... 44,067 6,407 148
Cash at beginning of year....................... 7,079 672 524
--------- -------- --------
Cash and cash equivalents at end of year........ $ 51,146 $ 7,079 $ 672
========= ======== ========
Supplemental disclosures:
Cash paid for:
Interest...................................... $ 8,519 $ 1,586 $ --
========= ======== ========
Income taxes.................................. $ 5,455 $ -- $ --
========= ======== ========
Purchase of subsidiaries...................... $ 66,928 $ -- $ 10,119
========= ======== ========
Non-cash investing activities:
Acquisitions:
Fair value of assets acquired................. $ 90,748 $ -- $ 10,119
========= ======== ========
Fair value of liabilities assumed............. $ 56,511 $ -- $ --
========= ======== ========
See accompanying notes to consolidated financial statements.
27
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
1. GENERAL INFORMATION
Halter Marine Group, Inc. is a Delaware corporation incorporated on June 24,
1996 to serve as the parent of a new consolidated group. The Company formerly
conducted the business of construction, repair and conversion of primarily
ocean-going vessels for the governmental and commercial markets as a division
of Trinity Industries, Inc. ("Trinity"). On September 26, 1996, Halter Marine
Group, Inc. and subsidiaries (collectively, the "Company") completed an
initial public offering of 18.7% of its stock. On March 31, 1997, Trinity
distributed all of the remaining stock of the Company to its stockholders. As
part of the transactions related to the spin-off, the Company assumed $25
million of indebtedness of Trinity associated with the Company's businesses.
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Halter Marine
Group, Inc. and its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated. The consolidated financial
statements reflect the results of operations, financial condition and cash
flows of the Company as a component of Trinity prior to October 1, 1996 and
those results may not be indicative of actual results of operations and
financial position of the Company under other ownership. Management believes
that the consolidated income statements include a reasonable allocation of the
administrative costs incurred by Trinity on the Company's behalf prior to
October 1, 1996. These costs include payroll services, benefits
administration, and cash management. The allocations of such costs to the
Company were approximately $1.8 million in 1996 and approximately $1.2 million
for the six months ended September 30, 1996.
Additionally, prior to the initial public offering, the Company provided
administrative services for Trinity's Inland Marine division in the areas of
accounting, human resources, marketing and public relations. The allocation of
such costs to the Inland Marine division was approximately $2.6 million in
1996, and approximately $1.6 million for the six months ended September 30,
1996.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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 reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash, interest-bearing deposits in
domestic banks, and highly liquid investments with original maturities of
three months or less when purchased.
Construction Contracts
The Company uses the percentage of completion method to account for
substantially all of its contracts in process. Under this method, revenues of
construction contracts are measured by the percentage of labor hours incurred
to date to estimated total labor hours for each contract. Management considers
expended labor hours to be the best available measure of progress on these
contracts. Changes in estimated profitability may result in revisions to
income and costs and are recognized in the period in which the revisions are
determined. Provisions for estimated losses on uncompleted contracts are made
in the period in which such losses are determined. Other changes, including
those arising from contract penalty provisions, and final contract settlements
are recognized in the period in which the revisions are determined.
28
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Contract costs include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect labor,
supplies, tools, repairs and depreciation costs. Indirect manufacturing costs
are allocated on the basis of labor hours incurred on the respective
contracts. Selling, general and administrative costs are charged to expense as
incurred.
The asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenue recognized in excess of amounts
billed. The liability, "Billings in excess of costs and estimated earnings on
uncompleted contracts," represents billings in excess of revenue recognized.
Inventories
Inventories, which consist primarily of steel and other marine vessel
components, are valued at the lower of cost or market. Inventory cost is
determined principally on the specific identification method. Market is
replacement cost or net realizable value.
Depreciation
Additions to property, plant and equipment are recorded at cost.
Depreciation and amortization are generally computed using the straight-line
method over the estimated useful lives of the assets which range from 3 to 30
years for buildings and improvements and 2 to 28 years for machinery and
equipment. The costs of ordinary maintenance and repairs are charged to
expense, while renewals and major replacements are capitalized.
Excess of Cost Over Net Assets Acquired
The excess of cost over the value of net assets acquired is amortized using
the straight-line basis over 20 years. Accumulated amortization of the excess
of cost over net assets acquired was $2.8 million at March 31, 1998.
Other Assets
Other assets includes $6 million of debt issuance costs capitalized in
conjunction with the issuance of the $185 million of 4 1/2% Convertible
Subordinated Notes and the $30 million of Taxable Revenue Bonds. These costs
are being amortized over the life of the related debt. Accumulated
amortization of debt issuance costs was $0.4 million at March 31, 1998.
Income Taxes
The Company accounts for income taxes using the liability method under
Statement of Financial Accounting Standards No.109, "Accounting for Income
Taxes". Under this method, deferred tax assets and liabilities are recorded
for temporary differences that occur between the financial reporting and tax
bases of assets and liabilities based on enacted tax rates and laws that will
be in effect when the differences are expected to reverse.
Net Income Per Share
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 128, "Earnings Per Share" (SFAS 128)
which was required to be adopted for the quarter ended December 31, 1997. This
Statement replaced the previously reported primary and fully diluted net
income per share with basic and diluted net income per share. Unlike primary
net income per share, basic net income per share excludes the dilutive effects
of stock options and convertible securities. Diluted net income per share is
very similar to the previously reported fully diluted net income per share.
All net income per share amounts for all periods have been presented, and
where necessary, restated, to conform to SFAS 128 requirements.
On September 29, 1997, the Board of Directors declared a three-for-two split
of the Company's common stock, effectuated in the form of a stock dividend
paid October 31, 1997 to shareholders of record as of October 15, 1997. As a
result, net income per share computations and related weighted average shares
outstanding for all periods presented in the foregoing financial statements
and accompanying footnotes have been adjusted to reflect the stock split.
29
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Shares outstanding for 1996 have been assumed to be 27,000,000 (the total
number of shares issued to Trinity and the public as a result of the initial
public offering, exclusive of the underwriters' overallotment option of
675,000 shares, and adjusted for the three-for-two stock split) for purposes
of calculating pro forma net income per share. Pro forma net income for the
year ended March 31, 1996 was $12.7 million as adjusted for a reduction in
interest expense, net of tax, resulting from the use of the net proceeds of
the offering to retire outstanding debt to Trinity as of the beginning of the
period.
Stock-based Compensation
The Company accounts for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related Interpretations. Accordingly,
compensation cost for stock options is measured as the excess, if any, of the
quoted market price of the Company's stock at the date of the grant over the
amount an employee must pay to acquire the stock. See Note 11 for stock option
information.
Long-lived Assets
The Company periodically evaluates the carrying value of long-lived assets
to be held and used, including excess of cost over net assets acquired in
accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of" (SFAS 121). SFAS 121 requires impairment losses to be
recorded on long-lived assets used in operations, including related excess of
cost over net assets acquired, when indicators of impairment are present and
the undiscounted cash flows estimated to be generated by those assets are less
than the assets' carrying amounts. In that event, a loss is recognized based
on the amount by which the carrying amount exceeds the fair market value of
the long-lived asset. Loss on long-lived assets to be disposed of is
determined in a similar manner, except that fair market values are reduced for
the cost of disposal.
Segment Information
On March 31, 1998, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (SFAS 131) which established revised standards for public
companies relating to the reporting of financial and descriptive information
about operating segments in financial statements. The adoption of SFAS 131 did
not affect the Company's results of operations or financial position. See Note
8 for segment information.
Reclassifications
Certain items included in the consolidated financial statements for 1997
have been reclassified to conform with the 1998 presentation.
3. BUSINESS ACQUISITIONS
The Company completed certain business acquisitions during fiscal 1998 and
1996, each of which was considered a purchase for accounting purposes. The
operations of these companies have been included in the consolidated financial
statements from the effective dates of the acquisitions.
On April 4, 1997, the Company acquired a 51% interest in and obtained an
option to acquire the remaining 49% of Texas Drydock, Inc. (TDI), a company
engaged principally in the construction, conversion and repair of offshore oil
drilling rigs. On May 16, 1997, the Company acquired the remaining 49% of TDI.
The aggregate purchase price amounted to approximately $47 million which
consisted of $20 million in cash and $27 million of short-term notes payable
which were paid in fiscal 1998. In addition, the Company advanced TDI $4.5
million for working capital and a fixed asset acquisition. A substantial
portion of the total purchase price was allocated to cost in excess of net
assets acquired.
30
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During August 1997, the Company acquired the assets of Bludworth Bond
Shipyard, Inc., Houston, Texas. During the third quarter of fiscal 1998, the
Company completed the acquisitions of four additional companies, including
AmClyde Engineered Products, Inc., and formed the Engineered Products Group.
The aggregate purchase price for these five companies was $75 million, of
which approximately $45 million was paid in cash and the balance in 835,484
shares of the Company's common stock. A substantial portion of the total
purchase price was allocated to cost in excess of net assets acquired.
The following unaudited pro forma financial information presents the
combined results of operations for the 12 months ended March 31, 1998 and
1997, assuming consummation of the purchase of TDI and the Engineered Products
Group as of April 1, 1996 and, after giving effect to the shares issued and
certain adjustments, including amortization of excess of cost over net assets
acquired and increased interest expense on debt related to the acquisitions,
and related income tax expenses. This pro forma information does not
necessarily reflect the results of operations that would have occurred had the
Company, along with TDI and the Engineered Products Group, constituted a
single entity during these periods.
--------------
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED
-----------------
3/31/98 3/31/97
-------- --------
(IN THOUSANDS,
EXCEPT
PER SHARE DATA)
<S> <C> <C>
Contract revenue earned...................................... $715,403 $632,907
Net income................................................... $ 21,764 $ 16,752
Net income per share......................................... $ 0.76 $ 0.60
Net income per share, diluted................................ $ 0.74 $ 0.59
Pro forma weighted average number of shares outstanding:
Basic...................................................... 28,539 28,116
Diluted.................................................... 29,495 28,174
</TABLE>
In March 1998, the Company also acquired the stock of three companies
comprising the operations of Calcasieu Shipyard, Inc., located in Sulphur,
Louisiana. The aggregate purchase price of these companies was approximately
$10 million of which approximately $4 million was paid in cash and the balance
in approximately 300,000 shares of the Company's common stock. The operating
results of these acquisitions would not have materially affected the Company's
consolidated revenue, net income, or net income per share for fiscal 1998 and
1997.
In fiscal 1996, the Company acquired the assets of American Marine
Corporation (now known as Halter Gulf Repair) and CBI-Con, Inc. (now known as
Halter Pascagoula). The assets of these businesses are utilized in the
manufacture and repair of marine products. The aggregate purchase price of
approximately $10.1 million was allocated entirely to the assets acquired. The
results of these acquisitions would not have materially affected consolidated
revenue, net income, or net income per share for fiscal 1996.
In conjunction with the acquisitions of AmClyde Engineered Products, Inc.
and Bludworth Bond Shipyard, contingent payment agreements based upon
operating results over the next three years were negotiated with the
respective former owners. The additional payments, which are not expected to
be material, will be paid in cash and accounted for as additonal excess of
cost over net assets acquired.
31
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
-------------------
MARCH 31,
-------------------
1998 1997
---------- --------
(IN THOUSANDS)
Costs incurred on uncompleted contracts..................... $1,064,026 $555,918
Estimated earnings.......................................... 130,607 103,565
---------- --------
1,194,633 659,483
Less billings to date....................................... 1,181,576 601,735
---------- --------
$ 13,057 $ 57,748
========== ========
Included in the following balance sheet captions:
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................... $ 81,229 $ 77,704
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................... 68,172 19,956
---------- --------
$ 13,057 $ 57,748
========== ========
5. PROPERTY, PLANT AND EQUIPMENT
----------------
MARCH 31,
----------------
1998 1997
-------- -------
(IN THOUSANDS)
Land.......................................................... $ 13,676 $ 8,427
Buildings and improvements.................................... 64,849 26,929
Machinery and equipment....................................... 104,448 53,118
Construction in progress ..................................... 16,418 12,696
-------- -------
199,391 101,170
Less accumulated depreciation................................. 73,429 39,721
-------- -------
Property, plant and equipment, net............................ $125,962 $61,449
======== =======
6. NOTES PAYABLE AND LONG-TERM DEBT
----------------
MARCH 31,
----------------
1998 1997
-------- -------
(IN THOUSANDS)
4 1/2% Convertible Subordinated Notes......................... $185,000 $ --
Taxable Revenue Bonds, Series 1998............................ 30,000 --
Revolving Credit Agreement.................................... -- 52,000
Other......................................................... 5,133 8,696
-------- -------
220,133 60,696
Less current portion.......................................... 1,918 8,696
-------- -------
$218,215 $52,000
======== =======
4 1/2% Convertible Subordinated Notes
On September 15, 1997, the Company issued an aggregate principal amount of
$185 million of 4 1/2% Convertible Subordinated Notes (the "Notes") which
mature on September 15, 2004. The Notes were issued under an Indenture (the
"Indenture") which provides that the Notes are convertible at the option of
the holder into shares of common stock of the
32
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Company at a conversion rate equivalent to $31.50 per share, subject to
adjustment for certain events (as defined in the Indenture). Interest on the
Notes is payable semi-annually, in arrears, on March 15 and September 15 of
each year, commencing March 15, 1998, with principal due at maturity. The
Notes are unsecured.
The Notes are redeemable, in whole or in part, at the option of the Company,
at any time on or after September 15, 2000, at the redemption prices
(expressed as percentages of the principal amount) set forth below, plus
accrued and unpaid interest and liquidated damages, if any, to, but excluding,
the redemption date.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2000......................................................... 102.57%
2001......................................................... 101.93
2002......................................................... 101.28
2003......................................................... 100.64
2004......................................................... 100.00
</TABLE>
Holders of the Notes may, at their option, require that the Company
repurchase all or a portion of the Notes upon the occurrence of a "change of
control" (as defined in the Indenture) at a cash price equal to 100% of the
principal amount, together with accrued and unpaid interest and liquidated
damages, if any, to the date of purchase.
Taxable Revenue Bonds, Series 1998
On January 1, 1998, the Company issued an aggregate principal amount of $30
million of Mississippi Business Finance Corporation Taxable Revenue Bonds,
Series 1998 (the "Bonds") which mature on December 31, 2013. Interest on the
Bonds is payable semi-annually, in arrears, on June 30 and December 31 of each
year, commencing June 30, 1998, at an annual interest rate of 6.39%. Principal
is due at maturity.
The Bonds are subject to mandatory sinking fund redemption requirements of
$3 million annually. These payments, together with accrued interest to the
date of redemption and without premium or penalty, are due on December 31 of
each year commencing December 31, 2004 and continuing through December 31,
2013. The Company has the option to redeem the Bonds, in whole at any time, or
in part on any payment date, in the inverse order of their maturities at an
amount equal to the principal amount together with accrued interest through
the redemption date. As of March 31, 1998, of the $30 million funded,
approximately $23 million had been applied to qualified construction
expenditures while approximately $7 million remained invested in an escrow
which will be utilized by the Company as it incurs qualified expenditures. The
balance remaining in escrow is expected to be expended during fiscal 1999.
Revolving Credit Agreement
During fiscal 1998, the Company renegotiated its revolving credit agreement
with a group of banks, increasing the maximum loan amount from $135 million to
$150 million. Any amounts outstanding under this revolving credit agreement
will become payable on September 30, 2002. Letters of credit are limited to an
aggregate of $50 million. The interest rate is 0.75% to 1.75% over the London
Interbank Offered Rate (LIBOR), or the base rate (as defined), depending on
the Company's choice. The range of rates over LIBOR is set quarterly,
depending on the ratio of the Company's borrowed debt to EBITDA (as defined).
Under the new credit agreement, the Company is obligated to pay certain
fees, including an annual commitment fee in an amount ranging from 0.2% to
0.5% of the unused portion of the commitment. The loan agreement contains
certain restrictive covenants, including minimum net worth requirements and
the encumbering of assets. In addition, the Company, among other things, is
required to maintain certain financial ratios, including an interest coverage
ratio (as defined), a debt service coverage ratio (as defined), and a current
ratio (as defined).
33
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At March 31, 1998, the Company had no amounts outstanding under the line of
credit. The amount available under the line of credit at March 31, 1998 was
$44 million.
Other Debt
Other long-term debt of $5.1 million at March 31, 1998 consists principally
of promissory notes due in monthly installments. The notes have fixed interest
rates ranging from 7% to 10% and variable rates of prime plus 1%. The notes
are secured by land, building, docking facilities, and improvements and
machinery and equipment with a net book value approximating $6.0 million. The
notes have final maturities ranging from the year 2000 through 2013.
Scheduled maturities of long-term debt for the next five years are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31, AMOUNT
--------------------- --------------
(IN THOUSANDS)
<S> <C>
1999.......................................................... $1,918
2000.......................................................... 444
2001.......................................................... 117
2002.......................................................... 126
2003.......................................................... 137
------
$2,742
======
</TABLE>
The fair value of the Company's 4 1/2% convertible subordinated notes at
March 31, 1998 was $156.9 million. The fair value of the Company's remaining
long-term debt approximates its recorded value.
7. LEASES
The Company leases certain machinery and equipment under non-cancelable
operating leases which expire at various dates through the year 2016. Total
lease expense recorded by the Company was $900,577, $280,902, and $247,848 for
fiscal 1998, 1997, and 1996, respectively.
Future minimum lease commitments are as follows:
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31, AMOUNT
--------------------- --------------
(IN THOUSANDS)
<S> <C>
1999.......................................................... $ 1,849
2000.......................................................... 1,796
2001.......................................................... 1,521
2002.......................................................... 972
2003.......................................................... 856
Thereafter.................................................... 4,255
-------
$11,249
=======
</TABLE>
8. SEGMENT INFORMATION
The Company classifies its business into three segments: Vessels, which
includes the new construction and repair of a wide variety of vessels for the
government, energy and commercial markets; Rigs, which includes the
construction, conversion and repair of mobile offshore drilling rigs; and
Engineered Products, which includes the design, manufacture and marketing of
cranes, derricks, winches, hoists, windlasses, jacks, linear winches,
fairleads, capstans, tuggers, locking devices, turret bearings, control
systems, and other related products used in the marine, offshore and
construction industries. The Company evaluates the performance of its
34
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
segments based upon income before interest and income taxes as these expenses
are not allocated to the segments. Accounting policies are the same as those
described in Note 2, "Basis of Presentation and Significant Accounting
Policies."
Selected information as to the operations of the Company by segment is set
forth below.
--------------------------------------
YEAR ENDED MARCH 31, 1998
--------------------------------------
ENGINEERED
VESSELS RIGS PRODUCTS TOTAL
-------- -------- ---------- --------
(IN THOUSANDS)
Operations:
Contract revenue earned................. $476,258 $159,934 $34,046 $670,238
Cost of revenue earned.................. 437,239 123,363 28,977 589,579
-------- -------- ------- --------
Gross profit.......................... 39,019 36,571 5,069 80,659
Selling, general and administrative
expenses............................... 26,733 8,516 3,364 38,613
Amortization of excess of cost over net
assets acquired........................ 58 1,645 1,098 2,801
Other, net.............................. (75) 953 54 932
-------- -------- ------- --------
Income before interest and income
taxes................................ $ 12,303 $ 25,457 $ 553 $ 38,313
======== ======== ======= ========
Certain other financial information of the Company by segment is set forth
below:
---------------------------------------------
YEAR ENDED MARCH 31, 1998
---------------------------------------------
ENGINEERED
VESSELS RIGS PRODUCTS ADJUSTMENTS TOTAL
------- ------ ---------- ----------- -------
(IN THOUSANDS)
Other financial information:
Depreciation and amortization ex-
pense:
Included in cost of revenue
earned........................ $9,529 $1,761 $ 186 $ -- $11,476
Included in selling, general
and administrative expenses... 413 1,790 1,114 424 3,741
------ ------ ------ ---- -------
$9,942 $3,551 $1,300 $424 $15,217
====== ====== ====== ==== =======
For consolidation purposes, all interest, amortization of debt issuance costs
and income taxes are allocated to corporate operations. Operations for fiscal
1997 and 1996 were attributable to the Vessels segment. Intersegment revenues
are not material to the consolidated revenue of the Company.
Fiscal 1998 revenue from one customer of the Vessels segment totaled $114.6
million and from another customer of the Vessels segment totaled $73.6 million.
Fiscal 1997 and 1996 included revenue from one customer of the Vessels segment
of $152.1 million and $120.3 million, respectively.
Total assets and capital expenditures of the Company by segment are set forth
below.
-------------------------------------------------
AS OF MARCH 31, 1998
-------------------------------------------------
ENGINEERED
VESSELS RIGS PRODUCTS ADJUSTMENTS TOTAL
-------- -------- ---------- ----------- --------
(IN THOUSANDS)
Total assets.................. $263,820 $102,029 $85,247 $48,505 $499,601
======== ======== ======= ======= ========
Capital expenditures.......... $ 26,453 $ 8,840 $ 383 $ 5,312 $ 40,988
======== ======== ======= ======= ========
For consolidation purposes, certain cash and cash equivalent balances and
certain capital expenditures are allocated to corporate and are included along
with other accounting eliminations and adjustments in the Adjustments column.
Revenues included in the consolidated financial statements of the Company are
primarily derived from customers domiciled in the United States. Substantially
all of the Company's long-lived assets are located in the United States.
35
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. RECONCILIATION OF NET INCOME PER SHARE
The following table sets forth the computation of basic and diluted net
income per share:
--------------------------------------
YEAR ENDED MARCH 31,
--------------------------------------
1998 1997 1996
------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Numerator:
Net Income.......................... $ 22,516 $ 16,116 $ 12,465
============ ============ ============
Numerator for net income per share,
diluted ........................... $ 22,516 $ 16,116 $ 12,465
============ ============ ============
Denominator:
Denominator for net income per
share--weighted average shares
outstanding*....................... 28,052 27,281 27,000
Effect of dilutive securities:
Stock Options..................... 956 58 --
------------ ------------ ------------
Denominator for net income per
share, diluted*.................... 29,008 27,339 27,000
============ ============ ============
Net income per share*............... $ 0.80 $ 0.59 $ 0.46
============ ============ ============
Net income per share, diluted*...... $ 0.78 $ 0.59 $ 0.46
============ ============ ============
- --------
*Pro forma for 1996.
The effect on net income per share, diluted, would be anti-dilutive if the
conversion of the 4 1/2% convertible subordinated notes had been assumed in
the computation. For additional information regarding the 4 1/2% convertible
subordinated notes and stock options, refer to Notes 6 and 11, respectively.
10. RELATED PARTY TRANSACTIONS
John Dane III, Chief Executive Officer and Chairman of the Company, acquired
25% of the stock of United States Marine, Inc. ("USMI") in June 1996 and an
additional 10% in July 1997, Mr. Dane has committed to acquire an additional
40% of the stock of USMI over the next four years. USMI manufactures custom
composite marine products for various customers and performs services for the
Company as a subcontractor with respect to the production of high-speed
composite vessels for the U.S. Navy. During fiscal 1998, 1997 and 1996, the
Company paid USMI approximately $4.8 million, $7.2 million and $5.5 million,
respectively, for subcontractor services.
Prior to his association with the Company, Rick S. Rees, Executive Vice
President and Chief Financial Officer, was a stockholder of Maritime Holdings,
Inc. ("MHI") and its President. MHI owned 80% of the outstanding capital stock
of Texas Drydock, Inc. ("TDI"). On February 14, 1997, the Company contracted
to acquire 51% of the outstanding capital stock of MHI; 51% of the remaining
20% of the capital stock of TDI not owned by MHI; and options to acquire the
other 49%. At the closing in April 1997, at which time Mr. Rees was a director
of the Company, he received $2.8 million. On May 16, 1997, the Company
purchased the other 49% of the outstanding stock of MHI. At the second
closing, Mr. Rees received a note from the Company in the principal sum of
$4.1 million, bearing interest at the rate of 7.1% per annum, payable in full,
principal and interest, on January 15, 1998 (the "Purchase Price Note"), and a
15.18% interest in a $1.0 million note, payable by the Company and delivered
in escrow, providing a similar interest rate (the "Escrow Note"). During
fiscal 1998, the Company pre-paid the Purchase Price Note, principal and
interest, in the amount of $4.2 million and, under the Escrow Note, interest
earned under the Escrow Note of $4,576.
In fiscal 1997, subsequent to its initial public offering, the Company
repaid to Trinity its intercompany balance, including $21.6 million for income
taxes and $25.0 million in debt assumed by the Company from Trinity. Such
amounts aggregated approximately $79.0 million.
36
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
As of March 31, 1997, the Company had a receivable from Trinity of $11.5
million, representing the year-end settlement of excess amounts of income tax
estimates paid to Trinity during the year, the settlement of the Company's
portion of assets in Trinity's captive insurance subsidiary, and various other
intercompany charges and credits.
Upon completion of the initial public offering, the Company and Trinity
entered into various agreements for the purpose of establishing the terms
governing their on-going arrangements and relationships. These agreements
contained various provisions including a non-compete provision, a provision
regarding the settlement of income tax matters and a provision related to the
settlement of other transactions between the Company and Trinity. The
agreements are not expected to have a significant impact on the Company's
business, financial position, results of operations or liquidity.
11. STOCK OPTIONS
On September 24, 1996, the Company established the 1996 Stock Option and
Incentive Plan which was amended and restated on July 15, 1997 (the "1996
Plan"). The 1996 Plan provides for awards to employees and directors in the
form of grants of stock options, stock appreciation rights, restricted or non-
restricted stock or units denominated in stock (collectively referred to as
"Awards"). All stock options granted under the 1996 Plan vest in equal annual
amounts over a five-year period and expire 10 years from the date of grant.
The 1996 Plan also provides that shares of common stock which are the subject
of awards that are forfeited or terminated, expire unexercised, are settled in
cash in lieu of common stock or in a manner such that all or some of the
shares covered thereby are not issued or are exchanged for Awards that do not
involve common stock will again immediately become available for Awards under
the 1996 Plan. A total of 3,600,000 shares are authorized to be issued under
the Plan.
Following is a summary of the option activity for the years ended March 31,
1998 and 1997:
--------------------
WEIGHTED-
AVERAGE
SHARES PRICE
--------- ---------
Outstanding at April 1, 1996............................ -- $ --
Granted............................................... 375,000 7.33
---------
Outstanding at March 31, 1997........................... 375,000 7.33
Granted............................................... 2,656,000 15.35
Cancelled............................................. (16,500) 8.15
Exercised............................................. (12,300) 7.33
---------
Outstanding at March 31, 1998........................... 3,002,200 $14.42
========= ======
Exercisable at March 31, 1998........................... 60,300 $ 7.33
========= ======
Exercisable at March 31, 1997........................... -- $ --
========= ======
The following table summarizes information about stock options outstanding
at March 31, 1998:
<TABLE>
<CAPTION>
------------------------------- ---------------------
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------- ---------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE PRICE RANGE PER NUMBER REMAINING EXERCISE NUMBER EXERCISE
SHARE OUTSTANDING LIFE PRICE EXERCISABLE PRICE
------------------------ ----------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$7.33 to $16.50......... 2,074,200 9.2 years $10.17 60,300 $7.33
$19.33 to $27.25........ 606,500 9.6 years $19.69 -- --
$30.50 to $34.88........ 321,500 9.6 years $31.89 -- --
</TABLE>
The Company accounts for options granted under the 1996 Plan as prescribed
by the provisions of APB 25 and, accordingly, no compensation expense has been
recognized for stock options granted. Had compensation expense for the 1996
Plan been
37
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
determined based on the fair value at the grant dates consistent with the
method of SFAS 123, the Company's net income and net income per share would
have been reduced to the pro forma amounts indicated below. For purposes of
these pro forma disclosures, the estimated fair value of the options granted
in fiscal 1998 and 1997 are amortized to expense over the options' vesting
period.
---------------------------------
YEAR ENDED MARCH 31,
---------------------------------
1998 1997
---------------- ----------------
AS PRO AS PRO
REPORTED FORMA REPORTED FORMA
-------- ------- -------- -------
(IN THOUSANDS, EXCEPT NET INCOME
PER SHARE)
Net income................................ $22,516 $19,343 $16,116 $15,912
Net income per share, diluted............. $ 0.78 $ 0.67 $ 0.59 $ 0.58
The weighted-average grant date fair value of options granted during the
year ended March 31, 1998 was $9.23. The fair value of options was calculated
using the Black-Scholes option pricing model using the following weighted-
average assumptions for fiscal year activity: risk-free interest rate of
5.70%, expected life of 7 years, expected volatility of .519 and no dividend
yield.
The weighted-average grant date fair value of options granted during the
year ended March 31, 1997 was $4.54. The fair value of options was calculated
using the Black-Scholes option pricing model using the following weighted-
average assumptions for fiscal year activity: risk-free interest rate of
5.98%, expected life of 7 years, expected volatility of .801 and no dividend
yield.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing model does not necessarily
provide a reliable single measure of the fair value of its employee stock
options.
12. EMPLOYEE BENEFIT PLANS
The Company maintains a pension plan which was curtailed effective March 31,
1998. The plan provides income and death benefits for eligible employees who
were members of the plan at the time of curtailment. The Company's policy is
to fund retirement costs accrued but only to the extent such amounts are
deductible for income tax purposes. Plan assets include cash, short-term debt
securities, and other investments. Benefits are based on years of credited
service and compensation. The curtailment of plan benefits, which had an
immaterial effect on operating results, has been recognized in all actuarial
calculations.
Net periodic pension expense includes the following components:
--------------------
YEAR ENDED MARCH
31,
--------------------
1998 1997 1996
------ ---- ------
(IN THOUSANDS)
Service cost-benefits earned during the period......... $1,035 $807 $ 598
Interest cost on projected benefit obligation.......... 572 501 386
Actual return on assets................................ (2,248) 143 (1,112)
Net amortization and deferral ......................... 1,400 (603) 699
------ ---- ------
Net periodic pension expense........................... $ 759 $848 $ 571
====== ==== ======
38
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Amounts recognized in the Company's consolidated balance sheets follow:
--------------
MARCH 31,
--------------
1998 1997
------ ------
(IN
THOUSANDS)
Actuarial present value of benefit obligation:
Vested benefit obligation.................................. $6,683 $3,946
====== ======
Accumulated benefit obligation............................. $7,789 $4,875
====== ======
Projected benefit obligation................................. $7,789 $6,644
Plan assets at fair value.................................... 7,683 5,437
------ ------
Projected benefit obligation in excess of plan assets........ (106) (1,207)
Unrecognized net asset at April 1, 1997...................... -- (42)
Unrecognized net loss........................................ -- 1,903
------ ------
(Accrued) prepaid pension expense............................ $ (106) $ 654
====== ======
A discount rate of 7.00% was assumed for the valuation of the projected
benefit obligation for 1998. Assumptions used for the valuation of the
projected benefit obligation for 1997 and 1996 were a discount rate of 7.75%,
an increase in compensation levels of 4.75% and an expected long-term rate of
return on assets of 9.00%.
The Company has a contributory 401(k) plan in which employees of the Company
may participate. Under the plan, eligible employees are allowed to make
voluntary pre-tax contributions which are matched, up to certain limits, by
the Company. Expenses related to this plan approximated $1,957,000, $896,000
and $614,000 in 1998, 1997 and 1996, respectively.
13. INCOME TAXES
For the years ended March 31, 1997 and 1996, the Company was included in the
consolidated federal income tax return of Trinity. Trinity allocated income
taxes to the Company in amounts approximating income taxes that the Company
would have been obligated to pay on a separate tax return basis. The Company
and Trinity entered into a tax allocation agreement under which the Company
and Trinity have agreed upon the allocation of certain tax liabilities and
related matters for those periods. The Company will file its own consolidated
federal income tax return for the fiscal year ended March 31, 1998.
The significant components of the provision (benefit) for income taxes
follow:
-----------------------
YEAR ENDED MARCH 31,
-----------------------
1998 1997 1996
------ ------- -------
(IN THOUSANDS)
Current:
Federal........................................... $9,167 $ 3,440 $13,475
State............................................. 1,086 1,685 2,310
------ ------- -------
10,253 5,125 15,785
Deferred:
Federal........................................... (970) 4,771 (6,692)
State............................................. (86) 991 (991)
------ ------- -------
(1,056) 5,762 (7,683)
------ ------- -------
Total........................................... $9,197 $10,887 $ 8,102
====== ======= =======
39
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred income taxes are provided for temporary differences between the
carrying amount of assets and liabilities for financial reporting purposes and
the carrying amount for income tax purposes. The components of deferred tax
liabilities and assets follow:
-------------
MARCH 31,
-------------
1998 1997
------ ------
(IN
THOUSANDS)
Deferred tax liabilities:
Depreciation and amortization............................... $8,517 $3,555
Long-term contracts......................................... -- 257
Pensions and other benefits................................. 757 640
Other ...................................................... 26 62
------ ------
Total deferred tax liabilities............................ 9,300 4,514
------ ------
Deferred tax assets:
Long-term contracts......................................... 1,439 --
Reserve for unpaid insurance claims......................... 836 1,617
------ ------
Total deferred tax assets................................. 2,275 1,617
------ ------
Net deferred tax liability.................................... $7,025 $2,897
====== ======
A reconciliation between the effective tax rate and the statutory tax rate
is as follows:
-----------------
YEAR ENDED
MARCH 31,
-----------------
1998 1997 1996
----- ---- ----
Statutory rate............................................ 35.0% 35.0% 35.0%
Research and experimentation tax credits.................. (11.0) -- --
Non-deductible goodwill amortization...................... 6.3 -- --
State taxes, net of federal benefit....................... 2.2 4.1 4.2
Other..................................................... (3.5) 1.2 0.2
----- ---- ----
Effective tax rate........................................ 29.0% 40.3% 39.4%
===== ==== ====
14. STOCKHOLDER RIGHTS PLAN
The Company has adopted a stockholder rights plan under which one right is
assigned to each share of common stock. Each right entitles the stockholder to
purchase from the Company one one-hundredth of a share of Series A Preferred
Stock at an exercise price to be determined by the Board when the rights are
issued. The rights are not exercisable or detachable from the common stock
until ten business days after a person acquires beneficial ownership of 15% or
more of the common stock or if a person or group commences a tender or
exchange offer upon consummation of which that person or group would
beneficially own 15% or more of the common stock.
If any person becomes a beneficial owner of 15% or more of the common stock
other than pursuant to an offer, as defined, for all shares determined by
certain directors to be fair to the stockholders and otherwise in the best
interests of both the Company and its stockholders (other than by reason of
share purchases by the Company), each right not owned by that person or
related parties enables its holder to purchase, at the right's then current
exercise price, shares of the Company's common stock having a calculated value
of twice the right's exercise price.
The rights, which are subject to adjustment, may be redeemed by the Company
at a price of one cent per right at any time prior to their expiration ten
years from issuance or the point at which they become exercisable.
40
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
15. COMMITMENTS AND CONTINGENCIES
The Company is involved in various claims and lawsuits incidental to its
business. In the opinion of management, these claims and suits in the
aggregate will not have a material adverse effect on the Company's financial
position, results of operations or liquidity.
Prior to September 30, 1996, Trinity had guaranteed certain contract
performance obligations of the Company. These guarantees, bonds, letters of
credit and similar obligations will remain in effect until they expire and
Trinity will remain liable until that time as any other guarantor. The Company
has indemnified Trinity for any losses incurred by Trinity under this
arrangement.
Subsequent to September 30, 1996, the Company obtained its own contract bid
and performance bonds, letters of credit and similar obligations in connection
with its business. As of March 31, 1998 the total of all outstanding
performance obligations was approximately $38 million.
16. SUPPLEMENTARY UNAUDITED QUARTERLY DATA
-----------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
Year ended March 31, 1998:
Contract revenue earned.................. $149,069 $151,198 $180,569 $189,402
Gross profit............................. $ 18,565 $ 21,653 $ 26,559 $ 13,882
Net income............................... $ 5,411 $ 7,812 $ 8,755 $ 538
Net income per share..................... $ 0.20 $ 0.28 $ 0.31 $ 0.02
Net income per share, diluted............ $ 0.19 $ 0.27 $ 0.29 $ 0.02
Year ended March 31, 1997:
Contract revenue earned.................. $ 85,981 $ 94,457 $112,496 $113,863
Gross profit............................. $ 11,286 $ 12,779 $ 12,558 $ 14,965
Net income............................... $ 3,342 $ 3,871 $ 4,192 $ 4,711
Net income per share..................... $ 0.12 $ 0.14 $ 0.15 $ 0.17
Net income per share, diluted............ $ 0.12 $ 0.14 $ 0.15 $ 0.17
Results for the fourth quarter of fiscal 1998 were adversely impacted by
increased production costs in the Company's marine vessel product line within
the Vessels segment. The Company's growing backlog resulted in increased
demands on engineering support and production resulting in some
inefficiencies. Costs on certain new projects rose beyond original estimates,
in part, because of the recent addition of many new, less experienced
shipbuilders. Additionally, unprecedented inclement weather during the quarter
caused production delays and a subsequent increase in the amount of planned
overtime.
41
<PAGE>
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANT ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS
Information concerning Directors and Executive Officers is incorporated by
reference from the Proxy Statement for the Annual Meeting of Stockholders to
be held July 28, 1998.
ITEM 11: EXECUTIVE COMPENSATION
Information concerning executive compensation is incorporated by reference
from the proxy statement described in Item 10 of this report.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning security ownership of certain beneficial owners and
management is incorporated by reference from the proxy statement described in
Item 10 of this report.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions is
incorporated by reference from the proxy statement described in Item 10 of
this report.
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.1**** --Form of Indenture dated September 15, 1997 between the Company
and the United States Trust Company of Texas, N.A., as Trustee for
the Company's 4 1/2% Convertible Subordinated Notes due 2004.
4.2**** --Form of Registration Rights Agreement dated September 15, 1997,
among the Company and Donaldson, Lufkin & Jenrette Securities
Corporation and Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
10.1* --Form of Amended and Restated Extension and Modification of
Noncompetition Agreement between Halter Marine Group, Inc. and
Daniel J. Mortimer dated April 1, 1998.
10.2***** --Form of Asset Purchase Agreement among the Company, AEPI
Acquisition, Inc., AmClyde Engineered Products, Inc. and Wallace
K. Fisk, Jr.
10.3***** --Form of Agreement and Plan of Merger by and among the Company,
Utility Acquisition, Inc., Utility Steel Fabrication, Inc. and the
shareholders of Utility Steel Fabrications, Inc.
10.4****** --Form of Revolving Credit Agreement, effective October 31, 1997 by
and among Halter Marine Group, Inc., as Borrower, Whitney National
Bank, as Administrative Agent, BankBoston, N.A., as Syndication
Agent, The First National Bank of Chicago, as Documentation Agent,
and other banks named therein.
10.5* --Form of Trust Indenture between Mississippi Business Finance
Corporation and Southtrust Bank, National Association, as Trustee,
and Loan Agreement between Mississippi Business Finance
Corporation and Halter Marine Group, Inc. dated January 1, 1998.
10.6** --Stock Purchase Agreement dated February 14, 1997 by and among
Thomas C. Weller, Jr., Ronald J. Stevens, Rick S. Rees, Don O.
Covington and Halter Marine, Inc.
10.7** --Amendment No. 1 to Stock Purchase Agreement dated February 14,
1997 by and among Thomas C. Weller, Jr., Ronald J. Stevens, Rick
S. Rees, Don O. Covington and Halter Marine, Inc.
10.8*** --Amendment No. 2 to Stock Purchase Agreement dated February 14,
1997 by and among Thomas C. Weller, Jr., Ronald J. Stevens, Rick
S. Rees, Don O. Covington and Halter Marine, Inc.
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.9** --Escrow Agreement dated April 4, 1997 among Halter Marine, Inc.,
Thomas C. Weller, Jr., Ronald J. Stevens, Rick S. Rees, Don O.
Covington and Bank One, Louisiana, National Association.
10.10** --Covington Employment Agreement dated April 4, 1997 by and between
Texas Drydock, Inc. and Don O. Covington.
10.11* --Form of Nonqualified Deferred Compensation Plan effective as of
April 1, 1998.
21* --Subsidiaries of the Company
23* --Consent of Ernst & Young LLP
27* --Financial Data Schedule
</TABLE>
- --------
* Filed herewith
** Incorporated by reference to exhibits to Form 8-K filed April 17, 1997
with the Securities and Exchange Commission.
*** Incorporated by reference to exhibits to Form 8-K/A filed on June 2,
1997 with the Securities and Exchange Commission.
**** Incorporated by reference to exhibits in Amendment No. 1 to the
Registration Statement (Registration No. 333-38491) filed on December
29, 1997 with the Securities and Exchange Commission.
***** Incorporated by reference to exhibits in Amendment No. 1 to the
Registration Statement (Registration No. 333-39379) filed on November
26, 1997 with the Securities and Exchange Commission.
****** Incorporated by reference to exhibits to Form 8-K filed November 12,
1997 with the Securities and Exchange Commission.
(b) Financial Statement Schedules
Copies of Consolidated Financial Statements are included within Form 10-K
and are incorporated herein by reference (See Index To Consolidated Financial
Statements at page 22 of Form 10-K).
Financial Statement Schedules other than the Financial Statements have been
omitted because the required information is contained in the consolidated
financial statements and notes thereto or because such schedules are not
required or applicable.
(c) Reports on Form 8-K
The following Forms 8-K were filed with the Securities and Exchange
Commission during the fourth quarter of fiscal 1998 on the dates indicated:
1. Announcement regarding expected earnings for the fourth quarter of
fiscal 1998 filed on March 13, 1998.
43
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934. The registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
HALTER MARINE GROUP, INC.
By: /s/ John Dane III
-----------------------------------
John Dane III
Chairman, President and
Chief Executive Officer
Date: June 29, 1998
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<S> <C>
</TABLE>
SIGNATURE TITLE DATE
/s/ John Dane III Chairman, President, June 29, 1998
- ----------------------------------- Chief Executive
JOHN DANE III Officer and
Chairman
/s/ Rick S. Rees Executive Vice June 29, 1998
- ----------------------------------- President, Chief
RICK S. REES Financial Officer,
and Director
/s/ Keith L. Voigts Senior Vice June 29, 1998
- ----------------------------------- President and Chief
KEITH L. VOIGTS Accounting Officer
/s/ Daniel J. Mortimer Executive Vice June 29, 1998
- ----------------------------------- President, Chief
DANIEL J. MORTIMER Operating Officer,
and Director
/s/ Kenneth W. Lewis Director June 29, 1998
- -----------------------------------
KENNETH W. LEWIS
44
<PAGE>
EXHIBIT 10.1
AMENDED AND RESTATED EXTENSION AND MODIFICATION
OF NONCOMPETITION
AGREEMENT
This Amended and Restated Extension and Modification of Noncompetition
Agreement (this "Extension") is entered into as of the 1st day of April 1998, by
and between Halter Marine Group, Inc., a Delaware corporation ("Halter"), and
Daniel J. Mortimer ("Mortimer").
WHEREAS, Mortimer, Trinity Industries, Inc. ("Trinity") and A. Fred May
entered into that certain Acquisition and Reorganization Agreement dated as of
October 31, 1994 (the "Gulf Coast Acquisition Agreement"), pursuant to which
Trinity acquired Gulf Coast Fabrication, Inc. ("Gulf Coast");
WHEREAS, in order to preserve the goodwill of Gulf Coast, Mortimer entered
into certain noncompetition covenants with Trinity, as set forth in Article II
of the Gulf Coast Acquisition Agreement (the "Existing Noncompetition
Covenants");
WHEREAS, Halter is the successor to Trinity's marine vessel construction
business and, therefore, is entitled to the benefit of the Existing
Noncompetition Covenants;
WHEREAS, as a result of certain provisions set forth in Article II of the
Gulf Coast Acquisition Agreement, Trinity's transfer of its marine vessel
construction business to Halter would, if not for this Extension, result in the
termination of the Existing Noncompetition Covenants as of March 31, 1998;
WHEREAS, the parties desire to preserve the goodwill of Gulf Coast by
extending the Existing Noncompetition Covenants in certain respects;
WHEREAS, in order to effect the purposes of the foregoing recitals, the
parties entered into that certain Extension and Modification of Noncompetition
Agreement dated as of the 20th day of November, 1997 (the "Original
Extension");
WHEREAS, the Original Extension failed to accurately reflect the agreement
of the parties in certain respects; and
WHEREAS, the parties are entering into this Extension in order to amend,
restate and replace the Original Extension in its entirety.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, in order to preserve the goodwill of
Gulf Coast, the parties hereto hereby agree as follows:
<PAGE>
1. During the Noncompetition Period (as defined below), Mortimer will not
engage, directly or indirectly, either as an employee, consultant, partner,
joint venturer, trustee, officer or director of any person, partnership, trust,
corporation or other entity, or as a shareholder of a corporation of which he
owns more than ten percent (10%) of any class of stock, anywhere in the
continental United States, in the manufacture, fabrication or sale of marine
products of the type and variety that in the past have been manufactured or
fabricated by Gulf Coast, Halter or any of their respective predecessors.
2. As consideration for the covenant of Mortimer set forth in Section 1
hereof, Halter shall pay to Mortimer the sum of $250,000 on or prior to April 1
of each of 1998, 1999 and 2000. Additional payments may be made, at the
election of Halter, at the beginning of Halter's fiscal years (each, a "Fiscal
Year") subsequent to the Fiscal Year beginning on April 1, 2000 in accordance
with the terms described in Section 3 below.
3. As used herein, the term "Noncompetition Period" means the longer of
(i) the period commencing on April 1, 1998 and ending on March 31, 2001 (the
"Initial Noncompetition Period") or (ii) the period commencing on April 1, 1998
and ending on the date specified for termination of the Noncompetition Period in
this paragraph 3. The Noncompetition Period may, at the sole election of
Halter, be extended beyond the Initial Noncompetition Period in accordance with
the following provisions:
(a) If, at the beginning of any Fiscal Year which begins following the
expiration of the Initial Noncompetition Period, Mortimer is still employed by
Halter or any of its subsidiaries, then Halter may extend the Noncompetition
Period through the end of such Fiscal Year. Any such extension pursuant to this
paragraph 3(a) for any particular Fiscal Year shall be deemed to be made if
Halter pays to Mortimer an additional $250,000 fee on or prior to April 10 of
such Fiscal Year.
(b) If, during the Initial Noncompetition Period, Mortimer ceases to be
employed by Halter or any of its subsidiaries for any reason, then Halter may,
at its sole option, extend the Noncompetition Period beyond the expiration of
the Initial Noncompetition Period for one or more additional Fiscal Years;
provided, that Halter may not extend the Noncompetition Period, pursuant to this
paragraph 3(b), beyond the end of the third full Fiscal Year following the
Fiscal Year in which such termination of employment occurs. Any extension
pursuant to this paragraph 3(b) for any particular Fiscal Year following
expiration of the Initial Noncompetition Period shall be deemed to be made if
Halter pays to Mortimer an additional $250,000 fee on or prior to April 10 of
such Fiscal Year.
(c) If, following expiration of the Initial Noncompetition Period, Mortimer
ceases to be employed by Halter or any of its subsidiaries for any reason, then
Halter may, at its sole option, extend the Noncompetition Period for one or more
additional Fiscal Years; provided, that Halter may not extend the Noncompetition
Period, pursuant to this paragraph 3(c), beyond the end of the third full Fiscal
Year following the Fiscal Year in which such termination of employment occurs.
Any extension pursuant to this paragraph 3(c) for any particular Fiscal Year
following such termination of employment shall be deemed to be made if Halter
pays to Mortimer an additional $250,000 fee on or prior to April 10 of such
Fiscal Year.
<PAGE>
(d) Notwithstanding the foregoing, Halter may not extend the Noncompetition
Period pursuant to paragraphs 3(a), (b) or (c) hereof if, prior to the date on
which such extension otherwise would be effective, the Noncompetition Period has
terminated (provided, that if the Noncompetition Period would terminate as of
the end of a particular Fiscal Year but Halter properly elects to extend the
Noncompetition Period pursuant to paragraphs 3(a), (b) or (c) by paying the
applicable $250,000 on or prior to April 10 of the next succeeding Fiscal Year,
then the Noncompetition Period will not be deemed to have terminated prior to
such extension).
4. This Extension constitutes the entire agreement of the parties with
respect to the subject matter hereof.
5. This Extension shall be interpreted in accordance with the internal
laws of the State of Mississippi.
HALTER MARINE GROUP, INC.
By: /s/ John Dane III
--------------------------
Title: President
/s/ Daniel J. Mortimer
- -------------------------------
<PAGE>
EXHIBIT 10.5
- --------------------------------------------------------------------------------
TRUST INDENTURE
BETWEEN
MISSISSIPPI BUSINESS FINANCE CORPORATION
AND
SOUTHTRUST BANK, NATIONAL ASSOCIATION, AS TRUSTEE
______________
JANUARY 1, 1998
______________
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions................................................ 4
ARTICLE II
DESCRIPTION, AUTHORIZATION, MANNER OF
EXECUTION, AUTHENTICATION, REGISTRATION AND
TRANSFER OF BONDS
SECTION 2.01. Authorization of Bonds..................................... 17
SECTION 2.02. 1998 Series Bonds.......................................... 17
SECTION 2.03. Redemption................................................. 17
SECTION 2.04. Mandatory Sinking Fund Redemption.......................... 19
SECTION 2.05. Method of Partial Redemption............................... 19
SECTION 2.06. Additional Bonds........................................... 20
SECTION 2.07. Bonds Mutilated, Destroyed, Stolen or Lost................. 20
SECTION 2.08. Temporary Bonds............................................ 21
SECTION 2.09. Execution.................................................. 22
SECTION 2.10. Negotiability, Transfer and Registry....................... 22
SECTION 2.11. Regulations with Respect to Exchanges and Transfers........ 22
SECTION 2.12. Authentication............................................. 23
SECTION 2.13. Destruction of Bonds....................................... 23
ARTICLE III
AUTHENTICATION AND DELIVERY OF BONDS
SECTION 3.01. Bonds Equally and Ratably Secured.......................... 24
SECTION 3.02. Provisions for Issuance of 1998 Series Bonds............... 24
SECTION 3.03. Provisions for Issuance of Additional Bonds................ 25
SECTION 3.04. Provisions for Issuance of Refunding Bonds................. 27
SECTION 3.05. Limited Obligations........................................ 27
ARTICLE IV
CONSTRUCTION AND ACQUISITION OF PROJECT
SECTION 4.01. Covenant to Proceed With Reasonable Dispatch; Revision
of Plans and Specifications................................ 29
SECTION 4.02. Covenant to Comply with Laws............................... 29
<PAGE>
TABLE OF CONTENTS (CONTINUED)
PAGE
ARTICLE V
CONSTRUCTION FUND
SECTION 5.01. Establishment of Construction Fund......................... 30
SECTION 5.02. Held in Trust.............................................. 30
SECTION 5.03. Use of Moneys.............................................. 30
SECTION 5.04. Retention of Requisitions.................................. 30
SECTION 5.05. Completion of Project...................................... 30
SECTION 5.06. Completion of Project - Default............................ 31
ARTICLE VI
BOND FUND
SECTION 6.01. Establishment of Bond Fund................................. 32
SECTION 6.02. Flow of Funds.............................................. 32
ARTICLE VII
SECURITY FOR AND INVESTMENT OF MONEYS
SECTION 7.01. Security................................................... 34
SECTION 7.02. Investment of Funds........................................ 34
SECTION 7.03. Transfer of Balance........................................ 34
ARTICLE VIII
REDEMPTION OF BONDS
SECTION 8.01. Method of Redemption....................................... 35
SECTION 8.02. Notice of Redemption....................................... 35
SECTION 8.03. Payment of Redeemed Bonds.................................. 35
ARTICLE IX
PARTICULAR COVENANTS OF THE ISSUER
SECTION 9.01. Payment of Bonds........................................... 37
SECTION 9.02. Maintain Its Existence..................................... 37
ii
<PAGE>
TABLE OF CONTENTS (CONTINUED)
PAGE
SECTION 9.03. Payments Under Loan Agreement; No Amendment to
Loan Agreement without Consent............................. 37
SECTION 9.04. Further Documents.......................................... 38
SECTION 9.05. Payment of Taxes and Assessments; Compliance with
Regulations; No Creation of Liens or Charges............... 38
SECTION 9.06. Extension of Payment of Bonds.............................. 38
ARTICLE X
DEFAULTS AND REMEDIES
SECTION 10.01. Events of Default.......................................... 39
SECTION 10.02. Right to Declare Bonds Due and Payable..................... 40
SECTION 10.03. Proceedings by Trustee..................................... 40
SECTION 10.04. Effect of Discontinuance or Abandonment.................... 41
SECTION 10.05. Rights of Bondholders...................................... 41
SECTION 10.06. Restriction on Bondholders' Action......................... 41
SECTION 10.07. Power of Trustee to Enforce................................ 42
SECTION 10.08. Remedies Not Exclusive..................................... 42
SECTION 10.09. Effect of Waiver........................................... 42
SECTION 10.10. Application of Moneys...................................... 42
ARTICLE XI
CREDIT FACILITY
SECTION 11.01. Delivery of Letter of Credit............................... 44
SECTION 11.02. Credit Facility Drawings................................... 44
SECTION 11.03. Disposition of Moneys Drawn Under the Credit Facility...... 45
SECTION 11.04. Alternate Letter of Credit................................. 45
ARTICLE XII
CONCERNING THE TRUSTEE
SECTION 12.01. Appointment and Acceptance of Duties....................... 47
SECTION 12.02. Responsibilities........................................... 47
SECTION 12.03. Powers..................................................... 47
SECTION 12.04. Compensation............................................... 47
SECTION 12.05. No Duty to Maintain Insurance.............................. 47
SECTION 12.06. Notice of Event of Default................................. 48
SECTION 12.07. Trustee's Actions.......................................... 48
iii
<PAGE>
TABLE OF CONTENTS (CONTINUED)
PAGE
SECTION 12.08. Limitation of Liability.................................... 48
SECTION 12.09. Ownership of Bonds......................................... 49
SECTION 12.10. No Duty to Invest.......................................... 49
SECTION 12.11. Construction of Provisions of Indenture.................... 49
SECTION 12.12. Resignation................................................ 49
SECTION 12.13. Removal.................................................... 49
SECTION 12.14. Appointment of Successor Trustee........................... 49
SECTION 12.15. Successor to be a Bank..................................... 50
SECTION 12.16. Failure to Appoint a Successor Trustee..................... 50
SECTION 12.17. Acceptance by Successor Trustee............................ 50
SECTION 12.18. Merger or Consolidation.................................... 50
SECTION 12.19. Action Upon Event of Default............................... 51
SECTION 12.20. Notice of Occurrence of Event of Default................... 51
SECTION 12.21. Intervention by Trustee.................................... 51
SECTION 12.22. Appointment and Acceptance of Paying Agent................. 51
SECTION 12.23. Resignation or Removal of Paying Agent; Appointment of
Successor.................................................. 51
SECTION 12.24. Trust Estate May Be Vested in Separate or Co-Trustee....... 52
ARTICLE XIII
EXECUTION OF INSTRUMENTS BY BONDHOLDERS AND
PROOF OF OWNERSHIP OF BONDS
SECTION 13.01. Execution of Instruments; Proof of Ownership............... 53
ARTICLE XIV
MODIFICATION OF INDENTURE AND SUPPLEMENTAL
INDENTURES
SECTION 14.01. Supplemental Indentures with Consent of the Company,
But Without Consent of Bondholders......................... 54
SECTION 14.02. Trustee Authorized to Enter Into Supplemental Indenture.... 55
SECTION 14.03. Supplemental Indentures with Consent of Bondholders and
the Company................................................ 55
ARTICLE XV
DEFEASANCE
SECTION 15.01. Defeasance................................................. 56
SECTION 15.02. Bonds Deemed to Have Been Paid............................. 57
iv
<PAGE>
TABLE OF CONTENTS (CONTINUED)
PAGE
ARTICLE XVI
MISCELLANEOUS
SECTION 16.01. Dissolution of Issuer...................................... 59
SECTION 16.02. Parties Interested Herein.................................. 59
SECTION 16.03. Severability of Invalid Provisions......................... 59
SECTION 16.04. No Recourse on Bonds....................................... 59
SECTION 16.05. Notice..................................................... 59
SECTION 16.06. Counterparts............................................... 60
SECTION 16.07. Governing Law.............................................. 60
ARTICLE XVII
BOND FORM
SECTION 17.01. Bond Form.................................................. 61
v
<PAGE>
THIS TRUST INDENTURE, dated as of January 1, 1998, between the Mississippi
Business Finance Corporation (the "Issuer"), a public corporation organized and
existing under the laws of the State of Mississippi (the "State"), and
SouthTrust Bank, National Association, as trustee (the "Trustee"), a national
banking association organized and existing under the laws of the United States
of America;
WITNESSETH:
WHEREAS, the Issuer is authorized by the provisions of Sections 57-10-401
et seq., Mississippi Code of 1972, as amended and supplemented and Sections 57-
10-201 et seq., Mississippi Code of 1972, as amended and supplemented
(collectively, the "Act"), to, among other things, provide and finance "economic
development projects" (as defined in the Act) in the State in order to promote,
foster and support economic development within the State and to finance such
projects by the issuance of revenue bonds; and
WHEREAS, the Issuer has duly authorized as a project under the Act the
following by Halter Marine Group, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Company"): (a) the acquisition and
improvement on the Project Site (as hereinafter defined) of the Building (as
hereinafter defined) and (b) the acquisition and installation therein and
thereon of the Equipment (as hereinafter defined), which Project Site, Building
and Equipment together, shall constitute the Project (as hereinafter defined);
and
WHEREAS, the Issuer desires to authorize the issuance of its revenue bonds
hereunder, to secure the payment of the principal, Make-Whole Premium, if
applicable, and the interest thereon and any other payments required under this
Indenture and to assure the performance and observance of the covenants and
conditions herein contained in order to finance the construction, installation
and equipping of the Project; and
WHEREAS, the Issuer has entered into a Loan Agreement dated as of the date
hereof (the "Loan Agreement") with the Company under which the Company has
agreed to construct, install and equip and/or cause to be constructed, installed
and equipped the Project with the proceeds of the loan from the Issuer and to
repay such loan to the Issuer; and
WHEREAS, the Issuer has determined to issue hereunder an initial series of
bonds to be designated as Mississippi Business Finance Corporation Taxable
Revenue Bonds, Series 1998 (Halter Marine Group, Inc. Project) (the "1998 Series
Bonds") in the principal amount of $30,000,000, the proceeds of which are to be
used by the Company to pay the costs of constructing, installing and equipping
the Project; and
WHEREAS, to further secure the 1998 Series Bonds, the Company has
authorized, executed and delivered a Note (as hereinafter defined) to the
Issuer, which Note the Issuer has assigned to the Trustee; and
WHEREAS, to further secure the prompt payment of the 1998 Series Bonds, the
Company concurrently with the execution hereof, has procured an irrevocable
direct-pay Letter of Credit (as hereinafter defined) from The First National
Bank of Chicago (the "Bank") in favor of the Trustee and for the benefit of the
holders of the 1998 Series Bonds; and
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WHEREAS, the Issuer, at a meeting thereof duly convened and held, has duly
authorized the execution and delivery of this Indenture and the execution and
issuance hereunder of the 1998 Series Bonds upon and subject to the terms and
conditions hereinafter set forth; and
WHEREAS, all acts and things have been done and performed which are
necessary to make the 1998 Series Bonds, when executed and issued by the Issuer,
authenticated by the Trustee and delivered, the valid and binding legal
obligations of the Issuer in accordance with their terms and to make this
Indenture a valid and binding agreement for the security of the 1998 Series
Bonds authenticated and delivered under this Indenture;
NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, THIS TRUST INDENTURE
WITNESSETH:
That the Issuer, in consideration of the premises, the acceptance by the
Trustee of the trusts hereby created, the purchase and acceptance of the 1998
Series Bonds by the purchaser or purchasers thereof, one dollar duly paid to the
Issuer by the Trustee at or before the execution and delivery of these presents
and other good and valuable consideration, the receipt of which is hereby
acknowledged, and in order to secure the payment of the principal of, Make-Whole
Premium, if applicable, and interest on all Bonds outstanding hereunder from
time to time, according to their tenor and effect, and such other payments
required to be made under this Indenture, and to secure the observance and
performance by the Issuer of all the covenants, expressed or implied herein and
in the 1998 Series Bonds, does hereby grant, bargain, sell, convey, assign,
pledge and set over unto the Trustee, and unto its successors in the trusts
hereunder, and to them and their successors and assigns forever, all right,
title and interest of the Issuer in, to and under, subject to the terms and
conditions of this Indenture, any and all of the following:
(a) all loan payments, including amounts drawn under the Credit Facility
(as hereinafter defined) and other revenues and receipts to be derived by the
Issuer under the Loan Agreement;
(b) the Loan Agreement, including but not limited to the Issuer's rights
to receive the loan payments and other revenues and receipts payable thereunder,
the liens and security interests created thereby, and the Issuer's rights to
enforce the Loan Agreement, provided, however, that the Issuer hereby reserves
its rights under the Loan Agreement to receive notices, the payment of
Administrative Expenses (as hereinafter defined) and indemnification payments,
all as provided in the Loan Agreement;
(c) the Note, including, without limitation, all payments to be made by
the Company pursuant to the Note;
(d) the proceeds of the 1998 Series Bonds (subject to provisions pertaining
to the use thereof set forth herein and in the Loan Agreement) and all funds and
accounts held by the Trustee under this Indenture;
(e) any and all other property of every kind and nature from time to time
hereafter by delivery or by writing of any kind, conveyed, mortgaged, sold,
pledged, assigned and transferred, as and for additional security hereunder by
the Issuer or by any other person, firm or entity in its behalf
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or with its written consent to the Trustee, and the Trustee is hereby authorized
to receive any and all such property at any and all times and to hold and apply
the same subject to the terms hereof;
(f) any income received by the Trustee from the investment of the proceeds
of the 1998 Series Bonds and other funds held by the Trustee hereunder (subject
to provisions pertaining to the use thereof set forth herein and in the Loan
Agreement); and
(g) the proceeds of any of the foregoing;
TO HAVE AND TO HOLD all the same hereby pledged, conveyed and assigned, or
agreed or intended so to be, to the Trustee and its successors in said trust and
to it and its assigns forever;
PROVIDED, HOWEVER, that if the Issuer, its successors or assigns, shall
well and truly pay, or cause to be paid, the principal of the Bonds issued and
secured hereunder, Make-Whole Premium, if applicable, and the interest due or to
become due thereon, at the times and in the manner mentioned in such Bonds
according to the true intent and meaning thereof, shall well and truly keep,
perform and observe all the covenants and conditions pursuant to the terms of
this Indenture to be kept, performed and observed by it, and shall pay or cause
to be paid to the Trustee all sums of money due or to become due to it in
accordance with the terms and provisions hereof, then upon such final payments
this Indenture and all rights, titles and interests hereby granted shall cease
and terminate, otherwise this Indenture to be and remain in full force and
effect;
The payment of the principal of, Make-Whole Premium, if applicable, and
interest on the Bonds is further secured by an irrevocable direct-pay Letter of
Credit issued by the Bank in favor of the Trustee and for the benefit of the
holders and owners of the 1998 Series Bonds;
THIS TRUST INDENTURE FURTHER WITNESSETH:
That, and it is expressly declared, all Bonds issued and secured hereunder
are to be issued, authenticated and delivered and all of the rights and property
hereby pledged are to be dealt with and disposed of under, upon and subject to
the terms, conditions, stipulations, covenants, agreements, trusts, uses and
purposes as hereinafter expressed, and the Issuer has agreed and covenanted, and
does hereby agree and covenant, with the Trustee and with the respective holders
and owners, from time to time, of the said Bonds, as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. The terms set forth below shall have the
following meanings in this Indenture, unless the context clearly otherwise
requires. Except where the context otherwise requires, words importing the
singular number shall include the plural number and vice versa. Capitalized
terms used and not defined herein shall have the meanings ascribed to them in
the Loan Agreement and the Letter of Credit.
ACT:
"Act" shall mean Sections 57-10-401 et seq., Mississippi Code of 1972, as
amended and supplemented and Sections 57-10-201 et seq., Mississippi Code of
1972, as amended and supplemented.
ACT OF BANKRUPTCY:
"Act of Bankruptcy" shall mean any of the following events:
(a) The Company (or any other person or entity obligated, as guarantor or
otherwise, to make payments under the Loan Agreement or Credit Agreement), the
Issuer or the Affiliate shall (1) apply for or consent to the appointment of, or
the taking of possession by, a receiver, custodian, trustee, liquidator or the
like of the Company or such other person or entity, the Issuer or the Affiliate
or of all or any substantial part of its property, (2) commence a voluntary case
under the United States Bankruptcy Code (as now or hereafter in effect), or (3)
file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or adjustment
of debts; or
(b) A proceeding or case shall be commenced, without the application or
consent of the Company (or any other person or entity obligated, as guarantor or
otherwise, to make payments under the Loan Agreement or Credit Agreement), the
Issuer or the Affiliate in any court of competent jurisdiction, seeking (1) the
liquidation, reorganization, dissolution, winding-up or composition or
adjustment of debts of the Company or such other person or entity, the Issuer or
the Affiliate, (2) the appointment of a trustee, receiver, custodian, liquidator
or the like of the Company or such other person or entity, the Issuer or the
Affiliate, or of all or any substantial part of its property, or (3) similar
relief in respect of the Company or such other person or entity, the Issuer or
the Affiliate under any law relating to bankruptcy, insolvency, reorganization,
winding-up or composition or adjustment of debts.
ADDITIONAL BONDS:
"Additional Bonds" shall mean Bonds of any Series, other than the 1998
Series Bonds, duly issued, authenticated and delivered pursuant to this
Indenture.
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ADMINISTRATION EXPENSES:
"Administration Expenses" shall mean the reasonable and necessary fees,
costs or expenses incurred or payable by the Company being: (a) the Initial
Administrative Fee payable to the Issuer and (b) the compensation and expenses
paid to or incurred by the Trustee or any Paying Agent under the Loan Agreement
or this Indenture.
AFFILIATE:
"Affiliate" shall mean any person, firm or corporation controlled by, or
under common control with the Company and any person, firm or corporation
controlling the Company.
ALTERNATE LETTER OF CREDIT:
"Alternate Letter of Credit" shall mean an irrevocable, direct-pay
substitute letter of credit or an extension of an existing Credit Facility
delivered to and accepted by the Trustee pursuant to Section 11.04 of this
Indenture provided that any extension or renewal of a Credit Facility (other
than an extension of the Letter of Credit) shall be regarded as the delivery of
an Alternate Letter of Credit for the purposes of this Indenture. An Alternate
Letter of Credit shall (a) be issued by a commercial bank organized and doing
business in the United States of America or a branch or an agency of a foreign
commercial bank located in the United States of America and subject to
regulation by state or federal banking regulatory authorities, with capital
stock and surplus of at least $50,000,000 and having a rating on its long-term
deposits of not less than Aa3 by Moody's or AA- by Standard & Poor's, (b) have
the same terms as the Letter of Credit (except for the expiration date, which
shall be on a January thirtieth (30th) and shall be at least two (2) years
following the effective date thereof) and (c) be in substantially the form of
the Letter of Credit. Prior to acceptance of an Alternate Letter of Credit, the
Trustee must be satisfied that certain requirements set forth in Section 11.04
hereof have been met.
ANNEX A:
"Annex A" shall mean the attachment annexed hereto and made a part hereof
containing such information as is specifically referred to therein.
AUTHORIZED COMPANY REPRESENTATIVE:
"Authorized Company Representative" shall mean any person or persons at the
time designated to act on behalf of the Company by a written certificate, signed
on behalf of the Company by its President or one of its Vice Presidents or other
duly authorized Person and its Secretary or its Treasurer or its Comptroller or
one of its Assistant Secretaries, Assistant Treasurers or Assistant Comptrollers
or other duly authorized Person and furnished to the Issuer and the Trustee,
containing the specimen signature of each such person.
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BANK:
"Bank" shall mean The First National Bank of Chicago which is issuing the
Letter of Credit and its successors and assigns (in whole or in part) under the
Credit Agreement meeting the requirements of a provider of an Alternate Letter
of Credit hereunder, or any issuer of an Alternate Letter of Credit.
BOND COUNSEL:
"Bond Counsel" shall mean an attorney-at-law or a firm of attorneys,
designated by the Issuer, of nationally recognized standing in matters
pertaining to bonds issued by states and their political subdivisions, duly
admitted to the practice of law before the highest court of any state of the
United States of America.
BOND COUNSEL'S OPINION:
"Bond Counsel's Opinion" shall mean an opinion signed by Bond Counsel and
satisfactory to the Issuer and the Trustee.
BOND FUND:
"Bond Fund" shall mean the fund created under Section 6.01 of this
Indenture and held by the Trustee and the accounts created thereunder.
BOND PLACEMENT AGREEMENT:
"Bond Placement Agreement" shall mean the bond placement agreement
concerning the 1998 Series Bonds among the Issuer, the Company and the Placement
Agents.
BOND REGISTER AND BOND REGISTRAR:
"Bond Register" and "Bond Registrar" shall have the respective meanings
specified in Section 2.10 of this Indenture.
BONDHOLDER:
"Bondholder" or "holder of the Bonds" or "holder" shall mean the Registered
Owner of any Bond.
BONDS:
"Bond" or "Bonds" shall mean any Bond or all of the Bonds, as the case may
be, of the Issuer authorized and issued by the Issuer, authenticated by the
Trustee and delivered under this Indenture.
The term "outstanding under this Indenture" or "outstanding hereunder" or
"outstanding", when used with reference to Bonds, shall mean, except as
otherwise provided in Sections 9.03 and
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14.03 of this Indenture, at any date as of which the amount of outstanding Bonds
is to be determined, the aggregate of all Bonds authorized, issued,
authenticated and delivered under this Indenture, except:
(a) Bonds canceled or surrendered to the Trustee for cancellation pursuant
to Section 2.13 of this Indenture prior to such date; and
(b) Bonds in lieu of or in substitution for which other Bonds shall have
been authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Trustee and the Company is presented that any such Bond is
held by a bona fide holder in due course.
In determining whether holders of a requisite aggregate principal amount of
Bonds outstanding have concurred in any request, demand, authorization,
direction, notice, consent or waiver under this Indenture, Bonds which are owned
by the Company or any Affiliate of the Company or the Issuer shall be
disregarded and deemed not to be outstanding for the purpose of any such
determination; provided, however, that for the purpose of determining whether
the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Bonds which the
Trustee actually knows to be so owned shall be so disregarded.
BUILDING:
"Building" shall mean the building or buildings located on the Project
Site, as described in Exhibit A to the Loan Agreement, and all additions,
modifications and improvements thereto, as they may at any time exist.
BUSINESS DAY:
"Business Day" shall mean any day, other than a Saturday or Sunday, on
which neither the Trustee nor the Bank is closed and on which the payment system
of the Federal Reserve System is operational.
COMPANY:
"Company" shall mean Halter Marine Group, Inc., a corporation organized and
existing under the laws of the State of Delaware.
COMPLETION DATE:
"Completion Date" shall have the meaning set forth in the Loan Agreement.
CONSTRUCTION FUND:
"Construction Fund" shall mean the fund created under Section 5.01 of this
Indenture and held by the Trustee.
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CORPORATE TRUST OFFICE:
"Corporate Trust Office" shall mean the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date hereof is located as more particularly
described in Annex A.
COST:
"Cost" or "Cost of the Project" shall mean and be deemed to include to the
extent permitted by the Act and the Code, whether incurred prior to or after the
date of the Loan Agreement, (a) obligations of the Issuer or of the Company
incurred for labor, materials, machinery, equipment and other expenses and to
architects, contractors, builders and materialmen in connection with the
construction, installation and equipping of the Project and improvements
thereto; (b) the cost of contract or performance bonds or of other bonds and of
insurance of all kinds that may be required or necessary prior to or during the
course of construction, installation and equipping of the Project; (c) all costs
of architectural and engineering services, including the expenses of the Issuer
and the Company for test borings, surveys, test and pilot operations, estimates,
plans and specifications and preliminary investigations therefor, and for
supervising construction, as well as for the performance of all other duties
required by or as a result of the proper construction, installation and
equipping of the Project; (d) compensation and expenses of the Issuer, the Bank
and the Trustee, legal, accounting, financial and printing expenses, fees and
all other expenses incurred in connection with the issuance of the Bonds, which
are not otherwise provided for under the terms of the Loan Agreement; (e) all
other costs which the Issuer or the Company shall be required to pay under the
terms of any contract or contracts for the construction, installation and
equipping of the Project; (f) any sums required to reimburse the Issuer or the
Company for advances made by either of them for any of the above items, or for
any other costs incurred and for work done by either of them, which are properly
chargeable to the Project being constructed, installed and equipped; (g) any
costs and fees incurred in obtaining the Letter of Credit; (h) the Initial
Administrative Fee and Administration Expenses; and (i) any other expenses or
fees of the Issuer, the Trustee or the Bank, which in the opinion of the Issuer
or the Company are related to the Project or the Bonds, including but not
limited to, commitment and legal fees and the costs, fees and expenses of the
Placement Agents in connection with the initial sale and issuance of the Bonds.
CREDIT AGREEMENT:
"Credit Agreement" shall mean that certain Revolving Credit Agreement,
dated October 31, 1997, among the Company, the Bank, et al, for so long as such
agreement shall be in effect and thereafter any agreement relating to the
obligations of the Company in respect of an Alternate Letter of Credit for so
long as such agreement shall be in effect.
CREDIT FACILITY:
"Credit Facility" shall mean the Letter of Credit if then in effect or an
Alternate Letter of Credit if then in effect.
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CURRENT ACCOUNT:
"Current Account" shall mean the account in the Bond Fund created under
Section 6.01 of this Indenture and held by the Trustee.
EQUIPMENT:
"Equipment" shall mean those items of machinery, equipment, fixtures and
other tangible personal property which (a) have been or are to be acquired and
installed in the Building or elsewhere at or on the Project Site, (b) were
acquired with proceeds of the 1998 Series Bonds and (c) any item of machinery,
equipment, fixtures and other tangible personal property which may be acquired
and installed in the Building or elsewhere at or on the Project Site in
substitution therefor pursuant to the provisions of the Loan Agreement, and
renewals and replacements of any of the foregoing less such property as may be
released pursuant to the provisions of the Loan Agreement or taken by the
exercise of the power of eminent domain, all as they may at any time exist.
EVENT OF DEFAULT:
"Event of Default", "event of default", "Default" or "default" shall mean
any Event of Default specified in Section 10.01 of this Indenture.
EXECUTIVE DIRECTOR:
"Executive Director" shall mean the Executive Director of the Mississippi
Business Finance Corporation.
GOVERNMENT OBLIGATIONS:
"Government Obligations" shall mean (a) direct obligations of the United
States of America for the payment of which the full faith and credit of the
United States of America is pledged and (b) obligations issued by a person
controlled or supervised by and acting as an instrumentality of the United
States of America, the full and timely payment of the principal of, and premium,
if any, and interest on which is fully guaranteed as a full faith and credit
obligation of the United States of America (including any securities described
in (a) or (b) issued or held in book-entry form on the books of the Department
of Treasury of the United States of America or Federal Reserve Bank), which
obligations, in either case, are not subject to redemption or prepayment prior
to maturity at the option of any one other than the holder.
INDENTURE:
"Indenture" shall mean this Trust Indenture as amended or supplemented from
time to time in accordance with the provisions hereof.
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INITIAL ADMINISTRATIVE FEE:
"Initial Administrative Fee" shall mean (a) the initial fee of the Issuer
with respect to the 1998 Series Bonds in the amount of Thirty Thousand and
No/100ths Dollars ($30,000) which fee is required to be paid by the Company to
the Issuer pursuant to the Loan Agreement, (b) the fee of the Issuer's Financial
Advisor and (c) any initial acceptance fee of the Trustee.
INVESTMENT SECURITIES:
"Investment Securities" shall mean any one of the following, if and to the
extent the same are at the time legal for the investment of the Issuer's funds:
(a) Government Obligations;
(b) certificates of deposit, time deposits or other banking arrangements,
whether negotiable or non-negotiable, issued by any bank or national banking
association having a capital stock and surplus of more than $20,000,000,
including the Trustee;
(c) commercial paper that is rated A-1 or A-2 by Standard & Poor's or P-1
or P-2 by Moody's;
(d) a repurchase agreement with any bank or national banking association
having a capital stock and surplus of more than $20,000,000, including the
Trustee, and a rating by Moody's within its NCO/Moody's ratings of Baa-3 or
prime 3, provided the obligation of the bank to repurchase is within thirty (30)
days of the date of purchase; and
(e) interests in any money market mutual fund including those of the
Trustee which invests solely in Government Obligations or repurchase agreements
which are collateralized solely by Government Obligations.
ISSUER:
"Issuer" shall mean the Mississippi Business Finance Corporation,
constituting a public corporation of the State, its successors and assigns, and
any public corporation resulting from or surviving any consolidation or merger
to which it or its successors may be a party.
LETTER OF CREDIT:
"Letter of Credit" shall mean the irrevocable direct-pay Letter of Credit
to be delivered by the Bank to the Trustee in accordance with the Credit
Agreement which shall have a scheduled expiration date of January 30, 2000 and
any renewals, extensions, amendments or supplements thereto. A copy of the
Letter of Credit is attached hereto as Exhibit A.
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LETTER OF CREDIT ACCOUNT:
"Letter of Credit Account" shall mean the account in the Bond Fund created
under Section 6.01 of this Indenture and held by the Trustee.
LOAN AGREEMENT:
"Loan Agreement" shall mean the Loan Agreement dated as of the date hereof
between the Issuer and the Company and any and all modifications, alterations,
amendments and supplements thereto made in accordance with the provisions
thereof and this Indenture.
MAKE-WHOLE PREMIUM:
"Make-Whole Premium" shall mean, with respect to any 1998 Series Bond, an
amount equal to the excess, if any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called Principal of such 1998 Series Bond
over the amount of such Called Principal, provided that the Make-Whole Premium
may in no event be less than zero. For the purposes of determining the Make-
Whole Premium, the following terms shall have the following meanings:
"CALLED PRINCIPAL" means, with respect to any 1998 Series Bond, the
principal of such 1998 Series Bond that is to be prepaid pursuant to
Section 2.03 of this Indenture or has become or is declared to be
immediately due and payable pursuant to Sections 10.01 and 10.02 of this
Indenture, as the context requires.
"DISCOUNTED VALUE" means, with respect to the Called Principal of any
1998 Series Bond, the amount obtained by discounting all Remaining
Scheduled Payments with respect to such Called Principal from their
respective scheduled due dates to the Settlement Date with respect to such
Called Principal, in accordance with accepted financial practice and at a
discount factor (applied on the same periodic basis as that on which
interest on the 1998 Series Bond is payable) equal to the Reinvestment
Yield with respect to such Called Principal.
"REINVESTMENT YIELD" means, with respect to the Called Principal of
any 1998 Series Bond, the yield to maturity implied by (a) the yields
reported, as of 10:00 a.m., New York City Time, on the second Business day
preceding the Settlement Date with respect to such Called Principal, on the
display designated as the "PX1 Screen" on the Bloomberg Financial Market
Service (or such other display as may replace the PX1 Screen on the
Bloomberg Financial Market Service) for actively traded Government
Obligations having a maturity equal to the Remaining Average Life of such
Called Principal as of such Settlement Date, or (b) if such yields are not
reported as of such time or the yields reported as of such time are not
ascertainable, the Treasury Constant Maturity Series Yields reported, for
the latest day for which such yields have been so reported as of the second
Business Day preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded Government
Obligations having a constant maturity equal to the Remaining Average
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Life of such Called Principal as of such Settlement Date. Such implied
yield will be determined, if necessary, by (1) converting Government
Obligations quotations to bond-equivalent yields in accordance with
accepted financial practice and (2) interpolating linearly between (A) the
actively traded Government Obligations with the duration closest to and
greater than the Remaining Average Life and (B) the actively traded
Government Obligations with the duration closest to and less than the
Remaining Average Life.
"REMAINING AVERAGE LIFE" means, with respect to any Called Principal,
the number of years (calculated to the nearest one-twelfth year) obtained
by dividing (a) such Called Principal into (b) the sum of the products
obtained by multiplying (1) the principal component of each Remaining
Scheduled Payment with respect to such Called Principal by (2) the number
of years (calculated to the nearest one-twelfth year) that will elapse
between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the Called
Principal of any 1998 Series Bond, all payments of such Called Principal
and interest thereon that would be due after the Settlement Date with
respect to such Called Principal if no payment of such Called Principal
were made prior to its scheduled due date, provided that if such Settlement
Date is not a date on which interest payments are due to be made under the
terms of the 1998 Series Bonds, then the amount of the next succeeding
scheduled interest payment will be reduced by the amount of interest
accrued to such Settlement Date and required to be paid on such Settlement
Date pursuant to Sections 2.03, 10.01 and 10.02 of this Indenture.
"SETTLEMENT DATE" means, with respect to the Called Principal of any
1998 Series Bond, the date on which such Called Principal is to be prepaid
pursuant to Section 2.03 of this Indenture or has become or is declared to
be immediately due and payable pursuant to Sections 10.01 and 10.02 of this
Indenture, as the context requires.
The Make-Whole Premium shall be timely calculated by the Company in
accordance with the above definition thereof and timely written notice thereof
given by the Company to the Trustee, the Bank and the holders of all 1998 Series
Bonds outstanding.
MOODY'S:
"Moody's" shall mean Moody's Investors Service, Inc., a Delaware
corporation, its successors and assigns and, if dissolved or liquidated or if it
no longer performs the functions of a securities rating agency, "Moody's" shall
be deemed to refer to any other nationally recognized securities rating agency
designated by the Company (with the approval of and the Issuer), by written
notice to the Trustee.
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1998 SERIES BONDS:
"1998 Series Bonds" shall mean Mississippi Business Finance Corporation
Taxable Revenue Bonds, Series 1998 (Halter Marine Group, Inc. Project) issued in
the aggregate principal amount of $30,000,000 and initially issued under Section
2.02 of this Indenture.
NOTE:
"Note" shall mean the Promissory Note of the Company issued by the Company
to the Issuer pursuant to the Loan Agreement and any amendments or supplements
thereto.
OFFICERS' CERTIFICATE:
"Officers' Certificate" shall mean a certificate signed by the President,
Executive Director, or an officer of the Board of Directors of the Issuer duly
authorized by resolution of such Board to sign such certificate and the
Secretary.
OPINION OF COUNSEL:
"Opinion of Counsel" shall mean an opinion in writing signed by legal
counsel, who may be an employee of or counsel to the Company, and is not
unsatisfactory to the Trustee. Any Opinion of Counsel in connection with the
Letter of Credit or any Alternate Letter of Credit must opine as to the validity
and enforceability of the Letter of Credit or the Alternate Letter of Credit and
must be given by legal counsel independent from the Bank and licensed to
practice law in the jurisdiction which governs the validity and enforceability
of the Letter of Credit or the Alternate Letter of Credit.
PAYING AGENT:
"Paying Agent" shall mean any paying agent for the 1998 Series Bonds (and
may include the Trustee) and its successor or successors appointed pursuant to
the provisions of this Indenture.
PAYMENT DATE OR PAYMENT DATES:
"Payment Date" or "Payment Dates" shall mean (a) as to the 1998 Series
Bonds, December 31 and June 30 of each year commencing June 30, 1998, provided,
however, that if any such Payment Date shall fall on a day other than a Business
Day, the payment due on such Payment Date shall be due on the next succeeding
Business Day, and (b) as to Additional Bonds, each date or dates designated as a
Payment Date or Dates in the Applicable Supplemental Indenture and Additional
Bonds.
PERMITTED ENCUMBRANCES:
"Permitted Encumbrances" shall mean and include:
(a) the lien of taxes and assessments which are not delinquent;
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(b) the lien of taxes and assessments which are delinquent but the
validity of which is being contested as permitted by Section 4.06 of the Loan
Agreement;
(c) any liens created by and under this Indenture, the Loan Agreement and
the Note;
(d) those liens, charges and encumbrances in Exhibit C attached to the
Loan Agreement, to which the Company's title to the Project Site is subject;
(e) easements, exceptions or reservations executed after the date hereof
for the purpose of pipelines, telephone lines, telegraph lines, power lines and
sub-stations, roads, streets, alleys, highways, railroad purposes, drainage and
sewerage purposes, dikes, canals, laterals, ditches, the removal of oil, gas,
coal or other minerals, and other like purposes, or for the joint or common use
of real property, facilities and equipment, which, in the reasonable opinion of
the Company, in the aggregate do not impair the value or the use of such
property for the purposes for which it is or may reasonably be expected to be
held;
(f) rights reserved to or vested in any municipality or governmental or
other public authority to control or regulate any portion of the Project which
in the aggregate do not impair the use of the Project for the purposes for
which, in the reasonable opinion of the Company, it is or may reasonably be
expected to be held;
(g) the rights of the Issuer, the Trustee and the Bank (as the case may
be) under this Indenture, the Loan Agreement and the Note;
(h) any lien on the Project or any part thereof created pursuant to the
Loan Agreement from the Company to the Issuer, as assigned to the Trustee
pursuant to this Indenture; and
(i) such other encumbrances as the Bank may approve or that may be
permitted by the Credit Agreement.
PERSON OR PERSON:
"Person" or "person" shall mean, as the case may be, any individual, sole
proprietorship, corporation, partnership (including, without limitation, general
and limited partnerships), joint venture, association, joint stock company,
trust, unincorporated organization or government, any agency or political
subdivision thereof or public corporation.
PLACEMENT AGENTS:
"Placement Agents" shall mean SPP Hambro & Co., LLC and Hibernia National
Bank.
PLANS AND SPECIFICATIONS:
"Plans and Specifications" shall, if such exist, mean the plans and
specifications prepared for the Project, certified by an Authorized Company
Representative, as the same may be implemented, detailed and revised from time
to time.
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PRESIDENT:
"President" shall mean the President of the Mississippi Business Finance
Corporation.
PROJECT:
"Project" shall mean (a) the Project Site, Building and the Equipment
financed with proceeds of the 1998 Series Bonds and as the same may become more
detailed from time to time, including any repair, replacement or modification
thereof, substitutions therefor and additions thereto and excluding deletions
therefrom, and including personal property installed in accordance with Section
4.15 of the Loan Agreement, (b) repairs, replacements, enlargements,
improvements or extensions of said facilities financed by Additional Bonds and
(c) additional facilities financed by Additional Bonds.
PROJECT SITE:
"Project Site" shall mean the real property described in Exhibit B to the
Loan Agreement on which the Building and Equipment are or will be situated.
PROPERTY:
"Property" shall mean any interest in any kind of asset, whether real,
personal or mixed, or tangible or intangible.
RATING AGENCY:
"Rating Agency" shall mean Moody's and/or Standard & Poor's.
RECORD DATE:
"Record Date" shall mean with respect to any Series of Bonds, the fifteenth
(15th) day of the calendar month preceding any Payment Date.
REDEMPTION PRICE:
"Redemption Price" shall mean the principal of and interest on the 1998
Series Bonds to be redeemed, and the Make-Whole Premium, if applicable, and all
other amounts due and owing in respect of such 1998 Series Bonds to be redeemed.
REGISTERED OWNER:
"Registered Owner" shall mean the Person or Persons in whose name or names
the particular Bond or Bonds shall be registered on the Bond Register.
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REVENUES:
"Revenues" shall mean all payments, receipts and revenues payable by the
Company to the Issuer under the Loan Agreement (except payment of Administration
Expenses and indemnification payments pursuant to Sections 4.03 and 4.11,
respectively, of the Loan Agreement) and any other payments, receipts and
revenues derived by the Issuer from the Company under the Loan Agreement.
SECRETARY:
"Secretary" shall mean the Secretary of the Mississippi Business Finance
Corporation.
SERIES OR SERIES OF BONDS:
"Series" or "Series of Bonds" shall mean all of the Bonds authenticated and
delivered on original issuance in a simultaneous transaction, and any Bonds
thereafter authenticated and delivered in lieu of or in substitution for such
Bonds, pursuant to the provisions of this Indenture, regardless of variations in
maturity, interest rate, or other provisions.
STANDARD & POOR'S:
"Standard & Poor's" shall mean Standard & Poor's Corporation, a New York
corporation, its successors and assigns and, if dissolved or liquidated or if it
no longer performs the functions of a securities rating agency, "Standard &
Poor's" shall be deemed to refer to any other nationally recognized securities
rating agency designated by the Company (with the approval of the Issuer), by
written notice to the Trustee.
STATE:
"State" shall mean the State of Mississippi.
SUPPLEMENTAL INDENTURE:
"Supplemental Indenture" or "indenture supplemental hereto" shall mean any
indenture supplemental to or amendatory of this Indenture as originally executed
which is duly executed and delivered in accordance with the provisions of this
Indenture.
TRUSTEE:
"Trustee" shall mean SouthTrust Bank, National Association (and its
corporate successors) and its successor under this Indenture, a national banking
association organized and existing under the laws of the United States of
America with its principal corporate trust office located in Birmingham,
Alabama.
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ARTICLE II
DESCRIPTION, AUTHORIZATION, MANNER OF
EXECUTION, AUTHENTICATION, REGISTRATION AND
TRANSFER OF BONDS
SECTION 2.01. AUTHORIZATION OF BONDS. The Bonds may, at the election of
the Issuer, be issued in one or more Series and, except as hereinafter provided,
shall be designated generally with such appropriate particular designations
added to or incorporated in such title for the Bonds of any particular Series as
the Issuer may determine. Each Bond shall bear upon the face thereof the
designation so selected for the Series to which it belongs. The Bonds shall be
issuable only in fully registered form.
SECTION 2.02. 1998 SERIES BONDS. There shall be issued under and secured
by this Indenture a Series of Bonds to be designated as Mississippi Business
Finance Corporation Taxable Revenue Bonds, Series 1998 (Halter Marine Group,
Inc. Project) in the aggregate principal amount of $30,000,000, to be dated as
of their date of issuance, to mature (subject to prior redemption at the prices
and dates and upon the terms and conditions hereinafter set forth) on December
31, 2013.
The 1998 Series Bonds shall bear interest from and including the dated date
thereof if the date of authentication thereof is on or prior to the day
preceding the first Payment Date and otherwise from the Payment Date next
preceding the date of authentication to which interest has been paid, payable
semiannually on December 31 and June 30 of each year, commencing on June 30,
1998, at the rate of interest of 6.39% per annum computed on the basis of a
three hundred sixty (360) day year of twelve (12), thirty (30) day months) until
the earliest of (a) maturity or (b) the date fixed for redemption or
acceleration. The 1998 Series Bonds shall be issued in denominations of
$500,000 or any integral multiple of $5,000 in excess thereof provided that if
necessary to enable the registration of transfer by a holder of its entire
holding of 1998 Series Bonds, one 1998 Series Bond may be in a denomination of
less than $500,000.
All payments of principal of, Make-Whole Premium, if applicable, and
interest on the 1998 Series Bonds shall be payable in any coin or currency of
the United States of America which, at the time of payment is legal tender for
the payment of public and private debts and shall be made to the Registered
Owner thereof as of the Record Date, in the case of principal and Make-Whole
Premium, if applicable, at the Corporate Trust Office of the Trustee upon
presentation and surrender thereof, and in the case of interest, by bank wire or
bank transfer as such Registered Owner may specify in writing or otherwise as
the Trustee and such Registered Owner may agree.
SECTION 2.03. REDEMPTION. The 1998 Series Bonds are subject to
redemption prior to maturity, in accordance with Article VIII hereof and subject
to the order of payment as set forth in Section 6.02 hereof, as follows:
(a) The 1998 Series Bonds are subject to mandatory redemption in the event
there are moneys remaining in the Construction Fund after the Completion Date,
as provided in Sections 5.05 and 6.01(b) herein. If called for redemption in
such event, the 1998 Series Bonds shall be subject to redemption on any Payment
Date, in part, in the inverse order of their maturities (less than all of
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said 1998 Series Bonds of a single maturity to be selected pro-rata), at a
Redemption Price for each 1998 Series Bond redeemed equal to the principal
amount thereof and accrued interest thereon to the date of redemption, plus the
Make-Whole Premium.
(b) The 1998 Series Bonds are subject to optional redemption at the option
of the Company, which option may be exercised at any time upon not less than
forty-five (45) days' written notice by the Company to the Trustee, in whole at
any time, or in part on any Payment Date, in the inverse order of their
maturities (less than all of said 1998 Series Bonds of a single maturity to be
selected pro-rata), at a Redemption Price for each 1998 Series Bond redeemed
equal to the principal amount thereof and accrued interest thereon to the date
of redemption, plus the Make-Whole Premium.
(c) The 1998 Series Bonds are subject to mandatory redemption, in whole,
at any time, or in part on any Payment Date in the inverse order of their
maturities (less than all of said 1998 Series Bonds of a single maturity to be
selected pro-rata), to the extent moneys are deposited in the Bond Fund pursuant
to Sections 4.13 and 4.14 of the Loan Agreement at a Redemption Price for each
1998 Series Bond redeemed equal to the principal amount thereof and accrued
interest thereon to the date of redemption, without premium or penalty. Said
Sections 4.13 and 4.14 of the Loan Agreement are by this reference thereto
incorporated herein as if fully set forth herein.
(d) The 1998 Series Bonds are subject to mandatory redemption, in whole,
at a Redemption Price for each 1998 Series Bond redeemed equal to the principal
amount thereof and accrued interest thereon to the date of redemption, plus the
Make-Whole Premium, if the rating assigned by Moody's or Standard & Poor's to
the long-term deposits of the Bank is downgraded to a rating below A1 by Moody's
or below A+ by Standard & Poor's, on the forty-fifth (45th) day following the
date on which the lowered rating is announced by either Rating Agency; provided,
however, the 1998 Series Bonds shall not be subject to mandatory redemption in
such case if the Company shall deliver to the Trustee at least five (5) Business
Days prior to the scheduled date of such redemption, an Alternate Letter of
Credit in accordance with Section 11.04 herein and issued by a Bank the senior
long-term debt or the long-term deposits of which are rated not less than Aa3 by
Moody's or AA- by Standard & Poor's. Written notice of any such downgrade shall
be timely provided by the Company to the Trustee, the Bank and the holders of
all 1998 Series Bonds then outstanding.
(e) The 1998 Series Bonds are subject to mandatory redemption, in whole,
five (5) Business Days following the failure of the Company (1) to provide an
irrevocable and unconditional commitment for an Alternate Letter of Credit in
accordance with Section 11.04 herein not later than one (1) year immediately
preceding the expiration of the Letter of Credit or any Alternate Letter of
Credit, or (2) to deliver said Alternate Letter of Credit forty-five (45) days
immediately preceding the expiration of the Letter of Credit or any Alternate
Letter of Credit, at a Redemption Price for each 1998 Series Bond redeemed equal
to the principal amount thereof and accrued interest thereon to the date of
redemption, plus the Make-Whole Premium.
(f) The 1998 Series Bonds are subject to mandatory redemption, in whole,
upon acceleration thereof upon the occurrence of an Event of Default on the
earliest Business Day for which any required notice may be given, at a
Redemption Price for each 1998 Series Bond redeemed
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equal to the principal amount thereof and accrued interest thereon to the date
of redemption, plus the Make-Whole Premium, for acceleration upon an Event of
Default occurring under Section 10.01 of this Indenture hereof.
(g) The 1998 Series Bonds are subject to mandatory redemption, in part, as
provided in Section 2.04.
If more than one of the events described in paragraphs (a), (c), (d), (e)
and (f) of this Section 2.03 shall occur at any one time requiring a mandatory
redemption of all of the 1998 Series Bonds, the Trustee shall redeem the 1998
Series Bonds according to the paragraph that will result in the 1998 Series
Bonds being redeemed on the earliest possible date.
A redemption pursuant to this Section 2.03(f) shall occur no later than ten
(10) calendar days after a declaration of acceleration pursuant to Sections
10.01 and 10.02 hereof.
SECTION 2.04. MANDATORY SINKING FUND REDEMPTION. The 1998 Series Bonds
are subject to mandatory sinking fund redemption, in part, prior to maturity or
redemption in whole as otherwise provided under this Indenture, on each December
31, commencing December 31, 2004, in the principal amount for each year
(together with accrued interest to the date of redemption and without premium or
penalty) (the "Sinking Fund Payment") from moneys deposited in the Bond Fund, in
accordance with the provisions of this Section 2.04 and Article VIII of this
Indenture, as follows:
DATE AMOUNT
December 31, 2004 $3,000,000
December 31, 2005 3,000,000
December 31, 2006 3,000,000
December 31, 2007 3,000,000
December 31, 2008 3,000,000
December 31, 2009 3,000,000
December 31, 2010 3,000,000
December 31, 2011 3,000,000
December 31, 2012 3,000,000
December 31, 2013 3,000,000
Not more than sixty (60) days nor less than forty (40) days prior to each
Sinking Fund Payment Date, the Trustee shall select for redemption pro-rata from
all 1998 Series Bonds outstanding a principal amount of 1998 Series Bonds equal
to the Sinking Fund Payment amount for such year and shall call such 1998 Series
Bonds or portions thereof ($500,000 or any integral multiple of $5,000 in excess
thereof) for redemption from amounts deposited therefor in the Bond Fund
following notice thereof as provided in Section 8.02 hereof.
SECTION 2.05. METHOD OF PARTIAL REDEMPTION. Unless otherwise provided
herein, in the event of a partial redemption pursuant to Section 2.03 hereof,
the 1998 Series Bonds to be redeemed
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shall be redeemed on a pro-rata basis among all Bondholders and, in case of a
partial redemption of a single maturity, 1998 Series Bonds of such maturity to
be redeemed shall be selected pro-rata.
SECTION 2.06. ADDITIONAL BONDS. Subject to determination from time to
time by the Issuer, and subject to the provisions of Section 3.03 hereof and
with the consent of one hundred percent (100%) of the holders of the 1998 Series
Bonds then outstanding, as expressed from time to time in one or more
Supplemental Indentures, the Bonds of any Series other than the 1998 Series
Bonds:
(a) shall be dated, shall bear interest at a rate or rates not in excess
of the maximum rate then permitted by applicable law, shall be payable and shall
mature by their terms at such time or times as may be provided in the
Supplemental Indenture creating the Series of which such Bonds are a part;
(b) shall be payable, both as to principal and interest and premium at
such place or places as the Issuer may determine in any coin or currency of the
United States of America which, at the time of payment, is legal tender for the
payment of public and private debts;
(c) may have such exchange privileges as may be determined by the Issuer;
(d) shall have such particular designations added to their title as the
Issuer may determine, and may be in such denominations as may be determined by
the Issuer;
(e) may be limited as to the maximum principal amount thereof which may be
authenticated by the Trustee and delivered or which may be at any time
outstanding, and an appropriate insertion in respect of such limitation may, but
need not, be made in the Bonds of such Series;
(f) may contain provisions for the redemption thereof at such redemption
price or prices, at such time or times, upon such notice, in such manner and
upon such other terms and conditions, not inconsistent with the provisions of
Article VIII of this Indenture and the terms of the Loan Agreement, as may be
determined by the Issuer and permitted by applicable law;
(g) may have mandatory provisions requiring payments of sinking fund
requirements for the purchase and sinking fund redemption of such Bonds, in such
amounts, at such time or times, in such manner and upon such terms and
conditions, not inconsistent with the provisions of this Indenture, as shall be
set forth in such Supplemental Indenture; and
(h) may contain such provisions with respect to acceleration of maturity
on the happening of specified events, and such other special terms and
conditions, not contrary to the provisions hereof or of the Act, as may be
determined by the Issuer.
SECTION 2.07. BONDS MUTILATED, DESTROYED, STOLEN OR LOST. In the event
any outstanding Bond, whether temporary or definitive, is mutilated, lost,
stolen or destroyed, the Trustee shall, upon written request of the Issuer,
authenticate and deliver a new Bond of the same Series, principal amount and
maturity and of like tenor as the mutilated, lost, stolen or destroyed Bond in
exchange and substitution for such mutilated Bond, or in lieu of and
substitution for such lost, stolen
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or destroyed Bond upon presentation of an open indemnity bond in favor of the
Trustee and the Issuer which is satisfactory to the Trustee.
Application for exchange and substitution of mutilated, lost, stolen or
destroyed Bonds shall be made to the Trustee, in writing, at the Corporate Trust
Office. In every case the applicant for a substitute Bond shall furnish to the
Issuer and to the Trustee such security or indemnity as may be required by them
to save each of them and any Paying Agent harmless. In every case of loss,
theft or destruction of a Bond, the applicant shall also furnish to the Issuer
and to the Trustee evidence to their satisfaction of the loss, theft or
destruction and of the ownership of such Bond, and in every case of mutilation
of a Bond, the applicant shall surrender to the Trustee the Bond so mutilated.
Notwithstanding the foregoing provisions of this Section 2.07, in the event
any such Bond shall have matured, and no default has occurred which is then
continuing in the payment of the principal of, Make-Whole Premium, if
applicable, or interest on the Bond, the Issuer may authorize, in writing, the
payment of the same (without surrender thereof except in the case of a mutilated
Bond) instead of issuing a substitute Bond provided security or indemnity is
furnished as above provided in this Section 2.07.
Upon the issuance of any substitute Bond, the Issuer and the Trustee may
charge the holder of such Bond with their fees and expenses in connection
therewith. Every substitute Bond issued pursuant to the provisions of this
Section 2.07 by virtue of the fact that any Bond is lost, stolen or destroyed
shall constitute an original additional contractual obligation of the Issuer,
whether or not the lost, stolen or destroyed Bond shall be found at any time, or
be enforceable by anyone, and shall be entitled to all the benefits of this
Indenture equally and proportionally with any and all other Bonds duly issued
under this Indenture to the same extent as the Bonds in substitution for which
such Bonds were issued.
The provisions of this Section 2.07 are exclusive and shall preclude (to
the extent lawful) all of the rights and remedies with respect to the payment of
mutilated, lost, stolen or destroyed Bonds, including those granted by any law
or statute now existing or hereafter enacted.
SECTION 2.08. TEMPORARY BONDS. Until Bonds in definitive form of any
Series are ready for delivery, the Issuer may execute, and upon its request in
writing, the Trustee shall authenticate and deliver in lieu of any thereof and
subject to the same provisions, limitations and conditions, one or more printed,
lithographed or typewritten Bonds in temporary form, substantially of the tenor
of the Bonds as set forth above in this Article II, with appropriate omissions,
variations and insertions. Bonds in temporary form will be for such principal
amounts as the Issuer shall determine.
Until exchanged for Bonds in definitive form, such Bonds in temporary form
shall be entitled to the lien and benefit of this Indenture. The Issuer shall,
without unreasonable delay, prepare, execute and deliver to the Trustee, and
thereupon, upon the presentation and surrender of the Bond or Bonds in temporary
form to the Trustee at the Corporate Trust Office, the Trustee shall authenti
cate and deliver, in exchange therefor, a Bond or Bonds of the same maturity and
Series, in definitive form in the authorized denominations, and for the same
aggregate principal amount, as the Bond or Bonds in temporary form surrendered.
Such exchange shall be made at the Issuer's own expense and without making any
charge therefor to any Bondholder.
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SECTION 2.09. EXECUTION. All the Bonds shall, from time to time, be
executed on behalf of the Issuer by, or bear the manual or facsimile signature
of, the Executive Director or President and its corporate seal (which may be in
facsimile) shall be thereunto affixed (or imprinted or engraved if facsimile)
and attested by the manual or facsimile signature of the Secretary.
If any of the officers who shall have signed or sealed any of the Bonds or
whose facsimile signature shall be upon the Bonds shall cease to be such officer
of the Issuer before the Bonds so signed and sealed shall have been actually
authenticated by the Trustee or delivered by the Issuer, such Bonds nevertheless
may be authenticated, issued and delivered with the same force and effect as
though the person or persons who signed or sealed such Bonds or whose facsimile
signature shall be upon the Bonds had not ceased to be such officer or officers
of the Issuer; and also any such Bond may be signed and sealed on behalf of the
Issuer by those persons who, at the actual date of the execution of such Bonds,
shall be the proper officers of the Issuer, although at the date of such Bond
any such person shall not have been such officer of the Issuer.
SECTION 2.10. NEGOTIABILITY, TRANSFER AND REGISTRY.
(a) The Bonds may be transferred and title thereto shall pass, only in the
manner provided and as set forth in paragraph (c) below. The Issuer hereby
designates the Trustee as initial Bond Registrar to keep the books for the
registration and for the transfer of Bonds as provided in this Indenture. All
Bonds presented for transfer, exchange, redemption or payment, shall be
accompanied by a written instrument or instruments of transfer or authorization
for exchange, in form and with guaranty of signature satisfactory to the
Trustee, duly executed by the Registered Owner or by his attorney duly
authorized in writing. No charge shall be made to the Registered Owner for the
transfer and registration of the Bonds except for a sum sufficient to pay any
tax, fee or governmental charge that may be imposed with respect thereto.
(b) The Issuer, the Trustee, the Bond Registrar and any Paying Agent may
deem and treat the Registered Owner of any registered Bond as the absolute owner
of such Bond for the purpose of receiving any payment on such Bond and for all
other purposes of this Indenture and the Loan Agreement, whether such Bond shall
be overdue or not, and neither the Issuer, nor the Trustee, nor the Bond
Registrar nor any Paying Agent shall be affected by any notice to the contrary.
Payment of, or on account of, the principal of and interest and Make-Whole
Premium, if applicable, on any registered Bond shall be made to such Registered
Owner or upon his written order. All such payments shall be valid and effectual
to satisfy and discharge the liability upon such Bond to the extent of the sum
or sums so paid.
(c) The Bonds shall be registered in the name of the initial owner as to
principal and interest on the books kept by the Bond Registrar. Any transfers
involving subsequent registration shall be made on the books kept by the Bond
Registrar. No transfer shall be valid unless (1) made by written assignment,
(2) noted on books of the Bond Registrar and (3) unless a new registered bond
shall be issued, noted in the books kept by the Bond Registrar as of the date of
registration and the name of the Registered Owner thereof.
SECTION 2.11. REGULATIONS WITH RESPECT TO EXCHANGES AND TRANSFERS. In
all cases in which the privilege of exchanging Bonds or registering the transfer
of Bonds is exercised, the Issuer
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shall execute and the Trustee, upon written request of the Issuer, shall
authenticate and deliver Bonds in accordance with the provisions of this
Indenture. All Bonds surrendered in any such exchanges or upon any such
registration of transfer shall forthwith be delivered to the Trustee and
canceled by it. There shall be no charge for any such exchange or registration
of transfer of Bonds to the Registered Owner, but the Issuer may require the
payment of a sum sufficient to pay any tax or other governmental charge required
to be paid with respect to any such exchange or registration of transfer.
Neither the Issuer nor the Trustee shall be required to register the transfer or
exchange of any Bond (a) after the Record Date but before a Payment Date or (b)
called for redemption in whole or in part.
SECTION 2.12. AUTHENTICATION. No Bond shall be secured by this Indenture
or be entitled to the benefit hereof or shall be valid or obligatory for any
purpose unless there shall be endorsed on such Bond the Trustee's certificate of
authentication, substantially in the form prescribed in this Indenture, executed
by the manual signature of a duly authorized officer of the Trustee; and such
certificate on any Bond issued by the Issuer shall be conclusive evidence and
the only competent evidence that such Bond has been duly authenticated and
delivered under this Indenture.
SECTION 2.13. DESTRUCTION OF BONDS. Upon the surrender to the
Trustee of any temporary or mutilated Bond, or any Bond acquired, redeemed, or
paid at maturity, the same shall forthwith be canceled and, not less than six
(6) months thereafter, cremated or otherwise destroyed by the Trustee. If such
Bond is so cremated or destroyed, the Trustee shall deliver its certificate of
such cremation or other destruction to the Issuer.
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ARTICLE III
AUTHENTICATION AND DELIVERY OF BONDS
SECTION 3.01. BONDS EQUALLY AND RATABLY SECURED. The aggregate principal
amount of Bonds which may be executed by the Issuer and authenticated by the
Trustee and delivered and secured by this Indenture is not limited except as is
or may hereafter be provided in this Indenture or as may be limited by the Act
and applicable law. All Bonds issued and to be issued hereunder are, and are to
be, to the extent provided in this Indenture, equally and ratably secured by
this Indenture without preference, priority or distinction on account of the
actual time or times of the authentication or delivery or maturity of the Bonds,
so that, subject as aforesaid, all Bonds at any time outstanding hereunder shall
have the same right, lien and preference under and by virtue of this Indenture
and shall all be equally and ratably secured hereby with like effect as if they
had all been executed, authenticated and delivered simultaneously on the date
hereof, whether the same or any of them shall actually be disposed of at such
date, or whether they, or any of them, shall be disposed of at some future date,
or whether they, or any of them, shall have been authorized to be executed,
authenticated and delivered under Section 3.02 of this Indenture or may be
authorized to be executed, authenticated and delivered hereafter pursuant to the
provisions of this Indenture.
SECTION 3.02. PROVISIONS FOR ISSUANCE OF 1998 SERIES BONDS. The 1998
Series Bonds in the aggregate principal amount of $30,000,000, being the first
Series of Bonds issued under this Indenture, shall forthwith be executed by the
Issuer and delivered to the Trustee for authentication, together with a
statement as to the amount and disposition of the proceeds of the sale of such
principal amount of said 1998 Series Bonds, and thereupon the 1998 Series Bonds
shall be authenticated by the Trustee and shall be delivered to or upon the
written order of the President or Executive Director, but only upon the receipt
by the Trustee of the aforesaid proceeds of sale which proceeds shall be
deposited in the Construction Fund, except that the amount of accrued interest
thereon, if any, shall be deposited in the Bond Fund. Prior to authentication
and delivery of the 1998 Series Bonds by the Trustee, the Trustee shall also
have received the following:
(a) a copy of the resolution or resolutions adopted by the Issuer
authorizing the execution and delivery of the Loan Agreement and this Indenture
and the sale, issuance and delivery of the 1998 Series Bonds, duly certified by
the Secretary, under its corporate seal, to have been duly adopted by the Issuer
and to be in full force and effect on the date of such certification;
(b) an original executed counterpart of the Loan Agreement, this Indenture
and the Note;
(c) an original executed direction to the Trustee on behalf of the Issuer
and signed by the Executive Director and by the Secretary to authenticate and
deliver the 1998 Series Bonds to the purchaser therein identified upon payment
to the Trustee, but for the account of the Issuer, of a sum specified in such
direction plus accrued interest on such 1998 Series Bonds to the date of
delivery, if any (such proceeds shall be paid over to the Trustee and deposited
in the manner provided herein);
(d) an original executed opinion of independent counsel to the Bank
satisfactory to the original purchasers of the 1998 Series Bonds to the effect
that the Letter of Credit has been duly
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authorized, executed and delivered and is valid, binding and enforceable upon
the Bank as regards the 1998 Series Bonds;
(e) an original executed counterpart of an opinion of counsel for the
Company, addressed to the Issuer, the Trustee, the Bank and Bond Counsel,
subject to standard assumptions and qualifications of counsel for the Company,
with respect to the due organization and existence in good standing of the
Company; its qualification to do business and its good standing under the laws
of the State of Mississippi; its power to execute, deliver and perform its
obligations under the Loan Agreement, the Note, this Indenture and any other
instruments and documents executed and delivered by the Company in connection
herewith; the due authorization thereof by all requisite authorizing action on
the part of the Company; the due execution and delivery thereof on the part of
the Company; the execution and delivery of the Loan Agreement and the Note; and
the performance of the obligations of the Company thereunder have not resulted
and will not result in a violation of the articles of incorporation of the
Company or its by-laws, and the legality, validity and binding effect thereof as
obligations of the Company enforceable in accordance with their terms (except to
the extent that the validity and enforceability thereof may be limited by
bankruptcy, reorganization or similar laws limiting the enforceability of
creditors rights generally and except that no opinion need be expressed as to
the availability of any discretionary equitable remedies);
(f) the original executed Letter of Credit and an original executed
counterpart of the Credit Agreement; and
(g) an original executed counterpart of an approving opinion of Bond
Counsel with respect to the validity of the 1998 Series Bonds.
SECTION 3.03. PROVISIONS FOR ISSUANCE OF ADDITIONAL BONDS.
(a) Subsequent to the authentication, issuance and delivery of the 1998
Series Bonds, and in accordance with Section 2.06 hereof, one or more Series of
Additional Bonds may be authenticated by the Trustee and delivered upon original
issuance for the purpose of providing funds to (1) complete payment of the Cost
of the Project, (2) pay the Cost of (A) enlargements, improvements or extensions
to the Building as described in Exhibit A to the Loan Agreement and/or (B)
additions to or replacement of the items of Equipment as the Company may deem
desirable, or (3) pay the Cost of additional facilities relating to the Project.
(b) The Issuer may execute and deliver to the Trustee, and the Trustee
shall thereupon authenticate and deliver, such Additional Bonds to the purchaser
or purchasers thereof, provided that, prior to such authentication and delivery,
there shall have been delivered to the Trustee and the Bank:
(1) a copy of the resolution or resolutions adopted by the Issuer
authorizing such Additional Bonds and the execution and delivery by the Issuer
of a Supplemental Indenture providing for the terms and conditions upon which
such Bonds are to be issued, duly certified by the Secretary under its corporate
seal, to have been duly adopted by the Issuer and to be in full force and
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effect on the date of such certification, together with an executed counterpart
of said Supplemental Indenture;
(2) a copy, certified by the Secretary as described in paragraph
(b)(1) hereinabove, of the resolution or resolutions adopted by the Issuer
authorizing the execution and delivery by the Issuer of any agreement which is
necessary to amend the Loan Agreement and to provide for an additional
promissory note of the Company to (A) increase or adjust the payments to be made
under the Loan Agreement to an amount sufficient to pay, as and when the same
mature or become due, the principal of and interest and Make-Whole Premium, if
applicable, on all outstanding Bonds, including such Additional Bonds (except to
such extent as the same may be payable out of moneys then in the Bond Fund or
otherwise on deposit with the Trustee in accordance with this Indenture), (B)
include as part of the Project all machinery, equipment, facilities, land and
rights in land to be financed by the issuance and sale of such Additional Bonds
and (C) make such other revisions to the Loan Agreement as are necessitated by
the issuance of such Additional Bonds; provided, however, that such other
revisions shall not prejudice the rights of the holders of outstanding Bonds as
granted them under the terms of this Indenture, together with a duly executed
counterpart of such amendatory agreement;
(3) an original executed statement by the Company (A) approving the
issuance and delivery of such Additional Bonds and (B) certifying that the
Company is not then in default under the Note, the Loan Agreement or the Credit
Agreement;
(4) copies, duly certified by the Secretary, of any approvals required
under the Act for the issuance of such Additional Bonds;
(5) an original executed opinion of Bond Counsel, addressed to the
Trustee and the Issuer, to the effect that all of the conditions precedent to
the issuance of such Additional Bonds set forth in this Indenture, the
Supplemental Indenture and the Act have been satisfied;
(6) an original executed direction to the Trustee on behalf of the
Issuer and signed by the Executive Director and the Secretary to authenticate
and deliver such Additional Bonds to the purchaser therein identified upon
payment to the Trustee, but for the account of the Issuer, a sum specified in
such direction plus accrued interest on such Additional Bonds to the date of
delivery, if any;
(7) the Credit Facility in effect at the time of the issuance and
delivery of such Additional Bonds shall be increased to cover the principal of,
Make-Whole Premium, if applicable, and interest on such Additional Bonds;
(8) the original executed consents to the issuance of such Additional
Bonds required by Section 2.06 hereof; and
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(9) (i) confirmation from the Rating Agency then rating the 1998
Series Bonds, if any, that the Additional Bonds will carry the same rating as
the 1998 Series Bonds and that the issuance of such Additional Bonds will not
result in a reduction or withdrawal of the rating on the 1998 Series Bonds, or
(ii) if the Additional Bonds are not to be rated, that they carry a legend
indicating that they are not rated and confirmation from the Rating Agency then
rating the 1998 Series Bonds, if any, that the issuance of such Additional Bonds
will not result in a reduction or withdrawal of the rating on the 1998 Series
Bonds.
The proceeds of such Additional Bonds shall be deposited with and held and
disbursed by the Trustee as provided in the Supplemental Indenture provided for
such Additional Bonds.
SECTION 3.04. PROVISIONS FOR ISSUANCE OF REFUNDING BONDS. The Issuer, if
and to the extent authorized by law, in addition to the Bonds authorized to be
executed, authenticated and delivered pursuant to the other provisions of this
Article III, may execute and deliver to the Trustee, and the Trustee shall
thereupon authenticate and deliver to or upon the written order of the President
or the Executive Director, Additional Bonds for the purpose of refunding all or
any part of the Bonds of any one or more Series issued under the provisions of
this Indenture and then outstanding, but only upon the receipt by the Trustee
and the Bank, in addition to the items required under Section 3.03 of this
Indenture, of:
(a) a copy of a resolution or resolutions adopted by the Issuer describing
the Series of Bonds to be refunded and authorizing all necessary action in
connection with the refunding thereof pursuant to the provisions of this
Indenture, certified by the Secretary under its corporate seal to have been duly
adopted by the Issuer and to be in full force and effect on the date of such
certification;
(b) evidence in the form of an affidavit of publication satisfactory to
the Trustee that notice of redemption of the Bonds to be redeemed has been
published or given as provided in this Indenture, or that provisions
satisfactory to the Trustee have been made for the publication or giving of such
notice; and
(c) either (1) moneys in an amount sufficient to effect payment at the
applicable Redemption Price of those Bonds, if any, to be redeemed or of the
principal amount of those Bonds, if any, to be paid at maturity, together with
accrued interest on such Bonds to the redemption or maturity date, which moneys
shall be held by the Trustee or the Paying Agent in a separate account
irrevocably in trust for and assigned to the respective holders of the Bonds to
be refunded, or (2) Government Obligations in such principal amounts, of such
maturities, bearing such interest, and otherwise having such terms and
qualifications, as shall be necessary to comply with the provisions of Section
15.02 of this Indenture, and any moneys required pursuant to said Section, which
securities and moneys shall be held in trust and used only as provided in said
Section.
SECTION 3.05. LIMITED OBLIGATIONS. The 1998 Series Bonds together
with the interest thereon, are limited obligations of the Issuer payable solely
by the Issuer from the Revenues and other funds and collateral pledged hereunder
and under the Loan Agreement. Neither the Issuer, the
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State, or any other political subdivision thereof, shall be obligated to pay the
Bonds, premium, if any, or the interest thereon or other costs incident thereto
except from the Revenues pledged by the Issuer or other monies held hereunder
for such purpose, and neither the faith and credit nor the taxing power of the
State or any political subdivision thereof is pledged to the payment of the
principal of, Make-Whole Premium, if applicable, or the interest on the Bonds.
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ARTICLE IV
CONSTRUCTION AND ACQUISITION OF PROJECT
SECTION 4.01. COVENANT TO PROCEED WITH REASONABLE DISPATCH; REVISION OF
PLANS AND SPECIFICATIONS. Subject to the provisions of the Loan Agreement, the
Issuer covenants that it will cause the Company to complete the Project with
reasonable dispatch according to the Plans and Specifications.
The Company may revise the Plans and Specifications at any time and from
time to time prior to the completion of the Project. No material revision in
the Plans and Specifications shall be made in the course of construction of the
Project unless and until such revision shall have been certified by an
Authorized Company Representative and filed with the Trustee.
SECTION 4.02. COVENANT TO COMPLY WITH LAWS. The Issuer covenants that in
the construction, installation and equipping of the Project it will comply and
will cause the Company to comply with all applicable requirements of the laws of
the State and with all applicable lawful requirements of any agency, board or
commission created under the laws of the State or of any other duly constituted
public authority with respect to the Project.
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ARTICLE V
CONSTRUCTION FUND
SECTION 5.01. ESTABLISHMENT OF CONSTRUCTION FUND. There is hereby
created and established with the Trustee a Construction Fund. The Issuer shall
pay or cause to be paid to the Trustee the proceeds from the sale by the Issuer
of each Series of Bonds, and the Trustee shall deposit the same in the
Construction Fund, except that an amount thereof equal to any interest accrued
on such Series of Bonds to the date of their delivery to the initial purchasers
thereof shall be deposited by the Trustee in the Bond Fund hereinafter created
and established.
SECTION 5.02. HELD IN TRUST. The moneys in the Construction Fund, until
applied in payment of any item of the Cost of the Project, shall be held in
trust by the Trustee and, pending such application, shall be subject to a lien
and charge in favor of the holders of the Bonds and for the further security of
such holders until paid out as herein provided.
SECTION 5.03. USE OF MONEYS.
The Trustee shall make payments from the Construction Fund to pay the Cost
of the Project upon receipt by the Trustee of (a) original executed requisitions
(upon which both the Trustee and the Issuer may conclusively rely and shall be
protected in relying) signed by an Authorized Company Representative, stating
with respect to each payment to be made: (1) the requisition number, (2) the
name and address of the person to whom payment is due or, in the event such
payment is to reimburse the Issuer or the Company, the name and the address of
the person to whom payment previously has been made (or, in the case of payments
to the Bond Fund, instructions to make such payments to the Bond Fund), (3) the
amount to be paid, (4) that there has been no Event of Default by the Company
(as defined in the Loan Agreement) under the Loan Agreement and (5) that each
obligation, item of cost or expense mentioned therein has been properly
incurred, is a proper charge against the Construction Fund and has not been the
basis of any previous withdrawal; (b) if required by the Credit Agreement,
executed copies of certifications of work completed by a licensed architect, if
the work is of the type which a licensed architect would be able to certify as
complete, which certifications shall be prepared on AIA draw forms or comparable
documents; and (c) if required by the Credit Agreement, an endorsement to the
title insurance policy related to the Project indicating no encumbrances to
title other than Permitted Encumbrances and reflecting the payments made.
SECTION 5.04. RETENTION OF REQUISITIONS. Until the satisfaction and
discharge of this Indenture pursuant to Section 15.01 of this Indenture, the
Trustee shall retain in its possession all requisitions or copies thereof
received by it as in this Indenture required, subject to the inspection of the
Issuer, its agents and representatives, the Company, the Bank and the
Bondholders and their representatives at all reasonable times at the Corporate
Trust Office.
SECTION 5.05. COMPLETION OF PROJECT. Upon the Completion Date (as
defined in the Loan Agreement) or completion of any enlargements, improvements
or extensions thereof or
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completion of any additional facilities for which Bonds shall be issued, the
Trustee and the Issuer shall be furnished with the certificate of an Authorized
Company Representative described in Section 3.05 of the Loan Agreement.
Thereupon, any balance in the Construction Fund not reserved for the payment of
the Cost of the Project shall (a) subject to the order of payment as set forth
in Section 6.02 hereof, be deposited in the Bond Fund and used, at the earliest
date permissible under the terms of this Indenture without the payment of any
premium or penalty, to pay principal on such Series of Bonds through redemption
or retirement or, at the option of the Company, be used to pay principal on the
Bonds of such Series purchased by the Company at such earlier date or dates as
the Company may elect; and (b) be invested in accordance with Article VII
hereof. Such deposits and investments shall be made by the Trustee pursuant to
written instructions of an Authorized Company Representative.
SECTION 5.06. COMPLETION OF PROJECT - DEFAULT. If, prior to the
Completion Date, an Event of Default shall occur under this Indenture resulting
in the mandatory redemption, in whole, of the 1998 Series Bonds under Section
2.03(f) of this Indenture, any balance in the Construction Fund not reserved for
the payment of the Cost of the Project shall be transferred to the Bond Fund for
use in said redemption of the 1998 Series Bonds.
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ARTICLE VI
BOND FUND
SECTION 6.01. ESTABLISHMENT OF BOND FUND. There is hereby created and
established a Bond Fund and a Current Account and a Letter of Credit Account
therein which shall be held by the Trustee. There shall be deposited into the
Bond Fund from the proceeds of the 1998 Series Bonds, immediately upon the
receipt thereof, the amount of accrued interest on the 1998 Series Bonds, if
any. In addition, there shall be deposited into the Bond Fund as and when
received: (a) all loan payments specified in Section 4.02 of the Loan Agreement
and all payments made on the Note; (b) after completion of the Project, such
amounts in the Construction Fund as are required to be deposited in the Bond
Fund by Section 5.05 of this Indenture; (c) any amounts to be deposited in the
Bond Fund pursuant to the provisions of a Supplemental Indenture; (d) all money
received for deposit in the Bond Fund resulting from draws on the Credit
Facility pursuant to Article XI hereof; (e) all moneys received to make Sinking
Fund Payments pursuant to Section 2.04 of this Indenture; (f) all moneys
received to effect any redemption of the 1998 Series Bonds pursuant to Section
2.03 of this Indenture; and (g) all other moneys received by the Trustee that
are required under or pursuant to any of the provisions of the Loan Agreement,
the Note or the Indenture to be paid into the Bond Fund. The Issuer hereby
covenants and agrees that so long as any of the Bonds issued hereunder are
outstanding, it will deposit or cause to be deposited in the Bond Fund sums, but
only from the Revenues or other moneys or securities available therefor,
sufficient to meet and pay promptly the principal, Make-Whole Premium, if
applicable, and interest on the Bonds as the same become due and payable;
provided, however, that it is hereby acknowledged that a payment pursuant to the
Credit Facility shall constitute a credit against the obligations of the Company
to make a payment pursuant to the provisions of subsections (a) and (e) hereof
and under the Loan Agreement; however, nothing herein shall mitigate the
obligations of the Company to make such payments under the Loan Agreement.
SECTION 6.02. FLOW OF FUNDS. To the extent moneys are available in the
Bond Fund, the Trustee shall, without indemnity, in the order provided below,
withdraw from the Bond Fund and apply such moneys on or before each date on
which principal, Make-Whole Premium, if applicable, and interest is due for any
Series of Bonds, an amount which will be sufficient to pay the principal, Make-
Whole Premium, if applicable, and interest on such Series of Bonds which will
become due on each such date to the holders of the Bonds.
Except for moneys drawn by Trustee under the Credit Facility, each deposit
into the Bond Fund shall be placed in the Current Account within the Bond Fund.
Moneys from drawings under the Credit Facility shall be placed in the Letter of
Credit Account within the Bond Fund.
Moneys in the Bond Fund shall be held in trust exclusively for the
Bondholders and shall be used solely for the payment of the interest on the
Bonds and for the payment of principal of and the Make-Whole Premium, if
applicable, on the Bonds upon maturity, whether stated or accelerated, or upon
mandatory or optional redemption.
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Neither the Company, the Bank nor any other party, other than the
Bondholders and the Trustee acting solely for the benefit of the Bondholders
pursuant to the terms of this Indenture or at their direction, shall have any
interest in or rights to the Bond Fund, including the Letter of Credit Account
and the Current Account therein.
The Issuer hereby authorizes and directs the Trustee, and the Trustee
hereby agrees, to withdraw and make available at the principal office of the
Paying Agent sufficient funds from the Bond Fund to pay the principal of, Make-
Whole Premium, if applicable, and interest on the Bonds upon maturity, whether
stated or accelerated, or upon mandatory or optional redemption, only, in the
following order of payment:
FIRST: Amounts held by the Trustee in the Letter of Credit Account of the
Bond Fund.
SECOND: Amounts held by the Trustee in the Current Account of the Bond
Fund to the extent that moneys under item FIRST are not sufficient to make
payment of principal, Make-Whole Premium, if applicable, and interest on the
Bonds.
Any amounts remaining in the Bond Fund after payment in full of the Bonds
and all other amounts required to be paid under this Indenture or the Loan
Agreement, shall be paid to the Bank, to the extent of any amounts owing under
the Credit Agreement, or, if there are no such amounts owed, to the Company upon
the expiration or sooner cancellation or termination of the term of the Loan
Agreement as provided in the Loan Agreement.
All moneys held in the Bond Fund, including the Letter of Credit Account
and the Current Account therein, shall be held absolutely and unconditionally
for the payment of the interest on the Bonds and for the payment of the
principal of and the Make-Whole Premium, if applicable, on the Bonds upon
maturity, whether stated or accelerated, or upon mandatory or optional
redemption, and are not subject to any right of set-off, counterclaim or
recoupment of any kind of the Company or any other party.
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ARTICLE VII
SECURITY FOR AND INVESTMENT OF MONEYS
SECTION 7.01. SECURITY. All moneys from time to time received by the
Trustee and held in any fund created under this Indenture shall be held in trust
by the Trustee for the benefit of the holders from time to time of the Bonds
entitled to be paid therefrom, subject to the provisions of Section 12.04 of
this Indenture and any other provisions of this Indenture (including provisions
relating to the payment to the Bank of any amounts due the Bank from the Company
under the Credit Agreement).
SECTION 7.02. INVESTMENT OF FUNDS. So long as the Bonds are outstanding
and there is no default under the Loan Agreement, moneys on deposit to the
credit of the Construction Fund or the Bond Fund shall, in accordance with
Section 3.08 of the Loan Agreement, be invested by the Trustee, to the extent
permitted by law, in any Investment Securities; provided, however, moneys in the
Bond Fund shall only be invested in Government Obligations. The Trustee shall
have no obligation to invest any moneys on deposit pursuant to this Indenture in
the absence of the direction of an Authorized Company Representative except for
moneys on deposit in the Bond Fund which shall at all times be invested in
Government Obligations for which the Company shall have no authority to direct
the investment thereof. Such investments shall have maturity dates, or shall be
subject to redemption by the holder, at the option of the holder, on or prior to
the dates the moneys invested therein will be needed for the purposes of such
funds. The Trustee may make such invest ments utilizing the services of any
qualified, duly licensed securities agent or broker of its choice including the
investment or bond department of the Trustee.
The securities purchased with the moneys in each such fund shall be deemed
a part of such fund. The interest, including realized interest on securities
purchased at a discount, received on all such securities (after deduction for
accrued interest, commissions, if any, and premium paid from such fund at time
of purchase) shall be deposited by the Trustee in the fund from which such
investment was made. The Trustee shall not be liable or responsible for any
loss resulting from any such investment or resulting from the redemption, sale
or maturity of any such investment as authori zed pursuant to this Section
7.02. If at any time it shall become necessary that some or all of the
securities purchased with the moneys in any such fund be redeemed or sold in
order to raise moneys necessary to comply with the provisions of this Indenture,
the Trustee shall effect such redemption or sale, employing, in the case of a
sale, any commercially reasonable method of effecting the same.
SECTION 7.03. TRANSFER OF BALANCE. Any balance in any of the Funds
created under this Indenture or otherwise held by the Trustee after all the
Bonds, premium, if any, together with the interest thereon, have been paid in
full or provision for such payment has been made in accordance with Section
15.02 of this Indenture and all amounts due to the Trustee, Paying Agent and the
Issuer have been paid, shall be paid over to the Company, provided, however,
that any such balance shall be paid to the Bank to the extent of any amount
owing from the Company to the Bank under the Credit Agreement.
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ARTICLE VIII
REDEMPTION OF BONDS
SECTION 8.01. METHOD OF REDEMPTION. Any redemption of all or any part of
the Bonds which are subject to redemption or such purchase shall be made in the
manner provided in this Article VIII.
SECTION 8.02. NOTICE OF REDEMPTION. In the case of any redemption, the
Trustee shall give notice in its own name or in the name of the Issuer, as
hereinafter provided in this Section 8.02, that Bonds of a particular Series and
maturity date identified by serial and/or CUSIP numbers have been called for
redemption and, in the case of Bonds to be redeemed in part only, the portion of
the principal amount thereof that has been called for redemption (or if all the
outstanding Bonds are to be redeemed, so stating, in which event such serial
numbers may be omitted), that they will be due and payable on the date fixed for
redemption (specifying such date) upon surrender thereof at the Corporate Trust
Office, at the applicable Redemption Price (specifying such price), that all
interest on the Bonds, or portions thereof, so to be redeemed will cease to
accrue on and after such date and that the Registered Owners thereof are
required to surrender such Bonds on or before the date fixed for redemption.
Such notice shall be given, on such date so as to insure the redemption of
the Bonds on the earliest possible date by overnight carrier delivery and by
first class mail, in a sealed envelope, postage prepaid, at least thirty (30)
days before the date fixed for redemption, to the Registered Owners of such
Bonds, or portions thereof, so called for redemption, at their respective
addresses as the same shall last appear on the Bond Register, and the Bank;
provided, however, that in the event of a redemption pursuant to Section
2.03(d), (e) and (f) hereof, notice of redemption shall be mailed at least five
(5) days before the date fixed for redemption.
In case, by reason of the suspension of or irregularities in regular mail
service, it shall be impractical to mail to the Registered Owners of registered
Bonds notice of any event when such notice is required to be given pursuant to
any provision of this Indenture, then any manner of giving such notice as shall
be satisfactory to the Trustee shall be deemed to be a sufficient giving of such
notice.
To the extent applicable, such notice may be conditioned upon the deposit
of sufficient moneys to effect such redemption at or prior to the date fixed for
redemption and if such moneys are not deposited, said Bonds shall continue to be
outstanding under this Indenture and not subject to redemption pursuant to said
notice.
SECTION 8.03. PAYMENT OF REDEEMED BONDS. If notice of redemption has been
given as provided in Section 8.02 of this Indenture, the Bonds or portions
thereof called for redemption shall be due and payable on the date fixed for
redemption at the Redemption Price. Payment of the Redemption Price shall be
made by the Trustee upon surrender of such Bonds. The Redemption Price shall be
paid out of the Bond Fund. The expense of giving notice and any other expenses
of
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redemption shall be paid by the Company. If there shall be called for redemption
less than the principal amount of a registered Bond, the Issuer shall execute
and deliver and the Trustee shall authenticate, upon surrender of such Bond, and
without charge to the Registered Owner thereof, at the option of the Registered
Owner, registered Bonds of like Series and maturity date for the unredeemed
portion of the principal amount of the registered Bond so surrendered.
From and after the date fixed for redemption designated in such notice
(deposit of the Redemption Price having been made with the Trustee with such
moneys to be held in trust and uninvested in a separate subaccount of the Bond
Fund and notice having been given or waived), notwithstanding that any Bonds so
called for redemption in whole or in part shall not have been surrendered for
cancellation, no further interest shall accrue upon the principal of any of the
Bonds or portions thereof so called for redemption; and such Bonds or portions
thereof so to be redeemed shall cease to be entitled to any lien, benefit or
security under this Indenture, and the holders thereof shall have no rights in
respect of such Bonds or portions thereof except to receive payment of the
Redemption Price thereof.
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ARTICLE IX
PARTICULAR COVENANTS OF THE ISSUER
SECTION 9.01. PAYMENT OF BONDS. The Issuer will promptly pay from the
Revenues and other funds and collateral pledged hereunder the principal of,
Make-Whole Premium, if applicable, and the interest on every Bond issued under
and secured by this Indenture at the places, on the dates and in the manner
specified in this Indenture and in said Bonds according to the true intent and
meaning thereof.
SECTION 9.02. MAINTAIN ITS EXISTENCE. The Issuer will at all times
maintain its existence and will use its best efforts to maintain, preserve and
renew all its rights, powers, privileges and franchises; and it will cause the
Company to covenant to comply with all valid acts, rules, regulations, orders
and directions of any legislative, executive, administrative or judicial body
applicable to the Project or the Project Site.
SECTION 9.03. PAYMENTS UNDER LOAN AGREEMENT; NO AMENDMENT TO LOAN
AGREEMENT WITHOUT CONSENT. So long as any of the Bonds are outstanding, the
Issuer will require the Company to pay, or cause to be paid, all the payments
and other costs and charges payable by the Company under the Loan Agreement.
The Loan Agreement may not be amended, changed, modified, altered or terminated
without the prior written consent of the Trustee and the Issuer and (a) the
holders of at least sixty-six and two-thirds percent (66-2/3%) in aggregate
principal amount of the Bonds then outstanding, or (b) in case less than all of
the several Series of Bonds, if any, then outstanding are affected by the
modifications or amendments, the holders of not less than sixty-six and two-
thirds percent (66-2/3%) in aggregate principal amount of the Bonds of each
Series so affected then outstanding; provided, however, that if such
modification or amendment will, by its terms, not take effect so long as any
Bonds of any specified Series remain outstanding, the consent of the holders of
such Bonds shall not be required and such Bonds shall not be deemed to be
outstanding for the purpose of any calculation of outstanding Bonds under this
Section 9.03; provided, further, that no such amendment, change, modification,
alteration or termination will reduce the percentage of the aggregate principal
amount of outstanding Bonds the consent of the holders of which is a requirement
for any such amendment, change, modification, alteration or termination. No
amendment, change, modification, alteration or termination of the Loan Agreement
shall be made other than pursuant to a written instrument signed by the Issuer
and the Company. The Loan Agreement may be amended, changed, modified, altered
or terminated without the consent of the holders of outstanding Bonds (a) to
provide necessary changes in connection with the issuance of Additional Bonds
and (b) to cure any ambiguity or to cure, correct or supplement any inconsistent
provisions of the Loan Agreement.
The Issuer will require the Company to make the payments due under the Loan
Agreement and to observe faithfully all of its covenants and agreements under
the Loan Agreement; and, in case the Company shall fail to make such payments or
observe said covenants and agreements, the Issuer will institute and prosecute
all such legal proceedings as may be appropriate for the protection of the
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holders of the Bonds. The Loan Agreement specifically provides that the rights
of the Company under the Loan Agreement are subject to the lien and rights,
remedies and powers of the Trustee under this Indenture.
SECTION 9.04. FURTHER DOCUMENTS. The Issuer covenants that it will from
time to time execute and deliver such further instruments and take such further
action as may be reasonable and as may be required to carry out the purpose of
this Indenture; provided, however, that no such instruments or actions shall
pledge the faith and credit or taxing power of the State, or any political
subdivision or public corporation of the State.
SECTION 9.05. PAYMENT OF TAXES AND ASSESSMENTS; COMPLIANCE WITH
REGULATIONS; NO CREATION OF LIENS OR CHARGES. The Issuer will: (a) pay or make
provision for payment of, or cause the Company to pay or make provision for
payment of, all lawful taxes and assessments, including income, profits,
property or excise taxes, if any, or other municipal or governmental charges
lawfully levied or assessed by the federal, state or municipal government upon
the Issuer with respect to or upon the Project or the Project Site or any part
thereof or upon any payments in respect thereof under the Loan Agreement when
the same shall become due and (b) not create or suffer to be created any lien or
charge upon the payments in respect to the Loan Agreement or the Note; provided,
however, that nothing in this Section 9.05 contained shall require the Issuer or
the Company to pay any tax or assessment, observe or comply with any requirement
or pay or cause to be discharged or make provision for any such lien or charge
so long as the validity thereof shall be contested in good faith by appropriate
legal proceedings duly prosecuted or there shall have been provided a bond
satisfactory to the Trustee to discharge such lien or charge.
SECTION 9.06. EXTENSION OF PAYMENT OF BONDS. In order to prevent any
accumulation of claims for interest after maturity, the Issuer will not directly
or indirectly extend or assent to the extension of time of payment of any claims
for interest on any of the Bonds and will not directly or indirectly be a party
to or approve any such arrangement by purchasing or funding such claims for
interest or in any other manner. In case any such claim for interest shall be
extended or funded in violation of this Section 9.06, such claim for interest
shall not be entitled, in case of any default under this Indenture, to the
benefit or security of this Indenture except subject to the prior payment in
full of the principal of and Make-Whole Premium, if applicable, on all Bonds
issued and outstanding under this Indenture, and of all claims for interest
which shall not have been so extended or funded.
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ARTICLE X
DEFAULTS AND REMEDIES
SECTION 10.01. EVENTS OF DEFAULT. In case one or more of the following
events, in this Indenture referred to as the "Events of Default", shall happen
and be continuing, that is to say, if
(a) payment of the principal of, Make-Whole Premium, if applicable, or
interest on the Bonds shall not be made when the same shall become due and
payable; or
(b) the Interest Component of the Letter of Credit or any Alternate Letter
of Credit is not reinstated by the eleventh day following the payment of an
interest draw thereunder; or
(c) an "event of default" occurs and is continuing under the Loan
Agreement or the Note; or
(d) the Issuer shall fail to observe or perform in any material way any
covenant, condition, agreement or provision contained in the Bonds or in this
Indenture on the part of the Issuer to be performed other than those set forth
in (a), (b), (c) and (e) of this Section 10.01, and such failure shall continue
for thirty (30) days after written notice specifying such failure and requiring
the same to be remedied shall have been given to the Issuer, the Bank and the
Company by the Trustee, which notice may be given by the Trustee in its
discretion and shall be given by the Trustee at the written request of the
holders of not less than sixty-six and two-thirds percent (66-2/3%) in aggregate
principal amount of all Bonds then outstanding; or
(e) an Act of Bankruptcy shall occur;
then, in each such case, unless the principal of all the Bonds shall have become
due and payable otherwise than by acceleration, or by acceleration as described
in the next succeeding paragraph, the Trustee may, and upon written request of
the holders of at least sixty-six and two-thirds percent (66-2/3%) in aggregate
principal amount of all Bonds then outstanding, the Trustee shall, by written
notice given to the Issuer, the Bank and the Company by the Trustee, declare the
principal of and the Make-Whole Premium, if applicable, on all Bonds then
outstanding, together with interest accrued thereon, to be due and payable
immediately, and upon such declaration the said principal, and the Make-Whole
Premium, if applicable, thereon, together with interest accrued thereon, shall
become due and payable immediately at the place of payment provided in the said
notice, anything in this Indenture or in said Bonds to the contrary
notwithstanding.
With respect to any Events of Default specified in paragraphs (a) and (b)
of this Section 10.01, without any notice to the Issuer, the Bank or the Company
or any other act by the Trustee or the Bondholders, the Trustee shall declare
the principal of and the Make-Whole Premium, if applicable, on all Bonds then
outstanding, together with interest accrued thereon, to be immediately due and
payable and the Trustee shall immediately draw on the Credit Facility pursuant
to Section 11.02 hereof. The Trustee shall immediately, upon such declaration,
provide notice thereof by first
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class mail, in a sealed envelope, postage prepaid, to the Registered Owners of
the Bonds. Pursuant to such acceleration, interest on the Bonds shall accrue to
the date of payment thereof but for no more than ten (10) calendar days
thereafter. Upon any declaration or acceleration hereunder, the Trustee shall
immediately exercise such rights as it may have under the Loan Agreement to
declare all payments thereunder to be immediately due and payable.
Immediately following any such declaration of acceleration, the Trustee
shall mail notice of such acceleration by first class mail to each holder of the
Bonds at his last address appearing on the Bond Register. Any defect in or
failure to give such notice of such declaration shall not affect the validity of
such declaration.
There shall not be so waived any Event of Default described in paragraphs
(a), (b) and (e) of this Section or any declaration of acceleration in
connection therewith rescinded or annulled except with the written consent of
the holders of all Bonds then outstanding. In the case of the waiver or
rescission and annulment, or in case any suit, action or proceedings taken by
the Trustee on account of any Event of Default shall have been discontinued,
abandoned or determined adversely to it, the Issuer, the Trustee, the Bank and
the holders shall be restored to their former positions and rights hereunder,
respectively. No waiver or rescission shall extend to any subsequent or other
Event of Default or impair any right consequent thereon.
SECTION 10.02. RIGHT TO DECLARE BONDS DUE AND PAYABLE. In any case in
which under the provisions of Section 10.01 of this Indenture the Trustee has
the right to declare the principal of all Bonds then outstanding to be due and
payable immediately, or when the Bonds by their terms mature (upon redemption or
otherwise) and are not paid, the Trustee, as the assignee and pledgee of all the
right, title and interest of the Issuer in and to the Loan Agreement, may
enforce each and every right granted to the Issuer under the Loan Agreement and
this Indenture except those rights specifically retained by the Issuer.
SECTION 10.03. PROCEEDINGS BY TRUSTEE. Upon the happening and
continuance of any Event of Default, then and in every such case the Trustee in
its discretion may, and upon the written request of the holders of at least
sixty-six and two-thirds percent (66-2/3%) in aggregate principal amount of the
Bonds then outstanding, and upon receipt of indemnification satisfactory to it,
shall:
(a) by mandamus, or other suit, action or proceeding at law or in equity,
enforce all rights of the Bondholders and require the Issuer or the Company to
carry out any agreements with or for the benefit of the Bondholders and to
perform its or their duties under the Act, the Loan Agreement and this
Indenture;
(b) bring suit upon the Bonds;
(c) by action or suit in equity require the Issuer to account as if it
were the trustee of an express trust for the Bondholders;
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(d) by action or suit in equity enjoin any acts or things which may be
unlawful or in violation of the rights of the Bondholders; or
(e) exercise any and all rights available under law.
If Events of Default set forth in Section 10.01 of this Indenture shall
require a mandatory redemption of the Bonds pursuant to Section 2.03 hereof, the
Trustee shall immediately take all such actions required by Sections 2.03 and
11.02 hereof without indemnity or direction.
SECTION 10.04. EFFECT OF DISCONTINUANCE OR ABANDONMENT. In case any
proceeding taken by the Trustee on account of any default shall have been
discontinued or abandoned for any reason, or shall have been determined
adversely to the Trustee, then and in every such case the Issuer, the Bank, the
Trustee and the Bondholders shall be restored to their former positions and
rights under this Indenture, respectively, and all rights, remedies and powers
of the Trustee shall continue as though no such proceeding had been taken.
SECTION 10.05. RIGHTS OF BONDHOLDERS. Anything in this Indenture to the
contrary notwithstanding, upon the happening and continuance of any Event of
Default the holders of not less than sixty-six and two thirds percent (66 2/3%)
in aggregate principal amount of the Bonds then outstanding shall have the right
upon providing the Trustee security and indemnity reasonably satisfactory to it
against the costs, expenses and liabilities to be incurred therein or thereby,
by an instrument in writing executed and delivered to the Trustee, to direct the
method and place of conducting all remedial proceedings to be taken by the
Trustee under this Indenture.
SECTION 10.06. RESTRICTION ON BONDHOLDERS' ACTION. No holder of any of
the Bonds shall have any right to institute any suit, action or proceeding in
equity or at law for the enforcement of any trust under this Indenture, or any
other remedy under this Indenture or on said Bonds, unless such holder
previously shall have given to the Trustee written notice of an Event of Default
as hereinabove provided and unless also the holders of not less than sixty-six
and two-thirds percent (66 2/3%) in aggregate principal amount of the Bonds then
outstanding shall have made written request of the Trustee to institute any such
suit, action, proceeding or other remedy, after the right to exercise such
powers or rights of action, as the case may be, shall have accrued, and shall
have afforded the Trustee a reasonable opportunity either to proceed to exercise
the powers in this Indenture granted, or to institute such action, suit or
proceeding in its or their name; nor unless there also shall have been offered
to the Trustee security and indemnity reasonably satisfactory to it against the
costs, expenses and liabilities to be incurred therein or thereby, and the
Trustee shall not have complied with such request within a reasonable time; and
such notification, request and offer of indemnity are hereby declared in every
such case to be conditions precedent to the execution of the trusts of this
Indenture or for any other remedy under this Indenture; it being understood and
intended that no one or more holders of the Bonds secured by this Indenture
shall have any right in any manner whatever by his or their action to affect,
disturb or prejudice the security of this Indenture, or to enforce any right
under this Indenture or under the Bonds, except in the manner in this Indenture
provided, and that all proceedings at law or in equity shall be instituted, had
and
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maintained in the manner in this Indenture provided and for the equal benefit of
all holders of outstanding Bonds. Notwithstanding the foregoing provisions of
this Section 10.06 or any other provision of this Indenture, the obligation of
the Issuer shall be absolute and unconditional to pay, but solely from the
Revenues and other funds and collateral pledged under this Indenture, the
principal of and Make-Whole Premium, if applicable, and interest on the Bonds to
the respective holders thereof at the respective due dates thereof, and nothing
herein shall affect or impair the right of action, which is absolute and
unconditional, of such holders to enforce such payment.
SECTION 10.07. POWER OF TRUSTEE TO ENFORCE. All rights of action under
this Indenture or under any of the Bonds secured by this Indenture which are
enforceable by the Trustee may be enforced by the Trustee without the possession
of any of the Bonds, or the production thereof at the trial or other proceedings
relative thereto, and any such suit, action or proceedings instituted by the
Trustee shall be brought in its name, as trustee, for the equal and ratable
benefit of the holders of the Bonds, subject to the provisions of this
Indenture.
SECTION 10.08. REMEDIES NOT EXCLUSIVE. No remedy in this Indenture
conferred upon or reserved to the Trustee or to the holders of the Bonds is
intended to be exclusive of any other remedy or remedies, and each and every
such remedy shall be cumulative, and shall be in addition to every other remedy
given under this Indenture or now or hereafter existing at law or in equity or
by statute.
SECTION 10.09. EFFECT OF WAIVER. No delay or omission of the Trustee or
of any holder of the Bonds to exercise any right or power accruing upon any
default or Event of Default shall impair any such right or power or shall be
construed to be a waiver of any such default or Event of Default, or an
acquiescence therein; and every power and remedy given by this Article X to the
Trustee and to the holders of the Bonds, respectively, may be exercised from
time to time and as often as may be deemed expedient.
SECTION 10.10. APPLICATION OF MONEYS. All moneys received by the Trustee
after acceleration of the maturity of the Bonds and derived from any drawing
made upon the Letter of Credit shall be applied by the Trustee to and only to
the payment of the principal, Make-Whole Premium, if applicable, and interest on
the 1998 Series Bonds. Subject to the foregoing, any moneys received by the
Trustee pursuant to this Article X or deposited pursuant to Article XV hereof
shall, after payment of all amounts payable to the Trustee, be deposited in the
Bond Fund and be applied as follows:
FIRST - To the payment of the persons entitled thereto of all installments
of interest then due on the Bonds, in the order of the maturity of the
installments of such interest and, if the amount available shall not be
sufficient to pay in full any particular installment, then to the payment
ratably, according to the amounts due on such installment, to the persons
entitled thereto, without any discrimination or privilege;
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SECOND - To the payment to the persons entitled thereto of the unpaid
principal of and Make-Whole Premium, if applicable, on any of the Bonds which
shall have become due (other than Bonds matured or called for redemption for the
payment of which moneys are held pursuant to the provisions of this Indenture),
in the order of their due dates, with interest on the principal of such Bonds
accruing from the respective dates upon which they became due, to the extent
permitted by law, at the rate per annum borne by any Bonds issued under this
Indenture and then outstanding and, if the amount available shall not be
sufficient to pay in full Bonds and premium, if any, due on any particular date,
together with such interest, then to the payment ratably, according to the
amount of principal due on such date, to the persons entitled thereto without
any discrimination or privilege;
THIRD - To be held for the payment to the persons entitled thereto as the
same shall become due of the principal of and Make-Whole Premium, if applicable,
and interest on the Bonds which may thereafter become due either at maturity or
upon call for redemption prior to maturity and, if the amount available shall
not be sufficient to pay in full Bonds due on any particular date, together with
interest and premium, if any, then due and owing thereon, payment shall be made
ratably according to the amount of principal due on such date to the persons
entitled thereto without any discrimination or privilege;
FOURTH - To the payment of Administration Expenses;
FIFTH - To the Bank any amounts owing to the Bank under the Credit
Agreement; and
SIXTH - To the Company any remaining amounts.
Whenever moneys are to be applied pursuant to the provisions of this
Section 10.10, such moneys shall be applied at such times, and from time to
time, as the Trustee shall determine, having due regard to the amount of such
moneys available for application and the likelihood of additional moneys
becoming available for such application in the future. Whenever the Trustee
shall apply such funds, it shall fix the date (which shall be the next
succeeding Payment Date) upon which such application is to be made and upon such
date interest on the amounts of principal to be paid on such dates shall cease
to accrue. The Trustee shall give, by mailing, pursuant to Section 16.05
hereof, such notice of the deposit with it of any such moneys and of the fixing
of any such date.
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ARTICLE XI
CREDIT FACILITY
SECTION 11.01. DELIVERY OF LETTER OF CREDIT. Pursuant to the Credit
Agreement, the Bank has agreed, subject to certain conditions, to deliver to the
Trustee on the date of delivery of the 1998 Series Bonds for the account of the
Company, the Letter of Credit, to be held by the Trustee in trust in order to
provide for the payment of principal of, Make-Whole Premium, if applicable, and
interest on the 1998 Series Bonds (based upon the actual rates of interest on
the Bonds) for a period of two hundred ten (210) days (computed on the basis of
a three hundred sixty (360) day year of twelve (12), thirty (30) day months) and
the Trustee hereby agrees to accept the Letter of Credit and any Alternate
Letter of Credit and to perform its obligations with respect thereto in
accordance with the express terms and conditions of this Indenture, the Letter
of Credit and any Alternate Letter of Credit.
SECTION 11.02. CREDIT FACILITY DRAWINGS. The Trustee shall, without
seeking indemnity or direction, draw moneys under the Credit Facility in the
following circumstances and only in the following circumstances:
(a) The Trustee shall, without making any prior demand or claim upon the
Company or the Issuer, and without regard to any other amounts on deposit for
such purposes in the funds created hereunder, make a drawing under and in
accordance with the Credit Facility so as to receive moneys thereunder in an
amount which shall be sufficient to pay in full the principal of, Make-Whole
Premium, if applicable, and interest on the Bonds when due, including on each
Payment Date, at maturity, and upon the date of any redemption pursuant to
Section 2.03 hereof, on the date such principal, Make-Whole Premium, if
applicable, or interest is required to be paid on the 1998 Series Bonds
according to the terms and provisions of this Indenture.
(b) Upon the occurrence of an Event of Default and (1) the acceleration of
payment of the 1998 Series Bonds pursuant to Sections 10.01 and 10.02 hereof or
(2) the mandatory redemption of the 1998 Series Bonds pursuant to Section
2.03(f) hereof, the Trustee shall, without making any prior demand or claim upon
the Company or the Issuer, and without regard to any other amounts on deposit
for such purposes in the funds created hereunder, immediately make a drawing
under and in accordance with the Credit Facility so as to receive moneys
thereunder in an amount which will be sufficient to pay in full the principal
of, Make-Whole Premium, if applicable, and accrued interest on the 1998 Series
Bonds on the date of payment or redemption of the 1998 Series Bonds resulting
from such declaration of acceleration or mandatory redemption.
(c) In the case of a mandatory redemption pursuant to Section 2.03(d) or
(e) hereof, the Trustee shall, without seeking indemnity or direction, draw
moneys under the Credit Facility at such time to insure the timely payment of
the Redemption Price of the 1998 Series Bonds on the date fixed for redemption.
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SECTION 11.03. DISPOSITION OF MONEYS DRAWN UNDER THE CREDIT FACILITY.
All amounts drawn by the Trustee under the Credit Facility shall be deposited
into the Letter of Credit Account of the Bond Fund and applied as provided in
Sections 6.01 and 6.02 hereof.
SECTION 11.04. ALTERNATE LETTER OF CREDIT. The Company may, at any time,
provide an Alternate Letter of Credit by delivery of such Alternate Letter of
Credit to the Trustee upon satisfaction of the following provisions of this
Section 11.04:
(a) Any Alternate Letter of Credit shall provide that funds may be
obtained for the purposes, in the manner and at the times as provided under the
Letter of Credit, and shall include (a) an amount sufficient to pay the
principal amount of the 1998 Series Bonds, plus (b) an amount equal to two
hundred ten (210) days' accrued interest on the outstanding 1998 Series Bonds,
based upon the actual rates of interest on the 1998 Series Bonds and computed on
the basis of a three hundred sixty (360) day year of twelve (12), thirty (30)
day months, plus (c) an amount equal to $1,600,000, as the Premium Component,
due in whole or in part upon the occurrence of certain circumstances as provided
in this Indenture.
(b) Any Alternate Letter of Credit shall be in effect for a period of at
least two (2) years, unless the Company elects to provide an Alternate Letter of
Credit having a term in excess of two (2) years, and shall have a scheduled
expiration of January thirtieth (30th) and shall be effective no later than
forty-five (45) days immediately preceding the scheduled expiration of the
Credit Facility then in effect.
(c) The Trustee shall have timely received written evidence that the
issuer of such Alternate Letter of Credit is a commercial bank organized and
doing business in the United States of America or a branch or agency of a
foreign commercial bank located and doing business in the United States of
America and subject to regulation by state or federal banking regulatory
authorities.
(d) The Trustee shall have timely received an opinion or opinions of
counsel satisfactory in form and substance to the Trustee to the effect that the
Alternate Letter of Credit is the valid and binding obligation of the Bank (or,
in the case of a branch or agency of a foreign commercial bank, the branch or
agency) issuing the same and enforceable in accordance with its terms. Said
opinion or opinions shall comply with the requirements set forth in the
definition of Opinion of Counsel herein.
(e) In the case of an Alternate Letter of Credit issued by a branch or
agency of a foreign commercial bank there shall also be timely delivered to the
Trustee an opinion of counsel licensed to practice law in the jurisdiction in
which the primary corporate office of such bank is located (which counsel shall
be satisfactory to the Trustee), satisfactory in form and substance to the
Trustee to the effect (1) that the Alternate Letter of Credit is the valid and
binding obligation of such bank, enforceable in accordance with its terms in the
courts of the jurisdiction in which the primary corporate office of such bank is
located, (2) that such bank has consented to jurisdiction in the United States
of America, (3) that such branch or agency is subject to banking regulations of
the
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United States of America or any state thereof and (4) that a judgment upon the
Alternate Letter of Credit obtained in the United States of America against such
branch or agency would be enforceable against such bank in the courts of the
jurisdiction in which the primary corporate office of such bank is located
without relitigation of the merits.
(f) The Trustee must timely receive written evidence that the rating of
the long-term deposits of the Bank providing such Alternate Letter of Credit
shall not be less than Aa3 by Moody's or AA-by Standard & Poor's.
The Trustee shall not accept any Alternate Letter of Credit unless the
conditions set forth above are satisfied.
Notice of the proposed issuance of an Alternate Letter of Credit shall be
given by the Trustee, by first-class mail, postage prepaid, to the Bondholders
at their addresses appearing on the Bond Register; such notice shall be mailed
to the Bondholders and the Bank at least thirty (30) days prior to the proposed
effective date of the Alternate Letter of Credit. Such notice shall specify
that an Alternate Letter of Credit is being obtained, the proposed effective
date of such Alternate Letter of Credit, the name of the entity providing such
Alternate Letter of Credit and a general description of the Alternate Letter of
Credit.
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ARTICLE XII
CONCERNING THE TRUSTEE
SECTION 12.01. APPOINTMENT AND ACCEPTANCE OF DUTIES. The Trustee hereby
accepts and agrees to the trusts hereby created, but only upon the additional
terms set forth in this Article XII, to all of which the Issuer agrees and the
respective holders of the Bonds, by their purchase and acceptance thereof,
agree.
SECTION 12.02. RESPONSIBILITIES. The recitals, statements and
representations in this Indenture or in the Bonds contained, save only the
Trustee's certificate of authentication upon the Bonds, shall be taken and
construed as made by and on the part of the Issuer, and not by the Trustee, and
the Trustee does not assume, and shall not have, any responsibility or
obligation for the correctness of any hereof or thereof. The Trustee shall have
no responsibility for any funds other than those funds actually paid to or
received or held by it hereunder. The Trustee shall pay to the Issuer the
Issuer's Administration Expenses immediately upon their receipt from the
Company. The Trustee shall be responsible for insuring that Uniform Commercial
Code continuation statements necessary to preserve and maintain the security
interest created hereunder are timely and properly recorded as required by law.
SECTION 12.03. POWERS. The Trustee may execute any of the trusts or
powers of this Indenture and perform the duties required of it under this
Indenture by or through attorneys, agents, receivers, or employees, and shall be
entitled to obtain and rely on advice of counsel concerning all matters of trust
and its duties under this Indenture and the Trustee shall not be answerable for
the default or misconduct of any such attorney, agent, receiver, or employee
selected by it with reasonable care. The Trustee shall not be answerable for
the exercise of any discretion or power under this Indenture or for anything
whatever in connection with the trusts in this Indenture created, except only
for its own wilful or intentional misconduct or wanton or gross negligence.
SECTION 12.04. COMPENSATION. The Issuer shall pay or cause the Company
to pay to the Trustee reasonable compensation for all services rendered by it
under this Indenture and also all its reasonable expenses, charges and other
disbursements and those of its attorneys, agents, receivers and employees
incurred in and about the administration and execution of the trusts by this
Indenture created and the performance of its powers and duties under this
Indenture. In default of such payment, the Trustee may deduct the same from any
moneys coming into its hands except (a) moneys received by the Trustee from any
drawing made upon the Letter of Credit (b) moneys held under the provisions of
Article XV of this Indenture and (c) moneys held under Section 8.03 of this
Indenture and shall be entitled to a preference in payment over any of the Bonds
outstanding under this Indenture.
SECTION 12.05. NO DUTY TO MAINTAIN INSURANCE. Subject to the provisions
of Article X, the Trustee shall be under no duty to effect or to renew any
policies of insurance or under any liability for the failure of the Issuer or
the Company to effect or renew insurance; or to report or file
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claims or proofs of loss for any loss or damage insured against or which may
occur; nor shall the Trustee be liable as an insurer.
SECTION 12.06. NOTICE OF EVENT OF DEFAULT. The Trustee shall not be
required to take notice, or to be deemed to have notice, of any default or Event
of Default under this Indenture other than a default or Event of Default under
Section 10.01(a), (b) or (d) of this Indenture, unless specifically notified in
writing of such default or Event of Default by the holders of at least ten
percent (10%) in aggregate principal amount of the Bonds then outstanding. The
Trustee may, however, at any time, in its discretion, require of the Issuer full
information and advice as to the performance of any of the covenants, conditions
and agreements contained in this Indenture.
SECTION 12.07. TRUSTEE'S ACTIONS. The Trustee shall be under no
obligation to take any action in respect of any default or Event of Default or
otherwise, or toward the execution or enforcement of any of the trusts by this
Indenture created (with the exception of any actions required to be taken under
Sections 11.02 and 12.20 hereof and under Sections 10.01 and 10.02 hereof to
accelerate the payment of the Bonds, and under Sections 2.03 and 8.02 hereof to
redeem the Bonds, and to make drawings under the Letter of Credit required
thereunder, which actions the Trustee shall take without seeking indemnity or
direction), or to institute, appear in or defend any suit or other proceeding in
connection therewith, unless requested in writing so to do by holders of at
least sixty-six and two thirds percent (66-2/3%) in aggregate principal amount
of the Bonds then outstanding as provided in Article X, and if in its opinion
such action may tend to involve it in expense or liability, unless furnished,
from time to time as often as it may require, with reasonable security and
indemnity satisfactory to it; but the foregoing provisions are intended only for
the protection of the Trustee, and shall not affect any discretion or power
given by any provisions of this Indenture to the Trustee to take action in
respect of any default or Event of Default without such notice or request from
the Bondholders, or without security or indemnity. In the event of a default by
the Bank under the Credit Facility, the Trustee is authorized and required to
enforce all of its rights in and under the Credit Facility by such action, at
law or in equity, as it deems necessary to protect the interests of the
Registered Owners of the Bonds. The Trustee shall not sell, assign or transfer
the Credit Facility except to a successor Trustee under this Indenture.
SECTION 12.08. LIMITATION OF LIABILITY. The Trustee shall be protected
and shall incur no liability in acting or proceeding in good faith upon any
resolution, notice, telegram, request, consent, waiver, certificate, statements,
affidavit, voucher, bond, requisition or other paper or document which it shall
in good faith believe to be genuine and to have been authorized or signed by the
proper board or person or to have been prepared and furnished pursuant to any of
the provisions of this Indenture, and the Trustee shall be under no duty to make
any investigation or inquiry as to any statements contained or matters referred
to in any such instrument, but may accept and rely upon the same as conclusive
evidence of the truth and accuracy of such statements. The Trustee shall not be
bound to recognize any person as a holder of any Bond or to take any action at
his request unless such Bond shall be deposited with the Trustee or evidence
satisfactory to the Trustee of the ownership of such Bond shall be furnished to
the Trustee.
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SECTION 12.09. OWNERSHIP OF BONDS. The Trustee and any bank or trust
company in common control with the Trustee may in good faith buy, sell, own,
hold and deal in any of the Bonds issued under and secured by this Indenture,
and may join in or take any action which any Bondholder may be entitled to take
with like effect as if the Trustee were not a party to this Indenture. The
Trustee and any bank or trust company in common control with the Trustee, as
principal or agent, may also engage in or be interested in any financial or
other transaction with the Issuer or the Company, and may act as depository,
trustee, or agent for any committee or body of holders of the Bonds issued under
or secured by this Indenture or other obligations of the Issuer as freely as if
it were not Trustee under this Indenture.
SECTION 12.10. NO DUTY TO INVEST. The Trustee shall be under no
liability for interest upon any moneys which it may at any time receive under
any of the provisions of this Indenture, except (a) to the extent it fails to
comply with Section 7.02 of this Indenture, or (b) such as it may agree in
writing with the Issuer or the Company to pay thereon.
SECTION 12.11. CONSTRUCTION OF PROVISIONS OF INDENTURE. The Trustee may
construe any of the provisions of this Indenture insofar as the same may appear
to be ambiguous or inconsistent with any other provision thereof, and any
construction of any such provisions of this Indenture by the Trustee in good
faith shall be binding upon the Bondholders.
SECTION 12.12. RESIGNATION. The Trustee may at any time and for any
reason resign and be discharged of the trusts created by this Indenture by
executing an instrument in writing resigning such trust and specifying the date
when such resignation shall take effect, and filing the same with the Secretary
of the Issuer with a copy to the Bank not less than thirty (30) days before the
date specified in such instrument when such resignation shall take effect. Such
resignation shall take effect on the day specified in such instrument and
notice, unless a successor Trustee shall not have been previously appointed and
accepted such appointment as hereinafter in this Article XII provided, in which
event such resignation and the transfer of the Credit Facility to such successor
Trustee shall take effect immediately on the appointment of and acceptance by
such successor Trustee.
SECTION 12.13. REMOVAL. The Trustee at any time and for any reason may
be removed by an instrument or instruments in writing appointing a successor
filed with the Trustee so removed and executed by the holders of at least sixty-
six and two thirds percent (66-2/3%) in aggregate principal amount of the Bonds
then outstanding. Such removal shall take effect upon the transfer of the
Credit Facility to such successor Trustee.
SECTION 12.14. APPOINTMENT OF SUCCESSOR TRUSTEE. In case at any time the
Trustee shall resign, or shall be removed, or be dissolved, or if its property
or affairs shall be taken under the control of any state or federal Court or
administrative body because of insolvency or bankruptcy, or for any other
reason, a vacancy shall forthwith and ipso facto exist in the office of Trustee,
a successor may be appointed by the holders of at least sixty-six and two thirds
percent (66-2/3%) in aggregate principal amount of the Bonds then outstanding,
by an instrument or instruments in writing filed with the Secretary of the
Issuer, signed by such Bondholders or by their attorneys-in-fact duly
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authorized in writing. Copies of each instrument shall be promptly delivered by
the Issuer to the predecessor Trustee and to the Trustee so appointed.
Until a successor Trustee shall be appointed by the Bondholders or by a
court of competent jurisdiction following the application therefor as authorized
by this Section 12.14, the Issuer, by an instrument authorized by resolution,
shall appoint a Trustee to fill such vacancy. Any new Trustee so appointed by
the Issuer shall immediately and without further act be superseded by a Trustee
appointed by the Bondholders or by a court of competent jurisdiction in the
manner hereinabove in this Section 12.14 provided.
SECTION 12.15. SUCCESSOR TO BE A BANK. Every successor in the trust
hereunder appointed pursuant to Section 12.14 of this Indenture shall be a bank
organized and doing business under the laws of the United States of America or
any state or territory thereof with trust powers, having combined capital and
surplus of at least $50,000,000.
SECTION 12.16. FAILURE TO APPOINT A SUCCESSOR TRUSTEE. In case at any
time the Trustee shall resign and no appointment of a successor Trustee shall be
made pursuant to the foregoing provisions of this Article XII prior to the date
specified in the notice of resignation as the date when such resignation shall
take effect, the Trustee or the holder of any Bond may apply to any court of
competent jurisdiction to appoint a successor Trustee. Such court may
thereupon, after such notice, if any, as it may deem proper, appoint a successor
Trustee.
SECTION 12.17. ACCEPTANCE BY SUCCESSOR TRUSTEE. Any successor Trustee
appointed under this Article XII shall execute, acknowledge and deliver to the
Issuer an instrument accepting such appointment under this Indenture, and
thereupon such successor Trustee, without any further act, deed or conveyance,
shall become duly vested with all the estates, property, rights, powers, trusts,
duties and obligations of its predecessor in the trust under this Indenture,
with like effect as if originally named Trustee in this Indenture. Upon the
written request of such successor Trustee, the Trustee ceasing to act and the
Issuer shall execute and deliver an instrument transferring to such successor
Trustee all the estates, property, rights, powers and trusts under this
Indenture of the Trustee so ceasing to act, and the Trustee so ceasing to act
shall pay over to the successor Trustee all moneys and other assets at the time
held by it under this Indenture.
Any Trustee ceasing to act shall nevertheless retain a lien upon all
property and funds held or collected by such Trustee to secure any amount then
due it pursuant to the provisions of Section 12.04 of this Indenture, except
moneys received by the Trustee from any drawing made upon the Letter of Credit.
SECTION 12.18. MERGER OR CONSOLIDATION. Any corporation or association
into which any Trustee under this Indenture may be merged or with which it may
be consolidated, or any corporation or association resulting from any merger or
consolidation to which any Trustee under this Indenture shall be a party, or any
corporation or association to which any Trustee under this Indenture may
transfer substantially all of its assets, shall be the successor Trustee under
this
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Indenture, without the execution or filing of any paper or any further act on
the part of the parties hereto, anything in this Indenture to the contrary
notwithstanding. The Trustee shall timely advise the Company of any such merger
or consolidation.
SECTION 12.19. ACTION UPON EVENT OF DEFAULT. Notwithstanding any other
provisions of this Article XII, the Trustee shall, provided it is indemnified to
its satisfaction, except as provided in Section 12.07 hereof, during the
existence of an Event of Default actually known to the Trustee, exercise such of
the rights and powers vested in it by this Indenture and use the same degree of
skill and care in their exercise as a prudent man would use and exercise under
the circumstances in the conduct of his own affairs provided, however, that the
liability of the Trustee shall only be to the extent provided in Section 12.03.
SECTION 12.20. NOTICE OF OCCURRENCE OF EVENT OF DEFAULT. Upon the
occurrence of an Event of Default actually known to the Trustee, the Trustee
shall, within thirty (30) days of such Event of Default becoming known to the
Trustee give written notice thereof by first class mail, postage prepaid, as
provided in Section 16.05 of this Indenture to each Registered Owner of Bonds
then outstanding at his last address appearing upon the Bond Register and to the
Bank and the Company, unless such Event of Default shall have been cured before
the giving of such notice.
SECTION 12.21. INTERVENTION BY TRUSTEE. In any judicial proceeding to
which the Issuer is a party and which in the opinion of the Trustee and its
counsel has a substantial bearing on the interests of holders of the Bonds, the
Trustee may in its own name and as trustee of an express trust intervene on
behalf of the holders of the Bonds and shall, upon receipt of indemnity
satisfactory to it, do so if requested in writing by the holders of at least
twenty-five percent (25%) in aggregate principal amount of the Bonds then
outstanding if permitted by the court having jurisdiction in the premises.
SECTION 12.22. APPOINTMENT AND ACCEPTANCE OF PAYING AGENT. The Trustee is
hereby appointed and does hereby accept its appointment as Paying Agent for the
1998 Series Bonds. The Issuer may at any time or from time to time appoint one
or more other Paying Agents for the 1998 Series Bonds or any other Bonds, in the
manner and subject to the conditions set forth in Section 12.23 of this
Indenture for the appointment of a successor Paying Agent. Each Paying Agent
(other than the Trustee) shall signify its acceptance of the duties and
obligations imposed upon it by written instrument of acceptance deposited with
the Issuer and the Trustee.
SECTION 12.23. RESIGNATION OR REMOVAL OF PAYING AGENT; APPOINTMENT OF
SUCCESSOR. Any Paying Agent may at any time resign and be discharged of the
duties and obligations created by this Indenture by giving at least sixty (60)
days written notice to the Issuer, the Bank and the Trustee. Any Paying Agent
may be removed at any time by an instrument filed with such Paying Agent and the
Trustee and signed by the Issuer. Any successor Paying Agent shall be appointed
by the Issuer, with the prior approval of the Trustee and the Company and shall
be a bank or trust company duly organized under the laws of the United States of
America or any state or territory thereof, having a capital stock and surplus
aggregating at least $50,000,000 and willing and able to
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accept the office on reasonable and customary terms and authorized by law to
perform all the duties imposed upon it by this Indenture.
In the event of the resignation or removal of any Paying Agent, such Paying
Agent shall pay over, assign and deliver any moneys held by it as Paying Agent
to its successor, or to the Trustee. In the event that for any reason there
shall be a vacancy in the office of any Paying Agent, the Trustee shall act (or
continue to act, as the case may be) as such Paying Agent.
SECTION 12.24. TRUST ESTATE MAY BE VESTED IN SEPARATE OR CO-TRUSTEE. It
is the purpose of this Indenture that there shall be no violation of any law of
any jurisdiction (including particularly the laws of the State) denying or
restricting the right of banking corporations or associations to transact
business as a trustee in such jurisdiction. It is recognized that in case of
litigation under this Indenture, the Loan Agreement or the Note, and in
particular in case of the enforcement of any of them, either on default, or in
case the Trustee, in reliance upon an opinion of counsel, deems that by reason
of any present or future law of any jurisdiction it may not exercise any of the
powers, rights or remedies herein granted to the Trustee or take any other
action which may be desirable or necessary in connection therewith, it may be
necessary that the Trustee appoint an additional individual or institution as a
separate or co-trustee. The following provisions of this Section 12.24 are
adopted to these ends:
(a) In the event that the Trustee appoints an additional individual or
institution as a separate or co-trustee, each and every remedy, power, right,
claim, demand, cause of action, immunity, estate, title, interest and lien
expressed or intended by this Indenture to be exercised by or vested in or
conveyed to the Trustee with respect thereto shall be exercisable by and vest in
such separate or co-trustee but only to the extent necessary to enable such
separate or co-trustee to exercise such powers, rights and remedies, and every
covenant and obligation necessary to the exercise thereof by such separate or
co-trustee shall run to and be enforceable by either of them.
(b) Should any deed, conveyance or instrument in writing from the Issuer
be required by the separate trustee or co-trustee so appointed by the Trustee
for more fully and certainly vesting in and confirming to him or it such
properties, rights, powers, trusts, duties and obligations, any and all such
deeds, conveyances and instruments in writing shall, on request, be executed,
acknowledged and delivered by the Issuer.
(c) In case any separate trustee or co-trustee, or a successor to either,
shall die, become incapable of acting, resign, be removed or be dissolved, or
shall be in the course of dissolution or liquidation, all the estates,
properties, rights, powers, trusts, duties and obligations of such separate
trustee or co-trustee, so far as permitted by law, shall vest in and be
exercised by the Trustee until the appointment of a new trustee or successor to
such separate trustee or co-trustee.
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ARTICLE XIII
EXECUTION OF INSTRUMENTS BY BONDHOLDERS AND
PROOF OF OWNERSHIP OF BONDS
SECTION 13.01. EXECUTION OF INSTRUMENTS; PROOF OF OWNERSHIP. Any
request, direction, consent or other instrument in writing required or permitted
by this Indenture to be signed or executed by Bondholders may be in any number
of concurrent instruments of similar tenor and may be signed or executed by such
Bondholders in person or by agent appointed by an instrument in writing. Proof
of the execution of any such instrument and of the ownership of Bonds shall be
sufficient for any purpose of this Indenture and shall be conclusive in favor of
the Trustee and any Paying Agent with regard to any action taken, suffered or
omitted by any of them under such instrument if made in the following manner:
(a) The fact and date of the execution by any Person of any such
instrument may be proved by the certificate of any officer in any jurisdiction
who, by the laws thereof, has power to take acknowledgments within such
jurisdiction, to the effect that the Person signing such instrument acknowledged
before him the execution thereof, or by an affidavit of a witness to such
execution.
(b) The fact of the holding of Bonds under this Indenture by any
Bondholder and the serial numbers of such Bonds and the date of his holding the
same shall be proved by the Bond Register.
Nothing contained in this Article XIII shall be construed as limiting the
Trustee to such proof, it being intended that the Trustee may accept any other
evidence of the matters in this Article XIII stated which to it may seem
sufficient. Any request or consent of the holder of any Bond shall bind every
future holder of the same Bond and any Bond or Bonds issued in exchange or
substitution therefor or upon the registration of transfer thereof in respect of
anything done by the Trustee in pursuance of such request or consent.
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ARTICLE XIV
MODIFICATION OF INDENTURE AND SUPPLEMENTAL
INDENTURES
SECTION 14.01. SUPPLEMENTAL INDENTURES WITH CONSENT OF THE COMPANY, BUT
WITHOUT CONSENT OF BONDHOLDERS. Subject to the conditions and restrictions in
this Indenture contained, the Issuer, when the execution thereof is consented to
in writing by the Company, may, without the consent of the Bondholders, enter
into a Supplemental Indenture or Supplemental Indentures with the Trustee (other
than with respect to Sections 10.01, 10.02, 11.01, 11.02, 11.03, 11.04, 14.01
and 14.02) which thereafter shall form a part of this Indenture, for any one or
more of the following purposes:
(a) to add to the covenants and agreements of the Issuer in this Indenture
contained other covenants and agreements thereafter to be observed, and to
surrender any right or power in this Indenture reserved to or conferred upon the
Issuer;
(b) to cure any ambiguity or to cure, correct or supplement any
inconsistent provision contained in this Indenture or in any Supplemental
Indenture;
(c) to assign additional revenues under this Indenture;
(d) to accept additional security and instruments and documents of further
assurance with respect to the Project;
(e) to add to the covenants, agreements and obligations of the Issuer
under this Indenture, other covenants, agreements and obligations to be observed
for the protection of the Bondholders, or to surrender or limit any right, power
or authority reserved to or conferred upon the Issuer in this Indenture,
including without limitation, the limitation of rights of redemption so that in
certain instances Bonds of different Series will be redeemed in some prescribed
relationship to one another for the protection of the holders of a particular
Series of Bonds;
(f) to evidence any succession to the Issuer and the assumption by its
successor of the covenants, agreements and obligations of the Issuer under this
Indenture, the Loan Agreement and the Bonds; or
(g) to make necessary or advisable amendments or additions in connection
with the issuance of Additional Bonds in accordance with Section 3.03 hereof as
do not adversely affect the interests of holders of outstanding Bonds.
The Issuer hereby covenants that it will perform all the requirements of
any such Supplemental Indenture which may be in effect from time to time; but no
restriction or obligation imposed by this Indenture upon the Issuer in respect
of any of the Bonds outstanding under this
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Indenture may, except as otherwise provided in Section 14.03 of this Indenture,
be waived or modified by such Supplemental Indenture, or otherwise. Nothing in
this Article XIV contained shall affect or limit the right or obligation of the
Issuer to execute and deliver to the Trustee any instrument of further assurance
or other instrument which elsewhere in this Indenture it is provided shall be
delivered to the Trustee.
SECTION 14.02. TRUSTEE AUTHORIZED TO ENTER INTO SUPPLEMENTAL INDENTURE.
The Trustee is hereby authorized to enter into with the Issuer any Supplemental
Indenture authorized or permitted by the terms of this Indenture, and to make
the further agreements and stipulations which may be therein contained, and the
Trustee, in entering into any Supplemental Indenture, shall be fully protected
in relying on an Opinion of Counsel, in form and substance satisfactory to the
Trustee, to the effect that such Supplemental Indenture is authorized or
permitted by the provisions of this Indenture and is not inconsistent with this
Indenture.
SECTION 14.03. SUPPLEMENTAL INDENTURES WITH CONSENT OF BONDHOLDERS AND
THE COMPANY. Exclusive of Supplemental Indentures to which reference is made in
Section 14.01 hereof, any modification or alteration of this Indenture or of the
rights and obligations of the Issuer or of the holders of the Bonds in any
particular may be made with the consent of the Company and (a) the holders of
not less than sixty-six and two thirds percent (66-2/3%) in aggregate principal
amount of the Bonds then outstanding, or (b) in case less than all of the
several Series of Bonds, if any, then outstanding are affected by the
modifications or amendments, the holders of not less than sixty-six and two
thirds percent (66-2/3%) in aggregate principal amount of the Bonds of each
Series so affected then outstanding; provided, however, that if such
modification or amendment will, by its terms, not take effect so long as any
Bonds of any specified Series remain outstanding, the consent of the holders of
such Bonds shall not be required and such Bonds shall not be deemed to be
outstanding for the purpose of any calculation of outstanding Bonds under this
Section 14.03. No such modification or alteration shall be made which will
reduce the percentage of aggregate principal amount of Bonds the consent of the
holders of which is required for any such modification or alteration, or permit
the creation by the Issuer of any lien prior to or, except to secure Additional
Bonds, on a parity with the lien of this Indenture upon the Revenues and other
funds and collateral pledged hereunder or which will affect the currency of
payment of the principal of, or interest or premium, if any, on, the Bonds.
For the purposes of this Indenture, a Series shall be deemed to be affected
by a modification or amendment of this Indenture if the same adversely affects
or diminishes the rights of the holders of Bonds of such Series. The Trustee
shall determine whether or not in accordance with the foregoing provisions Bonds
of any particular Series would be affected by any modification or amendment of
this Indenture and any such determination shall be binding and conclusive on the
Issuer and all the holders of Bonds.
For all purposes of this Article XIV, the Trustee shall be entitled to rely
upon an Opinion of Counsel with respect to the extent, if any, to which any
action affects the rights under this Indenture of any holders of Bonds then
outstanding.
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ARTICLE XV
DEFEASANCE
SECTION 15.01. DEFEASANCE. When at any time the whole amount of the
principal, Make-Whole Premium, if applicable, and the interest so due and
payable upon all of the Bonds shall be paid, or provision shall have been made
for the payment of the same, together with all other sums payable under this
Indenture by the Issuer, and all Administration Expenses shall have been paid or
provided for through the deposit with the Trustee of Government Obligations, the
principal of and the interest to be earned thereon is sufficient to pay all sums
due in respect of the Bonds, which Government Obligations shall have been
purchased with funds held by the Trustee for a period of three hundred sixty-
seven (367) days prior to and during which time no Act of Bankruptcy shall have
occurred, then and in that case, this Indenture and the lien created hereby
shall be discharged and satisfied and the Issuer shall be released from the
covenants, agreements and obligations of the Issuer contained in this Indenture,
and the Trustee shall assign and transfer to the Company, all property (in
excess of the amounts required for the foregoing) then held by the Trustee
(including the Loan Agreement and all payments thereunder and all balances in
any fund or account created under this Indenture free and clear of any
encumbrances other than Permitted Encumbrances and shall execute such documents
as may be reasonably required by the Company in this regard.
All moneys and Government Obligations delivered and held pursuant to this
Section 15.01 shall be held absolutely and unconditionally for the payment of
the interest on the Bonds and for the payment of the principal of and the Make-
Whole Premium, if applicable, on the Bonds upon maturity or earlier redemption,
and are not subject to any right of set-off, counterclaim or recoupment of any
kind of the Company or any other party.
When all of the Bonds of a particular Series shall have been paid and if,
at the time of such payment, the Issuer shall have kept, performed and observed
all the covenants and promises in such Bonds of a particular Series and in this
Indenture required or contemplated to be kept, performed and observed by the
Issuer or on its part on or prior to that time, and all amounts owed to the Bank
under the Credit Agreement shall have been paid, and the Credit Agreement shall
no longer be in effect, then this Indenture shall be considered to have been
discharged in respect of such Bonds of a particular Series and such Bonds shall
cease to be entitled to the lien of this Indenture.
Notwithstanding the satisfaction and discharge of this Indenture or the
discharge of this Indenture in respect of a particular Series of Bonds, the
Trustee shall continue to be obligated to hold in trust any moneys or
investments then held by the Trustee for the payment of the principal of, Make-
Whole Premium, if applicable, and interest on the Bonds, to pay to the holders
of Bonds the funds so held by the Trustee as and when such payment becomes due,
and, on written demand of the Company and the Issuer, the Trustee shall assign
and transfer to the Company, all property (in excess of the amounts required for
the foregoing) then held by the Trustee (including the Loan Agreement and all
payments thereunder and all balances in any Fund or account created under this
Indenture and shall execute such documents as may be required by the Company in
this regard; provided, however,
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that if any amounts are then owed to the Bank under the Credit Agreement, any
property then held by the Trustee shall first be paid to the Bank to the extent
of the amounts due under the Credit Agreement. Notwithstanding the satisfaction
and discharge of this Indenture or the discharge of this Indenture with respect
to a particular Series of Bonds, the covenants of the Issuer contained in
Section 7.03 shall survive any such satisfaction and discharge.
SECTION 15.02. BONDS DEEMED TO HAVE BEEN PAID. Bonds of any one or more
Series or interest installments for the payment or redemption of which
sufficient moneys shall have been held by the Trustee at the maturity or
redemption date thereof shall be deemed to be paid within the meaning and with
the effect provided in Section 15.01 of this Indenture. All outstanding Bonds
of any one or more Series shall prior to the maturity or redemption date thereof
be deemed to have been paid within the meaning and with the effect expressed in
Section 15.01 if (a) in case said Bonds are to be redeemed on any date prior to
their maturity, the Issuer shall have given to the Trustee in form satisfactory
to it irrevocable instructions to mail on a date in accordance with the
provisions of Section 8.02 hereof notice of redemption of such Bonds on said
redemption date, such notice to be given in accordance with the provisions of
Section 8.02 hereof, (b) there shall have been deposited with the Trustee
Government Obligations purchased with funds which shall have been held by the
Trustee for a period of three hundred sixty-seven (367) days prior to and during
which time no Act of Bankruptcy shall have occurred, the principal of and the
interest on which when due, and without any reinvestment thereof, will provide
moneys which are certified by an independent public accounting firm of
nationally recognized standing to be of such maturities or redemption dates and
interest payment dates, and to bear such interest, as shall be sufficient to pay
when due the principal of and Make-Whole Premium, if applicable, and interest
due and to become due on said Bonds on and prior to the redemption date or
maturity date thereof, as the case may be, (c) in the event any of said Bonds
are not to be redeemed within the next succeeding sixty (60) days, the Issuer
shall have given the Trustee in form satisfactory to it irrevocable instructions
to mail, as soon as practicable in the same manner as a notice of redemption is
mailed pursuant to Section 8.02 hereof, a notice to the holders of such Bonds
that the deposit required by (b) above has been made with the Trustee and that
said Bonds are deemed to have been paid in accordance with this Section 15.02
and stating such maturity or redemption dates upon which moneys are to be
available for the payment of the principal of and Make-Whole Premium, if
applicable, on said Bonds (d) all amounts owed to the Bank under the Credit
Agreement shall have been paid in full and the Credit Agreement shall no longer
be in effect and (e) an acceptable preference opinion shall have been provided
to the Issuer and the Trustee. The securities deposited with the Trustee
pursuant to this Section 15.02 nor principal or interest payments on any such
securities shall be withdrawn or used for any purpose other than, and shall be
held in trust for, the payment of the principal of and Make-Whole Premium, if
applicable, and interest on said Bonds.
Subject to the provisions of Section 12.04 of this Indenture, any release
under this Section 15.02 shall be without prejudice to the right of the Trustee
to be paid reasonable compensation for all services rendered by it under this
Indenture and all its reasonable expenses, charges and other disbursements and
those of its attorneys, receivers, agents and employees, incurred on and about
the
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administration of trusts by this Indenture created and the performance of its
powers and duties under this Indenture.
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ARTICLE XVI
MISCELLANEOUS
SECTION 16.01. DISSOLUTION OF ISSUER. In the event of the dissolution of
the Issuer, all the covenants, stipulations, promises and agreements in this
Indenture contained, by or on behalf of, or for the benefit of, the Issuer,
shall bind or inure to the benefit of the successors of the Issuer from time to
time and any officer, board, commission, agency or instrumentality to whom or to
which any power or duty of the Issuer shall be transferred.
SECTION 16.02. PARTIES INTERESTED HEREIN. Except as in this Indenture
otherwise specifically provided, nothing in this Indenture expressed or implied
is intended or shall be construed to confer upon any Person other than the
Company, the Issuer, the Trustee, the Bank and the holders of the Bonds issued
under this Indenture, any right, remedy or claim under or by reason of this
Indenture, this Indenture being intended to be for the sole and exclusive
benefit of the Company, the Issuer, the Trustee, the Bank and the holders of the
Bonds issued under this Indenture.
SECTION 16.03. SEVERABILITY OF INVALID PROVISIONS. If any clause,
provision or section of this Indenture be held illegal or invalid by any court,
the invalidity of such clause, provision or section shall not affect any of the
remaining clauses, provisions or sections hereof, and this Indenture shall be
construed and enforced as if such illegal or invalid clause, provision or
section had not been contained herein.
SECTION 16.04. NO RECOURSE ON BONDS. No covenant or agreement contained
in the Bonds or in this Indenture shall be deemed to be the covenant or
agreement of any member, agent, or employee of the Issuer in his individual
capacity, and neither the members of the Issuer nor any official executing the
Bonds shall be liable personally on the Bonds or be subject to any personal
liability or accountability by reason of the issuance thereof.
SECTION 16.05. NOTICE. All notices, certificates, requests or other
communications under this Indenture shall be sufficiently given and shall be
deemed given, unless otherwise required by this Indenture, when mailed by
registered or certified mail, return receipt requested (except as otherwise
provided in this Indenture), postage prepaid, addressed as set forth in Annex A
provided, however, all notices to Bondholders shall be given by overnight
carrier delivery and by first class mail, in a sealed envelope, postage prepaid,
to each Registered Owner of Bonds then outstanding at his last address appearing
upon the Bond Register. A duplicate copy of each notice, certificate, request
or other communication given under this Indenture to the Issuer, the Company,
the Trustee or the Bank shall also be given to the others. The Company, the
Issuer, the Bank and the Trustee may, by notice given under this Section 16.05,
designate any further or different addresses to which subsequent notices,
certificates, requests or other communications shall be sent.
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SECTION 16.06. COUNTERPARTS. This Indenture may be executed in any
number of counterparts, each of which, when so executed and delivered, shall be
an original; but such counterparts shall together constitute but one and the
same instrument.
SECTION 16.07. GOVERNING LAW. This Indenture shall be governed as to
validity, construction and performance by the laws of the State.
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ARTICLE XVI
BOND FORM
SECTION 17.01. BOND FORM. The 1998 Series Bonds to be issued under this
Indenture, the form of Assignment, the provisions for registration and the
Trustee's Certificate of Authentication to be endorsed thereon are to be in
substantially the following form, respectively, with necessary and appropriate
variations, omissions and insertions as permitted or required by this Indenture:
NOTICE: NO PURCHASE OR SUBSEQUENT TRANSFER OF ANY BOND OR ANY INTEREST THEREIN
MAY BE MADE TO ANY PERSON (1) WHO IS NOT EITHER (A) AN "ACCREDITED INVESTOR"
WITHIN THE MEANING OF REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR (B) A "QUALIFIED INSTITUTIONAL BUYER" WITHIN THE MEANING OF RULE
144A PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (2) WHO IS ACTING
AS A BROKER OR OTHER INTERMEDIARY, (3) WHO IS NOT PURCHASING SUCH BOND OR
INTEREST THEREIN AS AN INVESTMENT FOR SUCH PERSON'S OWN ACCOUNT OR FOR ONE OR
MORE SEPARATE ACCOUNTS MAINTAINED BY IT OR FOR THE ACCOUNT OF ONE OR MORE
PENSION OR TRUST FUNDS FOR WHICH IT EXERCISES SOLE INVESTMENT DISCRETION OR (4)
IN A MANNER THAT RESULTS IN SUCH PURCHASER OR TRANSFEREE OWNING LESS THAN
$500,000 AGGREGATE PRINCIPAL AMOUNT OF BONDS WITHOUT A PRESENT VIEW TO RESALE OR
OTHER DISTRIBUTION TO THE PUBLIC. THE TRUSTEE AND THE ISSUER SHALL BE ENTITLED
TO RECEIVE EVIDENCE WITH RESPECT THERETO AS IT SHALL REASONABLY REQUIRE THAT,
BASED UPON REPRESENTATIONS THEREIN DESCRIBED, THE TRANSFEREE IS AN "ACCREDITED
INVESTOR" OR "QUALIFIED INSTITUTIONAL BUYER". ALTHOUGH A BONDHOLDER MAY NOT
INTEND AT THE TIME OF PURCHASE TO DISPOSE OF ALL OR ANY PART OF ITS BONDS, IT IS
HEREBY ACKNOWLEDGED AND AGREED THAT SUCH BONDHOLDER'S RIGHT TO SELL AND TRANSFER
ITS BONDS SHALL AT ALL TIMES BE WITHIN ITS CONTROL, SUBJECT TO THE LIMITATION
THAT THE BONDHOLDER MAY NOT SELL AND TRANSFER ANY PORTION OF ITS BONDS UNLESS
THERE IS FULL COMPLIANCE WITH THIS NOTICE.
INTEREST ON THIS BOND SHOULD BE TREATED AS INCLUDABLE
IN GROSS INCOME OF THE HOLDER HEREOF FOR
FEDERAL INCOME TAX PURPOSES
UNITED STATES OF AMERICA
STATE OF MISSISSIPPI
MISSISSIPPI BUSINESS FINANCE CORPORATION
TAXABLE REVENUE BONDS, SERIES 1998
(HALTER MARINE GROUP, INC. PROJECT)
NO. R-___________ $____________
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INTEREST RATE MATURITY DATE DATED DATE CUSIP
6.39% December 31, 2013 March 3, 1998
REGISTERED OWNER
PRINCIPAL SUM DOLLARS
The Mississippi Business Finance Corporation, constituting a public
corporation of the State of Mississippi (the "Issuer"), for value received,
hereby promises to pay solely from the sources specified herein to the
Registered Owner or registered assigns, on the Maturity Date stated above
(unless redeemed prior thereto as provided herein), the principal amount stated
above and interest on said principal amount from and including the date
specified above, if the date of authentication hereof is on or prior to the day
preceding the first Payment Date (as hereinafter defined), and otherwise from
the Payment Date next preceding the date of authentication to which interest has
been paid, payable semiannually on December 31 and June 30 (a "Payment Date") in
each year, commencing June 30, 1998, at the rate per annum specified above (the
"Interest Rate"), until maturity, the date fixed for redemption or acceleration,
and the Make-Whole Premium (as hereinafter defined), if applicable.
This Bond represents a part of the issue of bonds of the Issuer designated
as "Mississippi Business Finance Corporation Taxable Revenue Bonds, Series 1998
(Halter Marine Group, Inc. Project)" (the "Bonds"), issued in the aggregate
principal amount of $30,000,000 under and pursuant to the Constitution and laws
of the State of Mississippi, particularly Sections 57-10-401, et seq.,
Mississippi Code of 1972, as amended and as supplemented, and Sections 57-10-201
et seq., Mississippi Code of 1972, as amended and supplemented (collectively,
the "Act"), and under and secured by a Trust Indenture between the Issuer and
SouthTrust Bank, National Association, Birmingham, Alabama (the "Trustee"),
dated as of January 1, 1998 (hereinafter, together with any and all indentures
supplementary thereto and amendatory thereof called the "Indenture"). This Bond
is issued for the purpose of, and the proceeds will be used for, financing the
cost of an "economic development project" (as defined in the Act), by Halter
Marine Group, Inc., a Delaware corporation (the "Company") under and pursuant to
a Loan Agreement between the Issuer and the Company, dated as of January 1, 1998
(hereinafter, together with any and all amendments thereof, called the "Loan
Agreement"), pursuant to which the Company is obligated to make loan payments
sufficient to pay the principal of, Make-Whole Premium, if applicable, and
interest on this Bond. The obligation to make loan payments is evidenced by a
promissory note, dated March 3, 1998 (the "Note"), executed by the Company. As
provided in the Indenture, Additional Bonds (as defined in the Indenture) may be
issued in one or more Series for the purpose of financing the completion of such
facilities, the cost of enlargements, improvements or expansions of such
facilities and the cost of acquisition and installation of additional facilities
(such facilities, together with any enlargements, improvements or expansions
thereof, and any such additional facilities and real property herein
collectively called the "Project").
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Copies of the Indenture, the Loan Agreement and the Note are on file at the
Corporate Trust Office of the Trustee and reference is made to the Indenture and
the Loan Agreement for the provisions relating, among other things, to the terms
and security of the Bonds, the collection and disposition of the revenues and
receipts of the Issuer from or in connection with the Project, the custody and
application of the proceeds of the Bonds, the rights and remedies of the holders
of the Bonds, the rights, duties and obligations of the Issuer, the Company and
the Trustee, and the modification or amendment of any of the foregoing
documents. Capitalized terms used and not defined herein shall have the
meanings ascribed to them in the Indenture and the Loan Agreement.
The principal of, Make-Whole Premium, if applicable, and interest on the
Bonds are payable from moneys deposited in the Bond Fund, (a) from moneys drawn
by the Trustee under the Credit Facility, or (b) to the extent necessary, from
any other moneys which have been on deposit in the Bond Fund with the Trustee.
The Company has caused to be delivered to the Trustee an irrevocable
direct-pay letter of credit (the "Letter of Credit") of The First National Bank
of Chicago (the "Bank"). The Letter of Credit will expire at the close of the
Bank's business on January 30, 2000, unless an Alternate Letter of Credit (as
defined in the Indenture) is provided in accordance with the Indenture. The
Trustee shall be entitled under the Letter of Credit to draw up to (a) an amount
sufficient to pay the principal amount of the Bonds, plus (b) an amount equal to
two hundred ten (210) days' accrued interest on the outstanding Bonds, based
upon the actual rates of interest on the Bonds and computed on the basis of a
three hundred sixty (360) day year of twelve (12), thirty (30) day months, plus
(c) an amount equal to $1,600,000, as the Premium Component under the Letter of
Credit, due in whole or in part upon the occurrence of certain circumstances as
provided in the Indenture.
Notice of the proposed issuance of an Alternate Letter of Credit shall be
given by the Trustee, by first-class mail, postage prepaid, to the Bondholders
at least thirty (30) days prior to the proposed effective date of such Alternate
Letter of Credit. Each such notice shall specify that an Alternate Letter of
Credit is being obtained, the proposed effective date of such Alternate Letter
of Credit, the name of the entity providing such Alternate Letter of Credit and
a general description of the Alternate Letter of Credit.
The principal of, Make-Whole Premium, if applicable, and interest on this
Bond shall be payable in any coin or currency of the United States of America
which, at the time of payment is legal tender for the payment of public and
private debts and shall be made to the Registered Owner thereof in the case of
principal and Make-Whole Premium, if applicable, at the Corporate Trust Office
of the Trustee upon presentation and surrender thereof, and in the case of
interest, to the Registered Owner hereof at the close of business on the Record
Date which shall be the fifteenth (15th) day of the calendar month preceding a
Payment Date, by bank wire or bank transfer as such Registered Owner may specify
or otherwise as the Trustee and such Registered Owner may agree.
This Bond and any Additional Bonds issued under and secured by the
Indenture are, and are to be, equally and ratably secured, to the extent
provided in the Indenture, solely by a pledge of the revenues and receipts
derived by the Issuer from or in connection with the Project, including payments
received under the Loan Agreement and the Note. This Bond, together with the
interest
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hereon, is a limited obligation of the Issuer payable solely from the Revenues
(as defined in the Indenture) and other funds and collateral pledged under the
Indenture and the Loan Agreement. Neither the Issuer, the State of Mississippi
nor any other political subdivision thereof shall be obligated to pay the Bonds
or the interest thereon or other costs incident thereto except from the Revenues
pledged by the Issuer, and neither the faith and credit nor the taxing power of
the Issuer, the State of Mississippi or any political subdivision thereof is
pledged to the payment of the principal of, Make-Whole Premium, if applicable,
or the interest on, this Bond.
The transfer of this Bond is registrable, as provided in the Indenture,
upon the Bond Register kept for that purpose at the above mentioned office of
the Trustee by the Registered Owner hereof in person, or by his attorney duly
authorized in writing, upon surrender of this Bond together with a written
instrument of transfer satisfactory to the Trustee duly executed by the
Registered Owner or his attorney duly authorized in writing. The Issuer and the
Trustee may deem and treat the person in whose name this Bond is registered as
the absolute owner hereof for the purpose of receiving payment of, or on account
of, the principal or Make-Whole Premium, if applicable, hereof and interest due
hereon and for all other purposes.
The Bonds shall be subject to redemption prior to maturity in accordance
with Article VIII of the Indenture and as follows:
(a) The Bonds shall be subject to mandatory redemption in the event there
are moneys remaining in the Construction Fund after the Completion Date (as
defined in the Indenture), as provided in Sections 5.05 and 6.01(b) of the
Indenture. If called for redemption in such event, the Bonds shall be subject
to redemption on any Payment Date, in part, to the extent such moneys in the
Construction Fund are available therefor, in the inverse order of their
maturities (less than all of said Bonds of a single maturity to be selected pro-
rata), at a Redemption Price (as defined in the Indenture) for each Bond
redeemed equal to the principal amount thereof and accrued interest thereon to
the date of redemption, plus the Make-Whole Premium.
(b) The Bonds shall be subject to optional redemption at the option of the
Company, which option may be exercised at any time upon not less than forty-five
(45) days' written notice by the Company to the Trustee, in whole at any time,
or in part on any Payment Date, in the inverse order of their maturities (less
than all of said Bonds of a single maturity to be selected pro-rata), at a
Redemption Price for each Bond redeemed equal to the principal amount thereof
and accrued interest thereon to the date of redemption, plus the Make-Whole
Premium.
(c) The Bonds shall be subject to mandatory redemption, in whole, at any
time, or in part on any Payment Date in the inverse order of their maturities
(less than all of said Bonds of a single maturity to be selected pro-rata), to
the extent moneys are deposited in the Bond Fund pursuant to Sections 4.13 and
4.14 of the Loan Agreement at a Redemption Price for each Bond redeemed equal to
the principal amount thereof and accrued interest thereon to the date of
redemption, without premium or penalty.
(d) The Bonds shall be subject to mandatory redemption, in whole, at a
Redemption Price for each Bond redeemed equal to the principal amount thereof
and accrued interest thereon to the
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date of redemption, plus the Make-Whole Premium, if the rating assigned by
Moody's Investors Services, Inc. ("Moody's") or Standard & Poor's Ratings Group
("Standard & Poor's") to the long-term deposits of the Bank is downgraded to a
rating below A1 by Moody's or below A+ by Standard & Poor's, on the forty-fifth
(45th) day following the date on which the lowered rating is announced by either
Rating Agency (as defined in the Indenture); provided, however, the Bonds shall
not be subject to mandatory redemption in such case if the Company shall deliver
to the Trustee at least five (5) Business Days prior to the scheduled date of
such redemption, an Alternate Letter of Credit in accordance with Section 11.04
of the Indenture and issued by a Bank the senior long-term debt or the long-term
deposits of which are rated not less than Aa3 by Moody's or AA- by Standard &
Poor's. Written notice of any such downgrade shall be timely provided by the
Company to the Trustee and the holders of all 1998 Series Bonds then
outstanding.
(e) The Bonds shall be subject to mandatory redemption, in whole, five (5)
Business Days following the failure of the Company (1) to provide an irrevocable
and unconditional commitment for an Alternate Letter of Credit in accordance
with Section 11.04 of the Indenture, not later than one (1) year immediately
preceding the expiration of the Letter of Credit or any Alternate Letter of
Credit, or (2) to deliver said Alternate Letter of Credit forty-five (45) days
immediately preceding the expiration of the Letter of Credit or any Alternate
Letter of Credit, at a Redemption Price for each Bond redeemed equal to the
principal amount thereof and accrued interest thereon to the date of redemption,
plus the Make-Whole Premium.
(f) The Bonds shall be subject to mandatory redemption, in whole, upon
acceleration thereof upon the occurrence of an Event of Default on the earliest
Business Day for which any required notice may be given, at a Redemption Price
for each Bond redeemed equal to the principal amount thereof and accrued
interest thereon to the date of redemption, plus the Make-Whole Premium, for
acceleration upon an Event of Default occurring under Section 10.01 of the
Indenture.
If more than one of the events described in paragraphs (a), (c), (d), (e)
and (f) above, shall occur at any one time requiring a mandatory redemption of
all of the Bonds, the Trustee shall redeem the Bonds according to the paragraph
that will result in the Bonds being redeemed on the earliest possible date.
A redemption pursuant to paragraph (f) above shall occur no later than ten
(10) calendar days after a declaration of acceleration pursuant to Sections
10.01 and 10.02 of the Indenture.
The Bonds shall be subject to mandatory sinking fund redemption, in part,
prior to maturity or in whole as provided in the Indenture on each December 31,
commencing December 31, 2004, in the principal amount for each year (together
with accrued interest to the date of redemption and without premium or penalty)
from moneys deposited in the Bond Fund in the amount and manner set forth in
Section 2.04 of the Indenture.
Unless otherwise provided in the Indenture, in the event of any partial
redemption of the Bonds, the Bonds to be redeemed shall be redeemed on a pro-
rata basis among all Bondholders and, in case of a partial redemption within a
maturity, Bonds of such maturity to be redeemed shall be selected pro-rata.
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Any redemption of this Bond, either in whole or in part, shall be made upon
at least thirty (30) days' prior notice in the manner and upon the terms and
conditions provided in the Indenture; provided, however, that in the event of a
redemption pursuant to paragraphs (d), (e) and (f) above, notice shall be mailed
at least five (5) days before the date fixed for redemption. If this Bond or
any portion hereof shall have been duly called for redemption and payment of the
Redemption Price shall have been made or provided for, all as more fully set
forth in the Indenture, interest on this Bond or such portion shall cease to
accrue from such date, and, from and after such date this Bond or such portion
shall no longer be entitled to any lien, benefit, or security under the
Indenture, and the holder hereof shall have no rights in respect of this Bond or
such portion except to receive payment of such Redemption Price.
For purposes of this Bond, Make-Whole Premium shall mean, with respect to
any Bond, an amount equal to the excess, if any, of the Discounted Value of the
Remaining Scheduled Payments with respect to the Called Principal of such Bond
over the amount of such Called Principal, provided that the Make-Whole Premium
may in no event be less than zero. For the purposes of determining the Make-
Whole Premium, the following terms shall have the following meanings:
"CALLED PRINCIPAL" means, with respect to any Bond, the principal of
such Bond that is to be prepaid pursuant to Section 2.03 of the Indenture
or has become or is declared to be immediately due and payable pursuant to
Sections 10.01 and 10.02 of the Indenture, as the context requires.
"DISCOUNTED VALUE" means, with respect to the Called Principal of any
Bond, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due
dates to the Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount factor
(applied on the same periodic basis as that on which interest on the Bond
is payable) equal to the Reinvestment Yield with respect to such Called
Principal.
"REINVESTMENT YIELD" means, with respect to the Called Principal of
any Bond, the yield to maturity implied by (a) the yields reported, as of
10:00 a.m., New York City Time, on the second Business day preceding the
Settlement Date with respect to such Called Principal, on the display
designated as the "PX1 Screen" on the Bloomberg Financial Market Service
(or such other display as may replace the PX1 Screen on the Bloomberg
Financial Market Service) for actively traded Government Obligations having
a maturity equal to the Remaining Average Life of such Called Principal as
of such Settlement Date, or (b) if such yields are not reported as of such
time or the yields reported as of such time are not ascertainable, the
Treasury Constant Maturity Series Yields reported, for the latest day for
which such yields have been so reported as of the second Business Day
preceding the Settlement Date with respect to such Called Principal, in
Federal Reserve Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded Government Obligations having a constant
maturity equal to the Remaining Average Life of such Called Principal as of
such Settlement Date. Such implied yield will be
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determined, if necessary, by (1) converting Government Obligations
quotations to bond-equivalent yields in accordance with accepted financial
practice and (2) interpolating linearly between (A) the actively traded
Government Obligations with the duration closest to and greater than the
Remaining Average Life and (B) the actively traded Government Obligations
with the duration closest to and less than the Remaining Average Life.
"REMAINING AVERAGE LIFE" means, with respect to any Called Principal,
the number of years (calculated to the nearest one-twelfth year) obtained
by dividing (a) such Called Principal into (b) the sum of the products
obtained by multiplying (1) the principal component of each Remaining
Scheduled Payment with respect to such Called Principal by (2) the number
of years (calculated to the nearest one-twelfth year) that will elapse
between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the Called
Principal of any Bond, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to
its scheduled due date, provided that if such Settlement Date is not a date
on which interest payments are due to be made under the terms of the Bonds,
then the amount of the next succeeding scheduled interest payment will be
reduced by the amount of interest accrued to such Settlement Date and
required to be paid on such Settlement Date pursuant to Sections 2.03,
10.01 and 10.02 of the Indenture.
"SETTLEMENT DATE" means, with respect to the Called Principal of any
Bond, the date on which such Called Principal is to be prepaid pursuant to
Section 2.03 of the Indenture or has become or is declared to be
immediately due and payable pursuant to Sections 10.01 and 10.02 of the
Indenture, as the context requires.
The Make-Whole Premium shall be timely calculated by the Company in
accordance with the above definition thereof and timely written notice thereof
given by the Company to the Trustee, the Bank and the holders of all Bonds
outstanding.
This Bond shall not be entitled to any benefit under the Indenture or be
valid or become obligatory for any purpose until this Bond shall have been
authenticated by the execution by the manual signature of a duly authorized
officer of the Trustee of the Trustee's certificate of authentication hereon.
No covenant or agreement contained in this Bond or the Indenture shall be
deemed to be a covenant or agreement of any member, agent, or employee of the
Issuer in his individual capacity, and neither the members of the Issuer nor any
officer thereof executing this Bond shall be liable personally on this Bond or
be subject to any personal liability or accountability by reason of the issuance
of this Bond.
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It is hereby certified and recited that all conditions, acts and things
required by law and the Indenture to exist, to have happened and to have been
performed precedent to an in the issuance of this Bond exist, have happened and
have been performed in due time, form and manner as required by law and the
Indenture, and that the issuance of this Bond and the issue of which it forms a
part are within every debt and other limit prescribed by the laws of the State
of Mississippi.
IN WITNESS WHEREOF, the Issuer has caused this Bond to be signed in its
name and on its behalf by the manual or facsimile signature of its Executive
Director and its seal or a facsimile thereof to be impressed, imprinted or
otherwise reproduced hereon and attested by the manual or facsimile signature of
its Secretary as of the 3rd day of March, 1998.
(SEAL) MISSISSIPPI BUSINESS FINANCE
CORPORATION
Attest
____________________________ By___________________________
Secretary Executive Director
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This Bond is one of the Mississippi Business Finance Corporation Taxable
Revenue Bonds, Series 1998 (Halter Marine Group, Inc. Project) described in the
within mentioned Indenture.
SOUTHTRUST BANK, NATIONAL
ASSOCIATION, AS TRUSTEE
By___________________________
Authorized Representative
Date of Authentication ________
VALIDATION CERTIFICATE
The issuance of the Bonds of which this Bond is one has been validated and
confirmed by decree of the Chancery Court of the First Judicial District of
Hinds County, Mississippi, rendered on the 26th day of January, 1998.
(SEAL) MISSISSIPPI BUSINESS FINANCE
CORPORATION
By___________________________
Secretary
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ASSIGNMENT
FOR VALUE RECEIVED
The undersigned hereby sells, assigns and transfers unto (Please insert
name, address and Social Security Number or other identifying number of
Assignee)
________________________________________________________________________________
________________________________________________________________________________
the within Bond of the MISSISSIPPI BUSINESS FINANCE CORPORATION and does hereby
constitute and appoint__________________________ as attorney to transfer the
said Bond on the books of the within named Issuer, with full power of
substitution in the premises.
Dated: _______________
Signature guaranteed
- -------------------------------------- --------------------------------------
Insert Social Security Number or Other Registered Owner
Tax Identification Number of Assignor:
Notice: Signature(s) to this
______________________________________ assignment must correspond with the
name(s) of the Registered Owner(s) as
it appears on the face of the within
- -------------------------------------- Bond in every particular, without
alteration or enlargement or any
change whatever and must be
guaranteed by a member firm of the
New York Stock Exchange or a
commercial bank or trust company who
is a member of a Medallion Signature
Guarantee Program acceptable to the
Trustee.
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IN WITNESS WHEREOF, the Mississippi Business Finance Corporation has caused
this Indenture to be executed by its Executive Director and its corporate seal
to be hereunto affixed, attested by its Secretary, and SouthTrust Bank, National
Association has caused this Indenture to be executed by its duly authorized
officer and (if applicable) its corporate seal to be hereunto affixed, attested
by its duly authorized officer, all as of the day and year first above written.
(SEAL) MISSISSIPPI BUSINESS FINANCE
CORPORATION
Attest
_______________________________ By_____________________________
Secretary Executive Director
(SEAL) SOUTHTRUST BANK, NATIONAL
ASSOCIATION, AS TRUSTEE
Attest
_______________________________ By_____________________________
Title__________________________ Title__________________________
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ACKNOWLEDGMENT OF ISSUER
STATE OF MISSISSIPPI )
) SS.
COUNTY OF HINDS )
Personally appeared before me, the undersigned authority in and for the
said county and state, on this _____ day of March, within my jurisdiction, the
within named William T. Barry and James Vernon Smith, Sr., who acknowledged they
are the Executive Director and Secretary, respectively, of the Mississippi
Business Finance Corporation, a Mississippi corporation, and that for and on
behalf of said corporation, and as its act and deed they executed the above and
foregoing instrument, after first having been duly authorized by said
corporation so to do.
_______________________________
Notary Public
(SEAL)
My Commission Expires:
__________________________
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<PAGE>
ACKNOWLEDGMENT OF TRUSTEE
STATE OF __________________ )
) SS.
COUNTY OF _____________ )
Personally appeared before me, the undersigned authority in and for the
said county and state, on this _____ day of March, within my jurisdiction, the
within named _____________________ and _____________________, who acknowledged
they are the _____________________ and _____________________, respectively, of
SouthTrust Bank, National Association, a national banking association organized
and existing under the laws of the United States of America, and that for and on
behalf of said banking association and as its act and deed, they executed the
foregoing instrument, after first having been duly authorized by said banking
association so to do.
____________________________
Notary Public
(SEAL)
My Commission Expires:
__________________________
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ANNEX A
TO
TRUST INDENTURE
If to the Issuer - Mississippi Business Finance Corporation
1306 Walter Sillers Building
Post Office Box 849
Jackson, Mississippi 39201
If to the Trustee - SouthTrust Bank, National Association
100 Office Park Drive, Lower Level
Birmingham, Alabama (35223)
Post Office Box 2554
Birmingham, Alabama 35290
If to the Company - Halter Marine Group, Inc.
13085 Seaway Road
Gulfport, Mississippi 39505
If to the Bank - The First National Bank of Chicago
One First National Plaza, Suite 0801
Chicago, Illinois 60670
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EXHIBIT A
FORM OF LETTER OF CREDIT
THE FIRST NATIONAL BANK OF CHICAGO
IRREVOCABLE DIRECT-PAY LETTER OF CREDIT
NO.______
March 3, 1998
SouthTrust Bank, National Association,
as Trustee
100 Office Park Drive, Lower Level
Birmingham, Alabama (35223)
Post Office Box 2554
Birmingham, Alabama 35290
Attention: Corporate Trust Services
Gentlemen:
We hereby establish at the request and for the account of Halter Marine
Group, Inc. (the "Company"), in your favor, as Trustee under the Trust Indenture
dated as of January 1, 1998, (the "Indenture") between the Mississippi Business
Finance Corporation (the "Issuer") and you, pursuant to which $30,000,000 in
aggregate principal amount of the Issuer's Taxable Revenue Bonds, Series 1998
(Halter Marine Group, Inc. Project) (the "Bonds") are being issued, our
Irrevocable Letter of Credit No. ____________________ in the amount of
$32,718,250 (the "Stated Amount") of which (a) an amount not exceeding
$30,000,000 may be drawn upon with respect to payment of the unpaid principal
amount of the Bonds (said amount equal to the principal amount of Bonds
outstanding under the Indenture from time to time, the "Principal Component"),
(b) an amount not exceeding $1,118,250, representing two hundred ten (210) days'
interest on the Bonds at an interest rate of 6.39% per annum, may be drawn upon
with respect to payment of interest accrued on the Bonds (said amount based upon
the principal amount of Bonds outstanding under the Indenture from time to time,
the "Interest Component"), and (c) an amount $1,600,000 may be drawn upon with
respect to payment of a Make-Whole Premium (as defined in the Indenture) on the
Bonds, the "Premium Component") on or prior to the Bonds' stated maturity date,
effective immediately and expiring on January 30, 2000, unless terminated
earlier in accordance with the provisions hereof. All drawings under this
Letter of Credit will be paid with our own funds.
Funds under this Letter of Credit will be made available to you against
your sight draft on us and upon receipt by us of your written certificate in
substantially the form of Annex A attached hereto appropriately completed and
signed by an Authorized Officer accompanied by a photocopy of this Letter of
Credit. Presentation of such certificate should be made at our office located
at The
A-1
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First National Bank of Chicago, Global Trade Services, Suite 0236, Seventh
Floor, 300 South Riverside, Chicago, Illinois 60670, Attention: Letter of Credit
Department (or at any other office which may be designated by us by written
notice delivered to you). Moneys drawn under this Letter of Credit shall be
applied to the timely payments of principal of, premium, if any, and interest on
the Bonds, whether upon redemption, at maturity, on the date principal and
interest is payable, or upon acceleration of maturity.
The amount of this Letter of Credit shall be decreased, upon receipt by us
of your written certificate in substantially the form of Annex C attached hereto
appropriately completed and signed by an Authorized Officer (relating to a
redemption or defeasance of less than all the Bonds outstanding), by an amount
equal to the amount stated in said certificate, and the amounts available to be
drawn by you by any subsequent draft, shall be decreased, upon our receipt of
such certificate, to the amounts stated in such certificate.
If you shall draw on this Letter of Credit for the payment of interest and
we shall not have sent to you within ten (10) days from the date of such drawing
a notice from us to the effect that we have not been reimbursed for such drawing
and that the Letter of Credit will not be reinstated as to the portion of the
Interest Component drawn and not reimbursed, your right to draw the Interest
Component on us by your draft for the payment of interest to become due and
payable shall be automatically reinstated and effective the eleventh (11th) day
from the date of such drawing and you shall be authorized to draw on us for the
Interest Component by your draft and Annex A. This automatic reinstatement of
your right to draw the Interest Component on us by your draft for the payment of
interest shall be applicable to successive drawings by your drafts for the
payment of interest so long as this Letter of Credit shall not have terminated
in accordance with its terms. In the event this Letter of Credit has not been
reinstated as to the portion of the Interest Component drawn, you shall be
entitled to draw for the payment of interest, the difference between the
Interest Component (calculated based on the principal amount of bonds
outstanding immediately preceding the interest drawing which has not been
reinstated) and the portion of the Interest Component drawn and not reinstated.
Reductions in the Stated Amount which are the result of payments under the
Letter of Credit honoring a demand for principal shall not be reinstated.
If a drawing is made by you hereunder at or prior to 11:00 a.m., Central
Standard Time, on a Business Day, and provided that such drawing and the
documents and other items presented in connection therewith conform to the terms
and conditions hereof, payment shall be made to you, or to your designee, of the
amount specified, in immediately available funds, not later than 1:30 p.m.,
Central Standard Time, on the same Business Day or not later than 1:30 p.m.,
Central Standard Time, on such later Business Day as you may specify. If
requested by you, payment under this Letter of Credit will be made by deposit of
immediately available funds into a designated account that you maintain with us.
If a demand for payment made by you hereunder does not, in any instance, conform
to the terms and conditions of this Letter of Credit, we shall give you written
notice within 24 hours that the demand for payment was not effected in
accordance with the terms and conditions of this Letter of Credit, stating the
reasons therefor and that we will upon your instructions hold any documents at
your disposal or return the same to you. Upon being notified that the demand
for payment was not effected in conformity with this Letter of Credit, you may
attempt to correct any such non-conforming demand for payment.
A-2
<PAGE>
Subject to the reinstatement provisions for the Interest Component
described herein, demands for payment hereunder honored by us shall not, in the
aggregate, exceed the Stated Amount.
Only you or your successor as Trustee may make a drawing under this Letter
of Credit. Upon the payment to you, to your designee or to your account of the
amount demanded hereunder, we shall be fully discharged on our obligation under
this Letter of Credit with respect to such demand for payment and we shall not
thereafter be obligated to make any further payments under this Letter of Credit
in respect of such demand for payment to you or any other person who may have
made to you or makes to you a demand for payment of principal of, premium, if
any, or interest on, any of the Bonds. By paying to you an amount demanded in
accordance herewith, we make no representation as to the correctness of the
amount demanded.
This Letter of Credit does not apply to any interest that may accrue
thereon or any principal, premium or interest which may be payable with respect
thereto after the date of expiration of this Letter of Credit.
This Letter of Credit is effective immediately and shall terminate on the
earliest of (a) 5:00 p.m., Central Standard Time, on January 30, 2000, or, if
such day is not a Business Day, the next following Business Day, (b) the date on
which there has been a drawing and payment under this Letter of Credit of the
Stated Amount in connection with the maturity, redemption or acceleration of all
of the Bonds, or (c) the date following our receipt of a certificate from you
stating that you have received an Alternate Letter of Credit in accordance with
the Indenture.
Communications with respect to this Letter of Credit shall be in writing
and shall be addressed to us at The First National Bank of Chicago, Global Trade
Services, Suite 0236, Seventh Floor, 300 South Riverside, Chicago, Illinois
60670, Attention: Letter of Credit Department, specifically referring thereon to
this Letter of Credit by number.
This Letter of Credit is irrevocable and transferable in its entirety to
any transferee whom you certify to us has succeeded you as Trustee under the
Indenture, and may be successively transferred. Transfer of the available
balance under this Letter of Credit to such transferee shall be effected upon
receipt by us of this Letter of Credit accompanied by your written certificate
in substantially the form of Annex B attached hereto appropriately completed and
signed by an Authorized Officer. Upon such presentation we shall forthwith
transfer the same to your transferee or, if so requested by your transferee,
issue a letter of credit to your transferee with provisions therein consistent
with this Letter of Credit.
All drafts under this Letter of Credit will be duly honored, provided the
terms and conditions contained herein are complied with.
As used herein (a) "Authorized Officer" shall mean any of your authorized
signors and (b) "Business Day" shall mean any day, except a Saturday or Sunday,
on which we and you are not required or authorized by law to remain closed and
on which the payment system of the Federal Reserve System is operational.
A-3
<PAGE>
This Letter of Credit sets forth in full our undertaking, and such
undertaking shall not in any way be modified, amended, amplified or limited by
reference to any document, instrument or agreement referred to herein
(including, without limitation, the Bonds), except only the certificate(s)
referred to herein; and any such reference shall not be deemed to incorporate
herein by reference any document, instrument or agreement except for such
certificate(s).
The Company has no interest in this Letter of Credit.
This Letter of Credit is subject to the Uniform Customs and Practices for
Documentary Credits, 1993 Revision, International Chamber of Commerce
Publication No. 500, which is incorporated herein by reference (the "UCP"). To
the extent not covered by the UCP, this Letter of Credit shall be governed by
the laws of the State of Illinois, including the Uniform Commercial Code as in
effect in the State of Illinois.
Very truly yours,
THE FIRST NATIONAL BANK OF
CHICAGO
By
----------------------------
Title
-------------------------
By
----------------------------
Title
-------------------------
A-4
<PAGE>
ANNEX A
CERTIFICATE AS TO DRAWING
The First National Bank of Chicago
Global Trade Services
Suite 0236, Seventh Floor
300 South Riverside
Chicago, Illinois 60670
Attention: Letter of Credit Department
Re: Irrevocable Direct-Pay Letter of Credit No. _____
Gentlemen:
The undersigned, a duly authorized officer of ____________________ (the
"Trustee"), hereby certifies to the addressee (the "Bank"), with reference to
Irrevocable Letter of Credit No. ________ (the "Letter of Credit") issued by the
Bank in favor of the Trustee as follows:
1. The Trustee is the Trustee under the Indenture for
the holders of the Bonds.
2. The Trustee is making a drawing under the above-referenced
Letter of Credit in the amount of $____________ with respect
to the payment of the principal of, premium, if any, and/or
interest due and payable on the Bonds which amount consists
of $___________ of principal, $___________ of premium
and $___________ of interest.
3. The amount, if any, demanded hereby on account of the principal
of the Bonds does not exceed the Principal Component of the
Letter of Credit.
4. The amount, if any, demanded hereby on account of interest
on the Bonds does not exceed the Interest Component of
the Letter of Credit.
5. The amount, if any, demanded hereby on account of a
premium on the Bonds does not exceed the Premium Component
of the Letter of Credit.
A-5
<PAGE>
6. Upon receipt by the undersigned of the amount demanded
hereby, (a) the undersigned will apply the same to the
payment of the principal of, premium, if any, and/or
interest due and payable on the Bonds in accordance with
Sections 6.01, 6.02 and 11.03 of the Indenture, (b) no
portion of said amount shall be applied by the undersigned
for any other purpose and (c) no portion of said amount
shall be commingled with other funds held by the undersigned.
Capitalized terms used herein and not defined shall have the meanings
assigned to such terms in the Letter of Credit.
IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate
as of the __ day of _________________, 19__.
_____________________________,
AS TRUSTEE
By
---------------------------
Title
------------------------
A-6
<PAGE>
ANNEX B
INSTRUCTION TO TRANSFER
________________, 19__
The First National Bank of Chicago
Global Trade Services
Suite 0236, Seventh Floor
300 South Riverside
Chicago, Illinois 60670
Attention: Letter of Credit Department
Re: Irrevocable Direct-Pay Letter of Credit No. _______
Gentlemen:
For value received, the undersigned beneficiary hereby irrevocably
transfers to:
---------------------------------
(Name of Transferee)
----------------------------------
(Address)
all rights of the undersigned beneficiary to draw under the above-captioned
Letter of Credit (the "Letter of Credit"). The transferee has succeeded the
undersigned as Trustee under the Indenture.
By this transfer, all rights of the undersigned beneficiary in the Letter
of Credit are transferred to the transferee and the transferee shall hereafter
have the sole rights as beneficiary thereof; provided, however, that no right
shall be deemed to have been transferred to the transferee until such transfer
complies with the requirements of the Letter of Credit pertaining to transfers.
The Letter of Credit is returned herewith and in accordance therewith we
ask that this transfer be effective and that you transfer the Letter of Credit
to our transferee or that, if so requested by the transferee, you issue a new
irrevocable Letter of Credit in favor of the transferee with provisions
identical with the Letter of Credit.
A-7
<PAGE>
Capitalized terms used herein and not defined shall have the meanings
assigned to such terms in the Letter of Credit.
Very truly yours,
_______________________________,
as Trustee
By
-----------------------------
Title
--------------------------
A-8
<PAGE>
ANNEX C
CERTIFICATE FOR THE REDUCTION OF AMOUNTS AVAILABLE
_________________, 19__
The First National Bank of Chicago
Global Trade Services
Suite 0236, Seventh Floor
300 South Riverside
Chicago, Illinois 60670
Attention: Letter of Credit Department
Re: Irrevocable Direct-Pay Letter of Credit No. _____
Gentlemen:
The undersigned, an Authorized Officer of the undersigned Trustee (the
"Trustee"), hereby certifies to the addressee (the "Bank"), with reference to
Irrevocable Letter of Credit No. ________ (the "Letter of Credit") issued by the
Bank in favor of the Trustee as follows:
1. The Trustee is the Trustee under the Indenture for the holders of the
Bonds.
2. The Trustee hereby notifies you that on or prior to the date hereof
Bonds in an aggregate principal amount of $____________________ have been
redeemed and paid or have been defeased pursuant to the Indenture.
3. Following the redemption and payment or the defeasance referred to in
paragraph (2) above, the aggregate principal amount of all of the Bonds which
are outstanding within the meaning of the Indenture is $_________________.
4. The amount available to be drawn by the Trustee under the Letter of
Credit as Interest Component is reduced to $_______________ upon receipt by the
Bank of this Certificate.
5. The amount available to be drawn by the Trustee under the Letter of
Credit as Principal Component is reduced to $__________________ upon receipt by
the Bank of this Certificate.
6. The amount available to be drawn by the Trustee under the Letter of
Credit as Premium Component is reduced to $________________ upon receipt by the
Bank of this Certificate.
A-9
<PAGE>
7. The Stated Amount of the Letter of Credit is reduced to $_____________
(such amount being equal to the sum of the amounts specified in paragraph 4, 5
and 6 above) upon receipt by the Bank of this Certificate.
Capitalized terms used herein and not defined shall have the meanings
assigned to such terms in the Letter of Credit.
IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate
as of the __ day of _______________, 19__.
_____________________________,
as Trustee
By
---------------------------
Title
------------------------
A-10
<PAGE>
- --------------------------------------------------------------------------------
LOAN AGREEMENT
BETWEEN
MISSISSIPPI BUSINESS FINANCE CORPORATION
AND
HALTER MARINE GROUP, INC.
____________
JANUARY 1, 1998
____________
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions............................................... 3
ARTICLE II
REPRESENTATIONS
SECTION 2.01. Representations of the Issuer.............................. 14
SECTION 2.02. Representations of Company................................. 14
SECTION 2.03. Benefits under the Act..................................... 16
ARTICLE III
COMPLETION OF PROJECT; ISSUANCE OF THE BONDS
SECTION 3.01. Completion of Project; Best Efforts........................ 20
SECTION 3.02. Issuance of Bonds.......................................... 20
SECTION 3.03. Requisition for Construction Funds......................... 21
SECTION 3.04. Revisions to Plans and Specifications...................... 21
SECTION 3.05. Certificate of Completion.................................. 21
SECTION 3.06. Completion of Project if Bond Proceeds Insufficient;
Surplus Proceeds........................................... 21
SECTION 3.07. Default by Contractors..................................... 22
SECTION 3.08. Investment of Construction Fund............................ 22
ARTICLE IV
ASSIGNMENT; LOAN PAYMENTS
SECTION 4.01. Assignment of this Agreement............................... 23
SECTION 4.02. Loan Payments and the Note................................. 23
SECTION 4.03. Assignment to Trustee; Obligation to Make Payments
Absolute................................................... 24
SECTION 4.04. Sole Possession of Project by the Company.................. 25
SECTION 4.05. Maintenance of Project..................................... 25
SECTION 4.06. Payment of Taxes and Assessments; Compliance with Law;
No Further Liens........................................... 25
SECTION 4.07. Operation of Project....................................... 26
SECTION 4.08. Payment of Expenses........................................ 26
SECTION 4.09. Payments Continue Upon Destruction of Project.............. 26
<PAGE>
TABLE OF CONTENTS (CONTINUED)
PAGE
SECTION 4.10. Amendment to Agreement..................................... 26
SECTION 4.11. Release and Indemnification of Issuer, Bank and Trustee.... 26
SECTION 4.12. Insurance.................................................. 27
SECTION 4.13. Application of Insurance Proceeds.......................... 27
SECTION 4.14. Condemnation............................................... 28
SECTION 4.15. After-Acquired Property as Part of the Project............. 29
SECTION 4.16. Letter of Credit........................................... 29
SECTION 4.17. Continuing Disclosure...................................... 30
ARTICLE V
SPECIAL COVENANTS
SECTION 5.01. No Warranty as to Suitability of Project by Issuer......... 31
SECTION 5.02. Continuation of Existence of Company....................... 31
SECTION 5.03. Covenant by the Company to Leave Project Free of
Other Liens or Encumbrances................................ 31
SECTION 5.04. Agreement to Cooperate..................................... 31
SECTION 5.05. Covenant by Issuer to Maintain Present Status.............. 32
SECTION 5.06. Qualification in Mississippi............................... 32
SECTION 5.07. Notice of Default.......................................... 32
SECTION 5.08. Acknowledgments of Issuer and Company with Respect to
Federal Income Tax Matters................................. 32
SECTION 5.09. Company Approval of Indenture.............................. 32
SECTION 5.10. Title Covenants............................................ 32
SECTION 5.11. Covenant Against Waste..................................... 32
SECTION 5.12. Environmental Covenants.................................... 33
ARTICLE VI
ASSIGNMENT, LEASE AND SALE; PROJECT NOT SECURITY
SECTION 6.01. Disposal of Project and Assets by Company.................. 34
SECTION 6.02. Assignment by Issuer....................................... 34
ii
<PAGE>
TABLE OF CONTENTS (CONTINUED)
PAGE
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
SECTION 7.01. Events of Default.......................................... 35
SECTION 7.02. Remedies................................................... 36
SECTION 7.03. No Remedy Exclusive........................................ 37
SECTION 7.04. Payment of Fees and Expenses............................... 37
SECTION 7.05. Effect of Waiver........................................... 37
ARTICLE VIII
ACCELERATION OF LOAN PAYMENTS; SURVIVAL OF OBLIGATION
SECTION 8.01. Acceleration of Loan Payments.............................. 38
SECTION 8.02. Survival of Obligation..................................... 38
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Excess Payments............................................ 39
SECTION 9.02. Tax Exemptions............................................. 39
SECTION 9.03. Notices.................................................... 39
SECTION 9.04. Parties Interested......................................... 39
SECTION 9.05. Counterparts............................................... 40
SECTION 9.06. Severability of Invalid Provisions......................... 40
SECTION 9.07. Governing Law.............................................. 40
iii
<PAGE>
THIS LOAN AGREEMENT, dated as of January 1, 1998 between the Mississippi
Business Finance Corporation (the "Issuer"), a public corporation organized and
existing under the laws of the State of Mississippi (the "State") and Halter
Marine Group, Inc. (the "Company"), a corporation organized and existing under
the laws of the State of Delaware.
WITNESSETH:
WHEREAS, the Issuer is authorized by the provisions of Sections 57-10-401
et seq., Mississippi Code of 1972, as amended and supplemented and Sections 57-
10-201 et seq., Mississippi Code of 1972, as amended and supplemented
(collectively, the "Act"), to, among other things, provide and finance "economic
development projects" (as defined in the Act) in the State in order to promote,
foster and support economic development within the State and to finance such
projects by the issuance of revenue bonds; and
WHEREAS, the Issuer is further authorized to issue revenue bonds for the
purpose of providing funds to pay all or a part of the cost of providing the
aforementioned economic development projects; to sell, lease, exchange, transfer
or otherwise dispose of any real or personal property; to pledge or assign any
money, rents, charges, fees or other revenues and any proceeds derived from
sales of property, insurance or condemnation awards; and
WHEREAS, the Issuer has duly authorized as a project under the Act the
following by the Company: (a) the acquisition and improvement on the Project
Site (as hereinafter defined) of the Building (as hereinafter defined) and (b)
the acquisition and installation therein and thereon of the Equipment (as
hereinafter defined), which Project Site, Building and Equipment together shall
constitute the Project (as hereinafter defined); and
WHEREAS, the Issuer has duly authorized the issuance of its revenue bonds
more particularly designated as Mississippi Business Finance Corporation Taxable
Revenue Bonds, Series 1998 (Halter Marine Group, Inc. Project) (the "1998 Series
Bonds") pursuant to the Act in the aggregate principal amount of $30,000,000 in
order to loan the proceeds thereof to the Company to finance the acquisition,
improvement and installation of the Project pursuant to a contractual
arrangement whereby the amount of loan payments to be made to the Issuer by the
Company shall be sufficient to pay the principal of, Make-Whole Premium, if
applicable, and interest on the 1998 Series Bonds as and when the same shall
become due and payable; and
WHEREAS, the 1998 Series Bonds are to be issued pursuant to and secured by
a trust indenture (the "Indenture") dated as of the date hereof, by and between
the Issuer and SouthTrust Bank, National Association, located in Birmingham,
Alabama (the "Trustee"); and
WHEREAS, The First National Bank of Chicago (the "Bank") has agreed to
issue its irrevocable direct-pay letter of credit (the "Letter of Credit") in
favor of the Trustee in order to further secure the payment of the principal of,
Make-Whole Premium, if applicable, and interest on the 1998 Series Bonds; and
<PAGE>
WHEREAS, to further secure the payment of the 1998 Series Bonds, the
Company has authorized, executed and delivered a Note (as hereinafter defined)
to the Issuer, which Note the Issuer has assigned to the Trustee;
NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, THIS LOAN AGREEMENT
WITNESSETH:
That the parties hereto, intending to be legally bound hereby and in
consideration of the mutual covenants hereinafter contained, do hereby agree as
follows:
2
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.0 DEFINITIONS. The terms set forth below shall have the
following meanings in this Loan Agreement, unless the context clearly otherwise
requires. Except where the context otherwise requires, words importing the
singular number shall include the plural number and vice versa. Capitalized
terms used and not defined herein shall have the meanings ascribed to them in
the Indenture and the Letter of Credit.
ACT:
"Act" shall mean Sections 57-10-401 et seq., Mississippi Code of 1972, as
amended and supplemented and Sections 57-10-201 et seq., Mississippi Code of
1972, as amended and supplemented.
ADDITIONAL BONDS:
"Additional Bonds" shall mean Bonds of any Series, other than the 1998
Series Bonds, duly issued, authenticated and delivered pursuant to the
Indenture.
ADMINISTRATION EXPENSES:
"Administration Expenses" shall mean the reasonable and necessary fees,
costs or expenses incurred or payable by the Company being: (a) the Initial
Administrative Fee payable to the Issuer and (b) the compensation and expenses
paid to or incurred by the Trustee or any Paying Agent under this Agreement or
the Indenture.
AFFILIATE:
"Affiliate" shall mean any person, firm or corporation controlled by, or
under common control with the Company and any person, firm or corporation
controlling the Company.
AGREEMENT:
"Agreement" shall mean this Loan Agreement between the Issuer and the
Company and any and all modifications, alterations, amendments and supplements
hereto made in accordance with the provisions hereof and the Indenture.
ALTERNATE LETTER OF CREDIT:
"Alternate Letter of Credit" shall mean an irrevocable, direct-pay
substitute letter of credit or an extension of an existing Credit Facility
delivered to and accepted by the Trustee pursuant to
3
<PAGE>
Section 11.04 of the Indenture provided that any extension or renewal of a
Credit Facility (other than an extension of the Letter of Credit) shall be
regarded as the delivery of an Alternate Letter of Credit for the purposes of
the Indenture. An Alternate Letter of Credit shall (a) be issued by a
commercial bank organized and doing business in the United States of America or
a branch or an agency of a foreign commercial bank located in the United States
of America and subject to regulation by state or federal banking regulatory
authorities with capital stock and surplus of at least $50,000,000 and having a
rating on its long-term deposits of not less than Aa3 by Moody's or AA- by
Standard & Poor's, (b) have the same terms as the Letter of Credit (except for
the expiration date, which shall be on a January thirtieth (30th) and shall be
at least two (2) years following the effective date thereof) and (c) be in
substantially the form of the Letter of Credit. Prior to acceptance of an
Alternate Letter of Credit, the Trustee must be satisfied that certain
requirements set forth in Section 11.04 of the Indenture have been met.
ANNEX A:
"Annex A" shall mean the attachment annexed hereto and made a part hereof
containing such information as is specifically referred to therein.
AUTHORIZED COMPANY REPRESENTATIVE:
"Authorized Company Representative" shall mean any person or persons at the
time designated to act on behalf of the Company by a written certificate, signed
on behalf of the Company by its President or one of its Vice Presidents or other
duly authorized Person and its Secretary or its Treasurer or its Comptroller or
one of its Assistant Secretaries, Assistant Treasurers or Assistant Comptrollers
or other duly authorized Person and furnished to the Issuer and the Trustee,
containing the specimen signature of each such person.
BANK:
"Bank" shall mean The First National Bank of Chicago which is issuing the
Letter of Credit and its successors and assigns (in whole or in part) under the
Credit Agreement meeting the requirements of a provider of an Alternate Letter
of Credit hereunder, or any issuer of an Alternate Letter of Credit.
BOND COUNSEL:
"Bond Counsel" shall mean an attorney-at-law or a firm of attorneys,
designated by the Issuer, of nationally recognized standing in matters
pertaining to bonds issued by states and their political subdivisions, duly
admitted to the practice of law before the highest court of any state of the
United States of America.
4
<PAGE>
BOND COUNSEL'S OPINION:
"Bond Counsel's Opinion" shall mean an opinion signed by Bond Counsel and
satisfactory to the Issuer and the Trustee.
BOND FUND:
"Bond Fund" shall mean the fund created under Section 6.01 of the Indenture
and held by the Trustee and the accounts created thereunder.
BONDHOLDER:
"Bondholder" or "holder of the Bonds" or "holder" shall mean the Registered
Owner of any Bond.
BONDS:
"Bonds" or "Bond" shall mean any Bond or all of the Bonds, as the case may
be, of the Issuer authorized and issued by the Issuer, authenticated by the
Trustee and delivered under the Indenture.
The term "outstanding", when used with reference to Bonds, shall mean, at
any date as of which the amount of outstanding Bonds is to be determined, the
aggregate of all Bonds authorized, issued, authenticated and delivered under the
Indenture, except:
Bonds canceled or surrendered to the Trustee for cancellation pursuant
to Section 2.13 of the Indenture prior to such date; and
Bonds in lieu of or in substitution for which other Bonds shall have
been authenticated and delivered pursuant to the Indenture unless proof
satisfactory to the Trustee and the Company is presented that any such Bond is
held by a bona fide holder in due course.
In determining whether holders of a requisite aggregate principal amount of
Bonds outstanding have concurred in any request, demand, authorization,
direction, notice, consent or waiver under the Indenture, Bonds which are owned
by the Company or any Affiliate of the Company or the Issuer shall be
disregarded and deemed not to be outstanding for the purpose of any such
determination; provided, however, that for the purpose of determining whether
the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Bonds which the
Trustee actually knows to be so owned shall be so disregarded.
BUILDING:
"Building" shall mean the building or buildings located on the Project Site
described in Exhibit A, and all additions, modifications and improvements
thereto, as they may at any time exist.
5
<PAGE>
BUSINESS DAY:
"Business Day" shall mean any day, other than a Saturday or Sunday, on
which neither the Trustee nor the Bank is closed and on which the payment system
of the Federal Reserve System is operational.
COMPANY:
"Company" shall mean Halter Marine Group, Inc., a corporation organized and
existing under the laws of the State of Delaware, or any corporation,
partnership or sole proprietorship which is the surviving, resulting or
transferee person in any merger, consolidation or transfer of assets permitted
under Section 5.02 of this Agreement and shall also mean, unless the context
otherwise requires, an assignee of this Agreement as permitted by Section 6.02
of this Agreement.
COMPLETION DATE:
"Completion Date" shall mean the date of completion of the acquisition,
construction, installation and equipping of the Project, as that date shall be
certified pursuant to Section 5.05 of the Indenture and Section 3.05 of this
Agreement.
CONSTRUCTION FUND:
"Construction Fund" shall mean the fund created under Section 5.01 of the
Indenture and held by the Trustee.
COST:
"Cost" or "Cost of the Project" shall mean and be deemed to include to the
extent permitted by the Act and the Code, whether incurred prior to or after the
date of the Loan Agreement, (a) obligations of the Issuer or of the Company
incurred for labor, materials, machinery, equipment and other expenses and to
architects, contractors, builders and materialmen in connection with the
construction, installation and equipping of the Project and improvements
thereto; (b) the cost of contract or performance bonds or of other bonds and of
insurance of all kinds that may be required or necessary prior to or during the
course of construction, installation and equipping of the Project; (c) all costs
of architectural and engineering services, including the expenses of the Issuer
and the Company for test borings, surveys, test and pilot operations, estimates,
plans and specifications and preliminary investigations therefor, and for
supervising construction, as well as for the performance of all other duties
required by or as a result of the proper construction, installation and
equipping of the Project; (d) compensation and expenses of the Issuer, the Bank
and the Trustee, legal, accounting, financial and printing expenses, fees and
all other expenses incurred in connection with the issuance of the Bonds, which
are not otherwise provided for under the terms of the Loan Agreement; (e) all
other costs which the Issuer or the Company shall be required to pay under the
terms of any contract or contracts for the construction, installation and
equipping of the Project; (f) any sums required to
6
<PAGE>
reimburse the Issuer or the Company for advances made by either of them for any
of the above items, or for any other costs incurred and for work done by either
of them, which are properly chargeable to the Project being constructed,
installed and equipped; (g) any costs and fees incurred in obtaining the Letter
of Credit; (h) the Initial Administrative Fee and Administration Expenses; and
(i) any other expenses or fees of the Issuer, the Trustee or the Bank, which in
the opinion of the Issuer or the Company, are related to the Project or the
Bonds, including but not limited to, commitment and legal fees and the costs,
fees and expenses of the Placement Agents in connection with the initial
issuance and sale of the Bonds.
CREDIT AGREEMENT:
"Credit Agreement" shall have the meaning set forth in the Indenture.
CREDIT FACILITY:
"Credit Facility" shall mean the Letter of Credit if then in effect or an
Alternate Letter of Credit if then in effect.
EQUIPMENT:
"Equipment" shall mean those items of machinery, equipment, fixtures and
other tangible personal property which (a) have been or are to be acquired and
installed in the Building or elsewhere at or on the Project Site, (b) were
acquired with proceeds of the 1998 Series Bonds and (c) any item of machinery,
equipment, fixtures and other tangible personal property which may be acquired
and installed in the Building or elsewhere at or on the Project Site in
substitution therefor pursuant to the provisions of this Agreement, and renewals
and replacements of any of the foregoing less such property as may be released
pursuant to the provisions of this Agreement or taken by the exercise of the
power of eminent domain, all as they may at any time exist.
EVENT OF DEFAULT:
"Event of Default", "event of default", "Default" and "default" shall mean
any Event of Default specified in Section 7.01 of this Agreement.
GOVERNMENT OBLIGATIONS:
"Government Obligations" shall mean (a) direct obligations of the United
States of America for the payment of which the full faith and credit of the
United States of America is pledged and (b) obligations issued by a person
controlled or supervised by and acting as an instrumentality of the United
States of America, the full and timely payment of the principal of, and premium,
if any, and interest on which is fully guaranteed as a full faith and credit
obligation of the United States of America (including any securities described
in (a) or (b) issued or held in book-entry form on the books of the Department
of Treasury of the United States of America or Federal Reserve Bank),
7
<PAGE>
which obligations, in either case, are not subject to redemption or prepayment
prior to maturity at the option of any one other than the holder.
INDENTURE:
"Indenture" shall mean the Trust Indenture, dated as of the date hereof,
between the Issuer and the Trustee, pursuant to which the Bonds are to be issued
and secured, as the same may be amended or supplemented from time to time in
accordance with the provisions thereof.
INITIAL ADMINISTRATIVE FEE:
"Initial Administrative Fee" shall mean (a) the initial fee of the Issuer
with respect to the 1998 Series Bonds in the amount of Thirty Thousand and
No/100ths Dollars ($30,000) which fee is required to be paid by the Company to
the Issuer pursuant to this Agreement, (b) the fee of the Issuer's Financial
Advisor and (c) any initial acceptance fee of the Trustee.
INVESTMENT SECURITIES:
"Investment Securities" shall mean any one of the following, if and to the
extent the same are at the time legal for the investment of the Issuer's funds:
(a) Government Obligations;
(b) certificates of deposit, time deposits or other banking arrangements,
whether negotiable or non-negotiable, issued by any bank or national banking
association having a capital stock and surplus of more than $20,000,000,
including the Trustee;
(c) commercial paper that is rated A-1 or A-2 by Standard & Poor's or P-1
or P-2 by Moody's;
(d) a repurchase agreement with any bank or national banking association
having a capital stock and surplus of more than $20,000,000, including the
Trustee, and a rating by Moody's within its NCO/Moody's ratings of Baa-3 or
prime 3, provided the obligation of the bank to repurchase is within thirty (30)
days of the date of purchase; and
(e) interests in any money market mutual fund including those of the
Trustee which invests solely in Government Obligations or repurchase agreements
which are collateralized solely by Government Obligations.
8
<PAGE>
ISSUER:
"Issuer" shall mean the Mississippi Business Finance Corporation,
constituting a public corporation of the State, its successors and assigns, and
any public corporation resulting from or surviving any consolidation or merger
to which it or its successors may be a party.
LETTER OF CREDIT:
"Letter of Credit" shall have the meaning set forth in the Indenture.
MAKE-WHOLE PREMIUM:
"Make-Whole Premium" shall have the meaning set forth in the Indenture.
MOODY'S:
"Moody's" shall mean Moody's Investors Service, Inc., a Delaware
corporation, its successors and assigns and, if dissolved or liquidated or if it
no longer performs the functions of a securities rating agency, "Moody's" shall
be deemed to refer to any other nationally recognized securities rating agency
designated by the Company (with the approval of the Issuer), by written notice
to the Trustee.
1998 SERIES BONDS:
"1998 Series Bonds" shall mean Mississippi Business Finance Corporation
Taxable Revenue Bonds, Series 1998 (Halter Marine Group, Inc. Project) and
issued in the aggregate principal amount of $30,000,000 and initially issued
under the Indenture.
NOTE:
"Note" shall mean the Promissory Note of the Company issued by the Company
to the Issuer in accordance with Section 4.02 hereof, the form of which is
attached hereto as Exhibit D and any amendments or supplements thereto.
OPINION OF COUNSEL:
"Opinion of Counsel" shall mean an opinion in writing signed by legal
counsel, who may be an employee of or counsel to the Company, and is not
unsatisfactory to the Trustee. Any Opinion of Counsel in connection with the
Letter of Credit or any Alternate Letter of Credit must opine as to the validity
and enforceability of the Letter of Credit or the Alternate Letter of Credit and
must be given by legal counsel independent from the Bank and licensed to
practice law in the jurisdiction which governs the validity and enforceability
of the Letter of Credit or the Alternate Letter of Credit.
9
<PAGE>
PAYMENT DATE OR PAYMENT DATES:
"Payment Date" or "Payment Dates" shall mean (a) as to the 1998 Series
Bonds, December 31 and June 30 of each year commencing June 30, 1998, provided,
however, that if any such Payment Date shall fall on a day other than a Business
Day, the payment due on such Payment Date shall be due on the next succeeding
Business Day and (b) as to Additional Bonds, each date or dates designated as a
Payment Date or Dates in the applicable Supplemental Indenture and Additional
Bonds.
PERMITTED ENCUMBRANCES:
"Permitted Encumbrances" shall mean and include:
(a) the lien of taxes and assessments which are not delinquent;
(b) the lien of taxes and assessments which are delinquent but the
validity of which is being contested as permitted by Section 4.06 of this
Agreement;
(c) any liens created by and under the Indenture, this Agreement and the
Note;
(d) those liens, charges and encumbrances in Exhibit C attached hereto, to
which the Company's title to the Project Site is subject;
(e) easements, exceptions or reservations executed after the date hereof
for the purpose of pipelines, telephone lines, telegraph lines, power lines and
sub-stations, roads, streets, alleys, highways, railroad purposes, drainage and
sewerage purposes, dikes, canals, laterals, ditches, the removal of oil, gas,
coal or other minerals, and other like purposes, or for the joint or common use
of real property, facilities and equipment, which, in the reasonable opinion of
the Company, in the aggregate do not impair the value or the use of such
property for the purposes for which it is or may reasonably be expected to be
held;
(f) rights reserved to or vested in any municipality or governmental or
other public authority to control or regulate any portion of the Project which
in the aggregate do not impair the use of the Project for the purposes for
which, in the reasonable opinion of the Company, it is or may reasonably be
expected to be held;
(g) the rights of the Issuer, the Trustee and the Bank (as the case may
be) under this Agreement, the Indenture and the Note;
(h) any lien on the Project or any part thereof created pursuant to this
Agreement from the Company to the Issuer, as assigned to the Trustee pursuant to
the Indenture; and
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(i) such other encumbrances as the Bank may approve or that may be
permitted by the Credit Agreement.
PERSON OR PERSON:
"Person" or "person" shall mean, as the case may be, any individual, sole
proprietorship, corporation, partnership (including without limitation, general
and limited partnerships), joint venture, association, joint stock company,
trust, unincorporated organization or government, any agency or political
subdivision thereof, or public corporation.
PLACEMENT AGENTS:
"Placement Agents" shall mean SPP Hambro & Co., LLC and Hibernia National
Bank.
PLANS AND SPECIFICATIONS:
"Plans and Specifications" shall, if such exist, mean the plans and
specifications prepared for the Project, certified by an Authorized Company
Representative, as the same may be implemented, detailed and revised from time
to time.
PROJECT:
"Project" shall mean (a) the Project Site, Building and/or the Equipment
financed with proceeds of the 1998 Series Bonds as the same may become more
detailed from time to time, including any repair, replacement or modification
thereof, substitutions therefor and additions thereto and excluding deletions
therefrom, and including personal property installed in accordance with Section
4.15 of this Agreement, (b) repairs, replacements, enlargements, improvements or
extensions of said facilities financed by Additional Bonds and (c) additional
facilities financed by Additional Bonds.
PROJECT SITE:
"Project Site" shall mean the real property described in Exhibit B attached
hereto on which the Building and the Equipment are or will be situated.
PROPERTY:
"Property" shall mean any interest in any kind of asset, whether real,
personal or mixed, or tangible or intangible.
RATING AGENCY:
"Rating Agency" shall mean Moody's and/or Standard & Poor's.
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REDEMPTION PRICE:
"Redemption Price" shall mean the principal of and interest on the 1998
Series Bonds to be redeemed, and the Make-Whole Premium, if applicable, and all
other amounts due and owing in respect of such 1998 Series Bonds to be redeemed.
REGISTERED OWNER:
"Registered Owner" shall mean the Person or Persons in whose name or names
the particular Bond or Bonds shall be registered on the Bond Register.
RELATED COMPANY OR RELATED COMPANIES:
"Related Company: or "Related Companies" shall mean Halter Pascagoula, Inc.
("Pascagoula"), Gulf Coast Fabrication, Inc. ("Gulf Coast") and Halter Gulfport,
Inc. ("Gulfport"), all of which are wholly owned subsidiaries, directly or
individually, of the Company.
SERIES OR SERIES OF BONDS:
"Series" or "Series of Bonds" shall mean all of the Bonds authenticated and
delivered on original issuance in a simultaneous transaction, and any Bonds
thereafter authenticated and delivered in lieu of or in substitution for such
Bonds, pursuant to the provisions of the Indenture, regardless of variations in
maturity, interest rate, or other provisions.
STANDARD & POOR'S:
"Standard & Poor's" shall mean Standard & Poor's Corporation, a New York
corporation, its successors and assigns and, if dissolved or liquidated or if it
no longer performs the functions of a securities rating agency, "Standard &
Poor's" shall be deemed to refer to any other nationally recognized securities
rating agency designated by the Company (with the approval of the Issuer), by
written notice to the Trustee.
STATE:
"State" shall mean the State of Mississippi.
SUPPLEMENTAL INDENTURE:
"Supplemental Indenture" or "indenture supplemental hereto" shall mean any
indenture supplemental to or amendatory of the Indenture as originally executed
which is duly executed and delivered in accordance with the provisions of the
Indenture.
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TRUSTEE:
"Trustee" shall mean SouthTrust Bank, National Association (and its
corporate successors) and its successor under the Indenture, a national banking
association organized and existing under the laws of the United States of
America with its principal corporate trust office located in Birmingham,
Alabama.
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ARTICLE II
REPRESENTATIONS
SECTION 2.01. REPRESENTATIONS OF THE ISSUER. The Issuer makes the
following representations as the basis for the undertakings on the part of the
Company herein contained.
(a) The Issuer is a public corporation of the State and is authorized
pursuant to the provisions of the Act to enter into the transactions
contemplated by this Agreement.
(b) The Issuer has full power and authority to enter into the transactions
contemplated by this Agreement and the Indenture and to carry out its
obligations hereunder and thereunder.
(c) To the best of its knowledge, the Issuer is not in default under any
provisions of the laws of the State material to the performance of its
obligations under this Agreement.
(d) The Issuer has been duly authorized to execute and deliver this
Agreement, the Indenture and the assignments of this Agreement and the Note to
the Trustee and by proper corporate action has duly authorized the execution and
delivery hereof and thereof and as to the Issuer, this Agreement and the
Indenture are valid and legally binding and enforceable in accordance with their
terms, except to the extent that the enforceability thereof may be limited (1)
by bankruptcy, reorganization, or similar laws limiting the enforceability of
creditors' rights generally or (2) by the availability of any discretionary
equitable remedies.
(e) The loan of the proceeds of the 1998 Series Bonds for the
construction, installation and equipping of the Project by the Company, as
provided by this Agreement, will further the purposes of the Act, to wit: to
induce the location or expansion of manufacturing facilities within the State by
granting tax credits to approved companies and thereby advance the public
purpose of relieving unemployment by creating new jobs within the State and to
create new sources of tax revenues for the support of public services provided
by the State.
(f) Under existing statutes and decisions no taxes on income or profits
are imposed on the Issuer.
(g) The Company is an "eligible company" within the meaning of the Act and
is entitled to the benefits provided by the Act.
SECTION 2.02. REPRESENTATIONS OF COMPANY. The Company makes the following
representations as the basis for the undertakings on the part of the Issuer
herein contained:
(a) the Company is a corporation duly incorporated under the laws of the
State of Delaware and the Company is in good standing and is duly qualified to
transact business in the State, has power to enter into the Note and this
Agreement and by proper corporate action has duly
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authorized the execution and delivery of the Note and this Agreement and as to
the Company, this Agreement and the Note are valid and legally binding and
enforceable in accordance with their respective terms, except to the extent that
the enforceability thereof may be limited (1) by bankruptcy, reorganization, or
similar laws limiting the enforceability of creditors' rights generally or (2)
by the availability of any discretionary equitable remedies;
(b) the Company is not in violation of any provision of its certificate of
incorporation, its by-laws or any laws in any manner material to its ability to
perform its obligations under this Agreement or the Note, has power to enter
into this Agreement and the Note and has duly authorized the execution and
delivery of this Agreement and the Note by proper corporate action;
(c) the Project consists of (1) the acquisition and construction on the
Project Site as more particularly described in Exhibit B to this Agreement of
the Building as more particularly described in Exhibit A to this Agreement and
in the Plans and Specifications, and (2) the acquisition and installation on the
Project site and in the Building of the Equipment;
(d) the estimated Cost of the Project is not less than the principal
amount of the 1998 Series Bonds;
(e) the Company is an "eligible company" within the meaning of the Act and
the Company is engaged in manufacturing within the meaning of Section 57-10-
401(g)(i) and 57-10-401(j) of the Act in connection with the Project.
(f) neither the execution and delivery of this Agreement, the Credit
Agreement or the Note, the consummation of the transactions contemplated hereby
or thereby, nor the fulfillment of or compliance with the terms and conditions
of this Agreement or the Note, conflicts with or results in a breach of the
terms, conditions or provisions of any corporate restriction or any agreement or
instrument to which the Company is now a party or by which it, or any of its
property, is bound, or constitutes a default under any of the foregoing, or
results in the creation or imposition of any impermissible lien, charge or
encumbrance whatsoever upon any of the property or assets of the Company under
the terms of any instrument or agreement;
(g) there are no pending, or to the knowledge of the Company, threatened
actions or proceedings before any court or administrative agency which are
likely in any case or in the aggregate to materially adversely affect the
financial condition or business or operations of the Company, nor is the Company
aware of any facts or circumstances that would give rise to any such actions or
proceedings;
(h) all information furnished by the Company to the Issuer for the purpose
of approving the financing of the Project through the sale and issuance of the
1998 Series Bonds including, but not limited to, its application for financing
is true, accurate and complete as of the date hereof and thereof; and
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(i) the financing of the Project will result in the creation of
approximately 926 new net full time jobs.
SECTION 2.03. BENEFITS UNDER THE ACT.
(a) The parties hereto acknowledge that the Company has been induced to
proceed with the construction and installation of the Project in part by the
benefits conferred on the Company and the Related Companies by the Act. The
Issuer agrees that it will not take any action to limit, curtail or otherwise
make unavailable to the Company and the Related Companies any of the benefits
available under the Act.
(b) With respect to benefits conferred by the Act referenced in (a) above,
the following shall apply:
(1) the maximum benefits accruing in any calendar year with respect
to the income tax credit (other than any credits which may be carried
forward to future years pursuant to the Act) shall not exceed the payments
on the 1998 Series Bonds during such year and the fees and expenses of the
Trustee, costs of issuance, letter of credit fees and expenses and such
other fees and expenses referenced herein;
(2) any benefit claimed or received by the Company and/or the Related
Companies for any Cost shall not be used as a deduction under the laws of
the State in order to determine the taxable income of the Company and/or
the Related Companies in the State;
(3) the Company shall request the Trustee to provide the Issuer, not
later than ninety (90) days after the end of each calendar year, with a
certificate setting forth the amount of all payments made to the Trustee
with respect to the 1998 Series Bonds whether for principal, Make-Whole
Premium, if applicable, interest or the fees and expenses of the Trustee
and the percentage of said amount attributable to each of the Related
Companies;
(4) the benefits accruing to the Company and the Related Companies
under this Section 2.03 shall cease in the event:
(A) a default should occur under this Agreement or the Indenture;
or
(B) the Company should fail to operate the Project for a period
of nine (9) consecutive months following the placement of the Project
in operation except for force majeure, strikes, lockouts, damage,
destruction, act of God or in general, reasons beyond the Company's
reasonable control excepting, however, general economic conditions;
provided, however, if the Company or a Related Company should fail to
operate its portion of the Project for such period, the loss of
benefits shall apply only to such portion of the Project;
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(5) the Company agrees to comply and to have the Related Companies
comply with the terms and provisions of the Act in all respects with
respect to the benefits available under the Act;
(6) the benefits or credits available under the Act shall cease to
accrue on the date the principal and interest on the 1998 Series Bonds are
paid in full whether at maturity or by way of redemption and any benefits
or credits carried forward as permitted by the Act shall be available to
the Company and/or the applicable Related Company for three (3) years from
such date of payment or redemption at which time all benefits under the Act
shall cease to exist and all unused benefits or credits shall be forfeited;
(7) the benefits accruing to the Company and each Related Company
under this Section 2.03 shall be limited to the annual debt service
payments on the 1998 Series Bonds for qualified Cost of the Project and
shall be reduced by the amount of surplus funds remaining after completion
of the Project which shall be used to redeem Bonds as provided for in
Section 3.06 of this Agreement;
(8) the Company and/or each Related Company will report to the
Mississippi Employment Security Commission ("MESC") its employees as
required by law, and shall annually report to the Issuer the average number
of employees reported for each year to the MESC and this shall be done for
each year after the year in which the Project was induced for financing by
the Issuer;
(9) for purposes of determining the benefits to which the Company
and/or the Related Companies are eligible under the Act, the following
definitions shall apply:
(A) (i) BASE EMPLOYMENT ("BE") means the average number of
employees of each Related Company in the State during the preceding
twelve (12) month period ending February 14, 1996 for Pascagoula and
June 26, 1997 for Gulf Coast and Gulfport, as reported by the Company
and/or each Related Company to the MESC.
(ii) BASE INVESTMENT ("BI") means the present true value of
the capital assets owned or leased by the each Related Company
within the State as determined by the Tax Assessor of each county
in which each Related Company owns or leases capital assets
related to manufacturing, processing, distribution or warehousing
facilities or corporate or regional offices.
(iii) FUTURE EMPLOYMENT ("FE") means the average number of
employees of each Related Company in the State after the
applicable portion of the Project is completed, which may be an
estimate for the first twelve (12) months after completion, and
as reported by the Company and/or each
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Related Company to the MESC over each twelve (12) month period
thereafter.
(iv) FUTURE INVESTMENT ("FI") means the sum of (x) the Base
Investment; (y) the Cost of the Project for each applicable
portion of the Project paid with the proceeds of the 1998 Series
Bonds; and (z) funds of each Related Company used to pay its Cost
of the Project, including the cost of any machinery, equipment,
fixtures or other tangible personal property located or to be
located at or on the applicable portion of the Project Site or
installed in the applicable portion of the Building.
(B) The Company represents and warrants that as of the date of
this Agreement that:
(i) the Base Employment for Pascagoula is 83 employees and
the Base Investment is $0.00, and
(ii) the Company reasonably anticipates that the Future
Employment for the first twelve (12) months after completion of
the applicable portion of the Project for Pascagoula will be 800
employees which represents increased employment of 717 employees
in connection with the applicable portion of the Project, and the
Future Investment in connection therewith will be $25,000,000.
(iii) the Base Employment for Gulf Coast is 180 employees and
the Base Investment is $8,153,526.00, and
(iv) the Company reasonably anticipates that the Future
Employment for the first twelve (12) months after completion of
the applicable portion of the Project for Gulf Coast will be 250
employees which represents increased employment of 70 employees
in connection with the applicable portion of the Project, and the
Future Investment in connection therewith will be $3,000,000.
(v) the Base Employment for Gulfport is 311 employees and
the Base Investment is $21,076,723.00, and
(vi) the Company reasonably anticipates that the Future
Employment for the first twelve (12) months after completion of
the applicable portion of the Project for Gulfport will be 450
employees which represents increased employment of 139 employees
in connection with the applicable portion of the Project, and the
Future Investment in connection therewith will be $2,000,000.
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(C) The percentage of the Company's or each Related Company's
total state income tax liability in which it shall be entitled to an
income tax credit provided by the Act shall be determined annually as
follows:
(i) (FE-BE) * FE = Employment Valuation Percentage ("EVP")
(ii) (FI-BI) * FI = Investment Valuation Percentage ("IVP")
(iii) [(EVP x 2) + IVP] * 3 = Percentage of income tax
liability of the Company or each Related Company to which it is
entitled to an income tax credit.
With respect to the benefits that may accrue to the Company and each
Related Company under this Section 2.03, the Company acknowledges and agrees
that the Issuer makes no representation, warranty or covenant regarding the
enforceability of the Company's or each Related Company's rights to receive the
benefits, the extent that such benefits may be received nor the term under which
the Company or each Related Company may be entitled to receive the benefits.
The Issuer agrees to provide reasonable assistance to the Company and/or
each Related Company in securing any other State tax exemptions which the
Company and/or each Related Company may legally qualify for, including, but not
limited to, sales tax exemptions and ad valorem tax exemptions, in connection
with each applicable portion of the Project.
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ARTICLE III
COMPLETION OF PROJECT; ISSUANCE OF THE BONDS
SECTION 3.01. COMPLETION OF PROJECT; BEST EFFORTS. Except as provided in
Section 3.06 hereof, the Company will timely construct, install and equip the
Project or timely cause the Project to be constructed, installed and equipped in
accordance with the Plans and Specifications and as herein provided, will use
its best efforts to cause the construction, installation and equipping thereof
to be completed with all reasonable dispatch, but if for any reason such
construction, installation and equipping shall not be completed there shall be
no resulting diminution in or postponement of the loan payments required in
Section 4.02 hereof to be paid by the Company.
Anything in this Agreement notwithstanding, the Issuer shall not be
obligated to complete the construction, installation and equipping of the
Project upon acceleration of the payment of the unpaid portion of the loan
payments due pursuant to this Agreement and the making of all payments in the
amount required by, and in accordance with the terms of, this Agreement.
In order to effectuate the purposes of this Agreement, the Company will
make, execute, acknowledge and deliver, or cause to be made, executed,
acknowledged and delivered, all contracts, orders, receipts, writings and
instructions, in the name of the Company or otherwise, with or to other persons,
firms or corporations, and in general do or cause to be done all such other
things as may be requisite or proper for the construction, installation and
equipping of the Project and fulfillment of the obligations of the Company under
this Agreement.
The Company will maintain such records in connection with the Cost of the
construction, installation and equipping of the Project as to permit ready
identification thereof.
The Company hereby grants to the Issuer the right, privilege and authority
to take all action and to do all other things necessary to effectuate the
purposes of this Agreement.
SECTION 3.02. ISSUANCE OF BONDS. In order to provide funds for payment of
the Cost of the Project, the Issuer, concurrent with or as soon as practicable
after the execution of this Agreement, and subject to the provisions of Section
3.02 of the Indenture, will sell, issue and deliver to the initial purchaser or
purchasers of the 1998 Series Bonds, as directed by the Placement Agents, the
1998 Series Bonds and deposit the proceeds thereof with the Trustee, as follows:
(a) in the Bond Fund, a sum equal to the accrued interest, if any, paid by the
initial purchaser or purchasers of the 1998 Series Bonds and (b) in the
Construction Fund, the balance of the proceeds to be received from said sale.
Upon written request from the Company to the Issuer to issue Additional
Bonds to complete payment of the Cost of the Project and subject to Sections
2.06 and 3.03 of the Indenture, the Issuer shall use its best efforts to issue
such Bonds in one or more Series for such purpose in accordance with the
provisions of the Indenture and the Act; provided, however, that the failure of
the Issuer to
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issue Additional Bonds shall not release the Company from any of the provisions
of this Agreement, regardless of the reason for such failure.
SECTION 3.03. REQUISITION FOR CONSTRUCTION FUNDS. The Issuer has, in the
Indenture, authorized and directed the Trustee to make payments from the
Construction Fund to pay the Cost of the Project, upon receipt by the Trustee of
(a) original executed requisitions (upon which both the Issuer and the Trustee
may rely conclusively and shall be protected in relying) signed by an Authorized
Company Representative, stating with respect to each payment to be made: (1) the
requisition number, (2) the name and address of the Person to whom payment is
due or, in the event such payment is to reimburse the Issuer or the Company, the
name and address of the Person to whom payment previously has been made (or, in
the case of payments to the Bond Fund, instructions to make such payments to the
Bond Fund), (3) the amount to be paid, (4) that there has been no default by the
Company under this Agreement, and (5) that each obligation, item of cost or
expense mentioned therein has been properly incurred, is a proper charge against
the Construction Fund and has not been the basis of any previous withdrawal; (b)
if required by the Credit Agreement, executed copies of certifications of work
completed by a licensed architect, if the work is of the type which a licensed
architect would be able to certify as complete, which certifications shall be
prepared on AIA draw forms or comparable documents; and (c) if required by the
Credit Agreement, an endorsement to the title insurance policy related to the
Project Site, if any, indicating no encumbrances to title other than Permitted
Encumbrances and reflecting the payments made.
SECTION 3.04. REVISIONS TO PLANS AND SPECIFICATIONS. The Company may
revise the Plans and Specifications at any time and from time to time prior to
the Completion Date. No material revision in the Plans and Specifications will
be made in the course of construction of the Project unless and until such
revision shall have been certified by an Authorized Company Representative and
filed with the Trustee.
SECTION 3.05. CERTIFICATE OF COMPLETION. When the Project is completed and
ready to be placed in service (the "Completion Date"), the Trustee and the
Issuer shall receive a certificate of an Authorized Company Representative
stating, as applicable, that (a) the construction of the Building has been
completed substantially in accordance with the Plans and Specifications and that
the Project complies with all zoning, planning, building and environmental
regulations and all regulations of any other governmental entities having
jurisdiction over the Project, (b) the acquisition of the Equipment has been
completed, (c) payment, or provision therefor of the Cost of the Building and
the Equipment has been made except for any Cost of the Building and the
Equipment not then due and payable or the liability for payment of which is
being contested or disputed by the Company and (d) the Company has received a
certificate of occupancy, if applicable, or that a certificate of occupancy is
not required. Notwithstanding the foregoing, such certificate shall state that
it is given without prejudice to any rights against third parties which exist at
the date thereof or which may subsequently come into being. The Issuer and the
Company agree to cooperate in causing such certificates to be furnished to the
Trustee and the Issuer.
SECTION 3.06. COMPLETION OF PROJECT IF BOND PROCEEDS INSUFFICIENT; SURPLUS
PROCEEDS. If the moneys in the Construction Fund available for payment of the
Cost of the Project
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(including moneys from the proceeds of any Additional Bonds sold pursuant to the
terms and provisions of the Indenture to finance completion of the Project) are
not sufficient to pay the Cost of the Project in full, the Company will complete
or cause to be completed the Project and pay or cause to be paid all of that
portion of the Cost of the Project in excess of the moneys available therefor in
the Construction Fund. The Issuer does not make any warranty, either express or
implied, that the moneys which will be paid into the Construction Fund will be
sufficient to pay the Cost of the Project. If the Company shall pay any portion
of the Cost of the Project pursuant to the provisions of this Section 3.06, it
shall not be entitled to any reimbursement therefor (except to the extent of
reimbursement from the proceeds of any Additional Bonds sold to finance
completion of the Project) from the Issuer, the Trustee, the Bank or the holders
of any of the Bonds, nor shall it be entitled to any diminution in or
postponement of the loan payments required in Section 4.02 hereof to be paid by
the Company.
If, upon the Completion Date, there shall be any surplus funds remaining in
the Construction Fund not reserved to pay for the Cost of the Project, such
funds shall, (a) be deposited in the Bond Fund and used, at the earliest date
permissible under the terms of the Indenture without the payment of a call
premium or penalty, to pay principal on such Series of Bonds through redemption
or retirement or, at the option of the Company, be used to pay principal on the
Bonds of such Series purchased by the Company at such earlier date or dates as
the Company may elect and (b) be invested as provided in the Indenture.
SECTION 3.07. DEFAULT BY CONTRACTORS. In the event of default of any
contractor or subcontractor under any contract made by it in connection with the
Project or in the event of a breach of warranty with respect to any materials,
workmanship or performance guaranty, the Company may proceed, either separately
or in conjunction with others, to pursue such remedies against the contractor or
subcontractor so in default and against each surety for the performance of such
contract as it may deem advisable. The Company will advise the Issuer, the Bank
and the Trustee of the steps it intends to take in connection with any such
default. If the Company shall so notify the Issuer, the Bank and the Trustee,
the Company may, in its own name or in the name of the Issuer, prosecute any
action or proceeding or take any other action involving any such contractor,
subcontractor or surety which the Company deems reasonably necessary, and in
such event the Issuer will cooperate fully with the Company. Any amounts
recovered by way of damages, refunds, adjustments or otherwise in connection
with the foregoing prior to the Completion Date shall be paid into the
Construction Fund or, if recovered after the Completion Date and full
disposition of the Construction Fund, shall be deposited in the Bond Fund and
used in the same manner as provided in Section 3.06 hereof for surplus funds in
the Construction Fund.
SECTION 3.08. INVESTMENT OF CONSTRUCTION FUND. Any moneys held as a
part of the Construction Fund shall, at the telephonic request of an Authorized
Company Representative, confirmed in writing within two (2) Business Days be
invested or reinvested by the Trustee as provided in Article VII of the
Indenture.
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ARTICLE IV
ASSIGNMENT; LOAN PAYMENTS
SECTION 4.01. ASSIGNMENT OF THIS AGREEMENT. The Issuer will assign this
Agreement, pursuant to the Indenture, on the date of delivery of the 1998 Series
Bonds to the Trustee. The Company acknowledges that its rights under this
Agreement are subject to the lien, and the rights, remedies and powers, of the
Trustee under the Indenture.
The Company shall, at its expense, promptly and duly execute, acknowledge
and deliver to the Trustee and the Issuer, as appropriate, such documents,
instruments and assurances and take such further action as may from time to time
be reasonably required or requested by the Trustee or the Issuer in order to
more effectively carry out the intent and purposes of this Agreement, the
Indenture and the Bonds issued thereunder, and the other instruments
contemplated thereby.
SECTION 4.02. LOAN PAYMENTS AND THE NOTE. The Company agrees to pay or
cause to be paid to the Issuer, in immediately available funds, a sum equal to
the aggregate principal amount of the Bonds issued under the Indenture for the
Project, Make-Whole Premium, if applicable, together with interest on the unpaid
balances thereof at the rates payable by the Issuer on such Bonds, in the
amounts and on the Payment Dates as follows:
(a) on the date of the issuance and delivery of the 1998 Series Bonds, the
sum which equals the amount of accrued interest due on such date, if any;
(b) on or before each Payment Date on which interest on the Bonds is due,
commencing June 30, 1998, the amount which equals the interest to be paid on
such Series of Bonds on such Payment Date; and
(c) on or before each Payment Date on which principal of the Bonds is due,
the amount which equals the sum of (1) the principal of Bonds of any Series
which will be due and payable on such Payment Date and (2) the amount of the
Redemption Price (including any Make-Whole Premium, if applicable) due and
payable on such Payment Date;
provided, however, that if the Bonds shall theretofore have been deemed to have
been paid pursuant to the Indenture no further payments need be made under
subsections (b) and (c) of this Section.
In the event the Company shall fail to make or cause to be made any of the
payments required in this Section 4.02, the payment so in default shall continue
as an obligation of the Company until the amount in default shall have been
fully paid, and the Company will pay the same with interest thereon until paid
at the rate or rates per annum borne by the Bonds issued under the Indenture.
The Company shall execute the Note to evidence its obligation to make loan
payments and any other sums payable by the Company to the Issuer hereunder and
in respect of the Bonds and the
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Issuer will assign and deliver the Note to the Trustee concurrently with the
execution of this Agreement.
The Company hereby agrees to deliver to the Trustee the Letter of Credit
and the Issuer acknowledges and agrees that a payment pursuant to the Letter of
Credit shall constitute a credit against the obligation of the Company to make a
corresponding payment pursuant to subsections (b) and (c) of this Section 4.02.
The Company hereby further agrees to comply with the provisions of the Indenture
concerning Alternate Letters of Credit.
The Company further agrees to pay to the party to whom such payment is due
the Initial Administrative Fee and the Administration Expenses, all sums
constituting a Cost of the Project and all other amounts due in respect of the
1998 Series Bonds as same shall have become due and payable.
In addition, the Company is obligated to make payments which are
accelerated hereunder upon the occurrence of certain events, all as described in
Article VIII hereof, including in the event of the mandatory redemption of all
or part of the 1998 Series Bonds as a result of the failure to obtain an
Alternate Letter of Credit in accordance with Section 11.04 of the Indenture,
such payments are to be made in an amount sufficient, together with other funds
held by the Trustee and available for such purpose, (a) to redeem at the
earliest date permitted under the Indenture the 1998 Series Bonds to be redeemed
at the Redemption Price (including any Make-Whole Premium, if applicable), (b)
to pay any interest which will become due on such 1998 Series Bonds to the
redemption date, (c) to pay all Administration Expenses accrued and to accrue
through the date fixed for redemption and (d) to pay any and all other amounts
owed on the Bonds under the terms and provisions of the Indenture, this
Agreement and the Note.
SECTION 4.03. ASSIGNMENT TO TRUSTEE; OBLIGATION TO MAKE PAYMENTS ABSOLUTE.
It is understood and agreed that all payments by the Company under this
Agreement (except payment of Administration Expenses pursuant to this Section
4.03, indemnification payments pursuant to Section 4.11 and fees and expenses
pursuant to Section 7.04 of this Agreement) are to be assigned by the Issuer to
the Trustee. The Company assents to such assignment and agrees that its
obligation to make such payments to the Trustee is absolute and unconditional
and is not subject to any defense (other than payment) or any right of set-off,
counterclaim or recoupment arising out of any breach by the Issuer of any
obligation to the Company, whether hereunder or otherwise, or out of any
indebtedness or liability at any time owing to the Company by the Issuer or by
any holder of any Bond. The Issuer directs the Company, and the Company agrees,
to pay to the Trustee at its Corporate Trust Office as stated in the Indenture
all payments (except payment of Administration Expenses pursuant to this Section
4.03, indemnification payments pursuant to Section 4.11 and fees and expenses
pursuant to Section 7.04 of this Agreement) payable by the Company pursuant to
this Agreement.
So long as any Bonds are outstanding, the Company will pay directly to the
Issuer, the Bank or the Trustee, as the case may be, on each Payment Date the
amount of Administration Expenses
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payable to them respectively not theretofore provided for which have then
accrued and become payable; provided, however, that before any such payment is
due and payable, the Issuer, the Bank or the Trustee, as the case may be, will
give notice to the Company, at least fifteen (15) days prior to such Payment
Date, of the amount and nature of such Administration Expenses.
SECTION 4.04. SOLE POSSESSION OF PROJECT BY THE COMPANY. The Company is
entitled to sole and exclusive possession of the Project.
SECTION 4.05. MAINTENANCE OF PROJECT. The Company will maintain, preserve
and keep the Project or cause the Project to be maintained, preserved and kept,
with the appurtenances and every part and parcel thereof, in good repair,
working order and condition and will from time to time make or cause to be made
all necessary and proper repairs, replacements and renewals.
Subject to Section 6.01 of this Agreement, the Company shall have the
privilege of remodeling the Project or making substitutions, modifications and
improvements to the Project from time to time as it, in its discretion, may deem
to be desirable for its uses and purposes, the cost of which remodeling,
substitutions, modifications and improvements shall be paid by the Company, and
the same shall be included under the terms of this Agreement as part of the
Project.
SECTION 4.06. PAYMENT OF TAXES AND ASSESSMENTS; COMPLIANCE WITH LAW; NO
FURTHER LIENS. The Company will: (a) pay, or make provision for payment of,
all lawful taxes and assessments, including income, profits, property or excise
taxes, if any, or other municipal or governmental charges, levied or assessed by
the federal, state or any municipal government with respect to or upon the
Project or any part thereof or upon any payments hereunder when the same shall
become due; (b) duly observe and comply with all valid requirements of any
governmental authority relative to the Project; and (c) not create or suffer to
be created any lien or charge upon the Project (except for Permitted
Encumbrances) or the payments in respect to this Agreement; provided, however,
that nothing in this Section 4.06 contained shall require the Company to pay or
make provision for payment of any such taxes or assessments, or comply with any
such requirements or cause to be discharged any such lien or charge so long as
the validity thereof shall be contested in good faith by appropriate proceedings
duly prosecuted by the Company, at its expense and in its own name and behalf or
in the name and on behalf of the Issuer. In the event of any such contest, the
Company may permit the taxes, assessments or other charges so contested to
remain unpaid during the period of such contest and any appeal therefrom,
unless, by nonpayment of any such items, the liens or security interests of this
Agreement or the Indenture as to the loan payments, other revenues and proceeds
derived from the Project will be materially endangered or will be subject to
loss or forfeiture, in which event such taxes, assessments or charges shall be
paid promptly, provided, however, that if, by posting a cash bond or surety
bond, the Company can cause such lien to be satisfied and discharged it may post
such bond in lieu of payment. The Issuer, at the expense of the Company, will
cooperate fully with the Company in any such contest provided, however, that
prior to any such contest the Company shall notify the Trustee in writing of its
intention to contest the same setting forth the grounds for such contest.
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SECTION 4.07. OPERATION OF PROJECT. The Company agrees that so long as any
of the Bonds are outstanding and the Project is in operation it will operate the
Project, or cause the Project to be operated, as an "eligible company" in
accordance with the Act.
SECTION 4.08. PAYMENT OF EXPENSES. The Company will pay, or cause to be
paid, in addition to the payments provided for in Sections 4.02 and 4.03 hereof,
all of the expenses of operation of the Project, including, without limitation,
the cost of all necessary and proper repairs, replacements and renewals made
pursuant to Section 4.05 hereof and any and all taxes and assessments payable
pursuant to Section 4.06 hereof.
SECTION 4.09. PAYMENTS CONTINUE UPON DESTRUCTION OF PROJECT. It is
understood and agreed that the payments under Section 4.02 and on the Note and
other charges payable hereunder shall continue to be payable at the time and in
the amounts herein specified, whether or not the Project, or any portion
thereof, shall have been condemned or taken by eminent domain or destroyed,
wholly or partially, by fire or other casualty, and that there shall be no
abatement or diminution of any such payments and other charges by reason
thereof.
SECTION 4.10. AMENDMENT TO AGREEMENT. The Company agrees that in the event
the Issuer shall, at the request of the Company and with the approval of the
Bondholders and the Trustee, issue Additional Bonds under the Indenture for the
purpose of completing the installation, equipping and/or construction of the
Project or repairing, replacing, enlarging, improving or expanding the Project,
the Company will, if necessary, enter into an amendment to this Agreement or a
separate agreement related thereto with the Issuer which will contain such
provisions as shall be required in respect of the issuance of such Additional
Bonds.
SECTION 4.11. RELEASE AND INDEMNIFICATION OF ISSUER, BANK AND TRUSTEE. The
Company hereby releases the Issuer, the Bank and the Trustee from, and agrees
that the Issuer, the Bank and the Trustee and their respective officers,
directors, members, employees, attorneys, and agents shall not be liable for,
and agrees to indemnify and hold the Issuer, the Bank and the Trustee and their
respective officers, directors, members, employees, attorneys, and agents
harmless against:
(a) any liability, cost or expense in the administration of the Indenture
and this Agreement and the obligations imposed on the Issuer, the Bank and the
Trustee thereby and hereby;
(b) any or all liability or loss, cost or expense, including reasonable
attorneys' fees, resulting from or arising out of any loss or damage to property
or any injury to or death of any person occurring on or about the Project Site
or resulting from any defect in the fixtures, machinery, equipment or other
property located on the Project Site or arising out of, pertaining to, or having
any connection with the Project or the financing thereof (whether or not arising
out of acts, omissions or negligence of the Company); and
(c) any or all liability or loss, cost or expense, including attorneys'
fees, arising out of or in connection with, or pertaining to the sale, issuance
or delivery of the Bonds, including, but not
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limited to, liabilities arising under the Securities Act of 1933, the Securities
Exchange Act of 1934 or any applicable state securities laws, but such indemnity
for securities liability shall be subject to the limitation that such indemnity
shall not have been determined by a binding legal precedent to be void as
contrary to public policy and such indemnity for securities liability shall not
include any liability or loss, cost or expense including attorneys' fees,
arising out of or in connection with any legal opinion rendered pursuant to
Section 3.02(j) of the Indenture.
The indemnity specified in this Section 4.11 shall not be effective to
relieve the Issuer, the Bank or the Trustee or their respective officers,
directors, members, employees, attorneys and agents from damages that result
from (a) wanton or gross negligence or intentional or wilful misconduct on the
part of the party seeking such indemnity, or (b) any misstatement or omission
appearing in any offering circular, official statement or other document solely
in reliance on information furnished by the party seeking such indemnity. This
indemnification covenant shall survive the termination of this Agreement with
respect to liability arising out of any event or act occurring prior to such
termination.
SECTION 4.12. INSURANCE. Throughout the term of this Agreement and to the
extent required in the Credit Agreement, the Company shall keep the Project
continuously insured against such risks as are customarily insured against by
businesses of like size and type (other than business interruption insurance),
paying as the same become due all premiums in respect thereto, including but not
necessarily limited to casualty insurance against loss and/or damage to the
Project, worker's compensation insurance and, if required by the Credit
Agreement, flood insurance.
In addition, the Company shall, throughout the term of this Agreement,
maintain comprehensive general public liability insurance protecting the
Company, the Issuer, the Bank and the Trustee, as named co-insureds, against
liability for death and injuries to persons and damage to property, occurring
on, in or about the Project, in minimum amounts satisfactory to the Bank.
All insurance required hereby shall be taken out and maintained in
generally recognized responsible insurance companies qualified to do business in
the State and selected by the Company. The insurance herein required may be
contained in blanket policies now or hereafter maintained by the Company.
To the extent required by the Credit Agreement, all such policies, or a
certificate or certificates of insurance showing that such insurance is in force
and effect, shall be deposited with the Bank and copies thereof with the Trustee
and shall contain a provision that such policies may not be canceled unless the
Trustee and the Bank are notified at least thirty (30) days prior to
cancellation. At least thirty (30) days prior to expiration of any such policy,
the Company shall furnish the Trustee and the Bank with evidence satisfactory to
the Trustee and the Bank that the policy has been renewed or replaced or is no
longer required by this Agreement.
SECTION 4.13. APPLICATION OF INSURANCE PROCEEDS. Immediately after the
occurrence of any damage or loss to the Project the Company shall notify the
Issuer, the Bank and the Trustee
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as to the nature and extent of such damage or loss and if the Company determines
that it will be unable to use the Project for a period in excess of six (6)
consecutive months, the Company shall, within one hundred twenty (120) days
after the occurrence of such damage or loss, notify the Issuer, the Bank and the
Trustee whether the Company deems it practicable and desirable to rebuild,
repair or restore such damage or loss. If the Company shall determine that such
rebuilding, repairing or restoring is practicable and desirable, the Company
shall forthwith proceed with such rebuilding, repairing or restoring and shall
notify the Issuer, the Bank and the Trustee upon the completion thereof;
provided, however, that if the cost of such loss or damage to the Project
exceeds $500,000. In the event the Company determines that it will be unable
to use the Project for a period in excess of six (6) months and chooses not to
rebuild, repair or restore the Project, the Company shall pay or cause to be
paid to the Issuer for deposit by the Trustee to the Bond Fund as the entire
amount of loan payments due hereunder a sum which when added to the amounts in
the Construction Fund and the Bond Fund, will equal an amount of money equal to
the aggregate principal amount of the Bonds outstanding with interest on the
unpaid principal amount thereof, plus an amount equal to the accrued
Administration Expenses, if any, and, after the payment of said amounts, the
Company shall be paid any remaining insurance proceeds, provided, however, that
such insurance proceeds shall be paid to the Bank to the extent of any amount
owing from the Company to the Bank under the Credit Agreement.
The Issuer shall cooperate fully with the Company in the handling and the
conduct of any prospective or pending insurance claims with respect to the
Project or any portion thereof. In no event will the Issuer voluntarily settle
or consent to the settlement of any prospective or pending insurance claims with
respect to the Project or any portion thereof without the written consent of the
Company.
Any provisions of this Agreement to the contrary notwithstanding, the
Company shall be entitled to, receive, keep and retain that portion of insurance
proceeds received for damages to its own property other than the Project subject
to the rights of the Bank under the Credit Agreement.
SECTION 4.14. CONDEMNATION. In the event that title to or the temporary
use of the Project, or any portion thereof, for a period in excess of six (6)
consecutive months, shall be taken in condemnation or by the exercise of the
power of eminent domain by any governmental body or by any person, firm or
corporation acting under governmental authority, the Company shall notify the
Issuer, the Bank and the Trustee as to the nature and extent of such
condemnation or eminent domain proceedings and shall, within one hundred twenty
(120) days after such taking, notify the Issuer, the Bank and the Trustee
whether the Company deems it practicable and desirable to replace or restore
that portion of the Project taken in or affected by condemnation or by the
exercise of the power of eminent domain. If the Company shall determine that
such replacement or restoration is practicable and desirable, the Company shall
forthwith proceed with such replacement or restoration and shall notify the
Issuer, the Bank and the Trustee upon the completion thereof, and such replaced
or restored property shall become part of the Project subject to the security
interests granted herein; provided, however, if the proceeds of such taking
exceed $500,000. In the event the Company determines that it will be unable to
use the Project for a period in excess of six (6) months and
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chooses not to replace or restore the Project, the Company shall pay or cause to
be paid to the Issuer for deposit by the Trustee to the Bond Fund as the entire
amount of loan payments due hereunder a sum which when added to the amount in
the Construction Fund and the Bond Fund, will equal an amount of money equal to
the aggregate principal amount of the Bonds outstanding, with interest on the
unpaid principal amount thereof, plus an amount equal to the accrued
Administration Expenses, if any, and after the payment of said amounts, the
Company shall be paid any remaining condemnation proceeds, provided, however,
that such condemnation proceeds shall be paid to the Bank to the extent of any
amount owing from the Company to the Bank under the Credit Agreement.
The Issuer shall cooperate fully with the Company in the handling and the
conduct of any prospective or pending condemnation proceedings with respect to
the Project or any portion thereof. In no event will the Issuer voluntarily
settle or consent to the settlement of any prospective or pending condemnation
proceedings with respect to the Project or any portion thereof without the
written consent of the Company.
Any provisions of this Agreement to the contrary notwithstanding, the
Company shall be entitled to receive, keep and retain that portion of the
proceeds of any condemnation award made for damages to or taking of its own
property other than the Project subject to the rights of the Bank under the
Credit Agreement.
SECTION 4.15. AFTER-ACQUIRED PROPERTY AS PART OF THE PROJECT. All Property
comprising a part of the Project and all other buildings, structures,
improvements, furnishings, machinery, equipment and other property which shall
be constructed, placed or installed in or upon the Project Site as a
substitution for or in renewal or replacement of, any buildings, structures,
improvements, furnishings, machinery, equipment or other property constituting
part of the Project and financed with proceeds of the 1998 Series Bonds, shall
become a part of the Project. All other additions and improvements to the
Project which are constructed, placed or installed by the Company in or upon the
Project or the Project Site after the Completion Date, the cost of which is
financed from sources other than Bonds, shall remain the property of the Company
and may be altered, removed, replaced or otherwise used by the Company at any
time subject to the terms and provisions of the Credit Agreement.
SECTION 4.16. LETTER OF CREDIT.
(a) The Letter of Credit shall be delivered to the Trustee simultaneously
with the issuance and delivery of the 1998 Series Bonds. The Letter of Credit
shall be an obligation of the Bank to pay to the Trustee, against presentation
of a certificate required by the Bank, up to (1) an amount equal to the
aggregate principal amount of the 1998 Series Bonds then outstanding to be used
to pay the principal of the 1998 Series Bonds, whether at maturity or upon
redemption or acceleration, (2) plus an amount equal to at least 210 days'
interest on the 1998 Series Bonds (calculated at the rate or rates of interest
on the 1998 Series Bonds), and (3) plus an amount of Make-Whole Premium equal to
$1,600,000.00. Further, the Letter of Credit shall terminate on the earliest of
(A) 5:00 p.m., Central Standard Time, on January 30, 2000, or if such day is not
a Business Day, the next following
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Business Day, (B) the date on which there has been a drawing and payment under
the Letter of Credit of the "Stated Amount" of the Letter of Credit in
connection with the maturity, redemption or acceleration of all of the 1998
Series Bonds, or (C) the date following the Bank's receipt of a certificate of
the Trustee stating that the Trustee has received an Alternate Letter of Credit
in accordance with the Indenture.
(b) At any time prior to the termination or expiration of the Letter of
Credit, the Company may, at its option, provide for the delivery to the Trustee
of an Alternate Letter of Credit pursuant to the provisions and subject to the
requirements set forth in Section 11.04 of the Indenture.
SECTION 4.17. CONTINUING DISCLOSURE. The Company hereby represents that
pursuant to the provisions of Securities and Exchange Commission Rule 15c2-
12(d)(1), the 1998 Series Bonds are exempt from the provisions of said Rule
15c2-12.
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ARTICLE V
SPECIAL COVENANTS
SECTION 5.01. NO WARRANTY AS TO SUITABILITY OF PROJECT BY ISSUER. The
Issuer makes no warranty, either express or implied, as to the actual or
designed capacity of the Project, as to the suitability of the Project for the
purposes specified in this Agreement, as to the condition of the Project, or
that the Project will be suitable for the Company's purposes or needs.
SECTION 5.02. CONTINUATION OF EXISTENCE OF COMPANY. The Company covenants
that it will maintain its existence in its present form, will not dissolve or
otherwise dispose of all or substantially all its assets and will not
consolidate with or merge into another person or permit one or more other
persons (other than a subsidiary) to consolidate with or merge into it (unless
the Company shall be the surviving or continuing person); provided, however,
that, if no Event of Default hereunder shall have occurred and be continuing,
and if the Issuer shall consent thereto in writing, the Company may consolidate
with or merge into another person, or permit one or more other persons to
consolidate with or merge into it, or sell or otherwise transfer to another
person all or substantially all its assets as an entirety and thereafter
dissolve if the successor person or transferee has a net worth at least equal to
that of the Company prior to such transaction, and, if such successor is not the
Company, assumes in writing all the obligations of the Company herein, and is
duly qualified to do business in the State. Upon any consolidation or merger,
or any conveyance or transfer of the assets of the Company substantially as an
entirety in accordance with this Section 5.02, the successor Company formed by
such consolidation or into which the Company is merged or to which such
conveyance or transfer is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Agreement with the
same effect as if such successor Company had been named as the Company herein.
In the event of any such conveyance or transfer, the Company as the
predecessor person may be dissolved, wound up and liquidated (if applicable) at
any time thereafter.
If a consolidation, merger or sale or other transfer is made as permitted
by this Section 5.02, the provisions of this Section 5.02 shall continue in full
force and effect and no further consolidation, merger or sale or other transfer
shall be made except in compliance with the provisions of this Section 5.02 and
Section 6.01 hereof.
SECTION 5.03. COVENANT BY THE COMPANY TO LEAVE PROJECT FREE OF OTHER LIENS
OR ENCUMBRANCES. The Company covenants that it shall not create or suffer to be
created any lien, charge or encumbrance on the Project or any part thereof,
except Permitted Encumbrances.
SECTION 5.04. AGREEMENT TO COOPERATE. In the event it may be necessary for
the proper performance of this Agreement, or for the exercise of any rights
hereunder, on the part of the Issuer or the Company that any application or
applications for any permit or license or authorization to do or to perform
certain things be made to any governmental or other agency by the Company or the
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Issuer, or both, the Company and the Issuer each agree to execute and prosecute
upon the request of the other such application or applications.
SECTION 5.05. COVENANT BY ISSUER TO MAINTAIN PRESENT STATUS. The Issuer
will use its best efforts to maintain, preserve and renew all the rights,
powers, privileges and franchises owned by it; and will comply with all valid
acts, rules, regulations, orders and directions of any legislative, executive,
administrative or judicial body applicable to the Project and the Project Site.
The Issuer further covenants that it will not take or fail to take any action
that would result in the loss of any exemption from taxes which it presently
enjoys or to which it may subsequently become entitled.
SECTION 5.06. QUALIFICATION IN MISSISSIPPI. Subject to Section 5.02
hereof, the Company warrants that it is and throughout the term of this
Agreement will continue to be duly qualified to do business in the State.
SECTION 5.07. NOTICE OF DEFAULT. Within three (3) Business Days of any
officer of the Company obtaining actual knowledge of the occurrence of any Event
of Default hereunder or under the Indenture or any event which, with the passage
of time or the giving of notice would constitute such an Event of Default, the
Company shall notify the Trustee, the Bank and the Issuer of such Event of
Default, which notice shall specify the nature and period of existence thereof.
SECTION 5.08. ACKNOWLEDGMENTS OF ISSUER AND COMPANY WITH RESPECT TO FEDERAL
INCOME TAX MATTERS. The Issuer and the Company acknowledge that the 1998 Series
Bonds are being issued as taxable bonds and interest thereon should be treated
as includable in the gross income of the holders thereof for federal income tax
purposes.
SECTION 5.09. COMPANY APPROVAL OF INDENTURE. The Company has reviewed the
Indenture and the 1998 Series Bonds and the Company hereby approves the form of
the Indenture and the 1998 Series Bonds and covenants that it will faithfully
perform at all times any and all covenants, undertakings, stipulations and
provisions contained in the Indenture, in the 1998 Series Bonds authenticated
and delivered thereunder and in all proceedings of the Issuer pertaining
thereto, on its part to be observed or performed, whether express or implied.
SECTION 5.10. TITLE COVENANTS. The Company covenants that the Project and
each component thereof including the Project Site is free from all encumbrances
except for Permitted Encumbrances, that lawful seisin of and good right to
encumber the Project and each component thereof including the Project Site is
vested in the Company, and that the Company hereby fully warrants the title to
the Project and each component thereof subject to Permitted Encumbrances
including the Project Site and will defend the same against the lawful claims of
all persons whomsoever.
SECTION 5.11. COVENANT AGAINST WASTE. The Company will not permit or
commit any waste on the Project Site and will keep the Building and the
Equipment therein in good repair, and
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promptly comply with all laws, ordinances, regulations, and requirements of any
governmental body affecting the Project Site.
SECTION 5.12. ENVIRONMENTAL COVENANTS. The Company covenants that, to the
best of its knowledge, no portion of the Project contains any matter or
substance which has or may cause or result in any material violation of local,
federal or State environmental laws, rules or regulations or which may result in
any material liability or obligation being imposed on the Project, the Company,
the Issuer, the Bank or the Trustee under or pursuant to such laws, rules or
regulations. In addition, the Company covenants, at its own expense, to
materially comply with all existing or hereafter enacted local, federal or State
environmental cleanup responsibility laws, rules and regula tions.
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ARTICLE VI
ASSIGNMENT, LEASE AND SALE; PROJECT NOT SECURITY
SECTION 6.01. DISPOSAL OF PROJECT AND ASSETS BY COMPANY. The Project may
be sold or leased, as a whole or in part, without the necessity of obtaining the
consent of either the Issuer or the Trustee; provided, however, that no such
assignment, sale or lease shall violate any provisions of the Act; provided
further, however, that no such assignment, sale or lease shall relieve the
Company of any of its then applicable obligations under this Agreement.
SECTION 6.02. ASSIGNMENT BY ISSUER. The Issuer may assign its rights
(except its right to receive payments pursuant to Section 4.03 and Section 4.11
of this Agreement) under, and interest in, this Agreement, and may pledge and
assign all loan payments and receipts and revenues receivable under or pursuant
to this Agreement, any moneys receivable by the Issuer due to other payments and
income earned by the investment of funds held under the Indenture for the Cost
of the Project and otherwise, as provided herein and in the Indenture, to the
Trustee pursuant to the Indenture as security for payment of the principal of,
Make-Whole Premium, if applicable, and interest on the Bonds, but such
assignment or pledge shall be subject to this Agreement. Except as provided in
this Section 6.02, the Issuer will not sell, assign, transfer, convey or
otherwise dispose of the loan payments, receipts and the revenues during the
term of this Agreement and will not, without the written consent of the Company
create or suffer to be created any lien, charge or encumbrance thereon other
than those consented to by the Company, or arising from the action or inaction
of, the Company.
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ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 7.01. EVENTS OF DEFAULT. The following shall be "events of
default" under this Agreement, and the terms "event of default" or "default"
shall mean, whenever they are used in this Agreement, any one or more of the
following events:
(a) failure by the Company to pay or cause to be paid when due any loan
payment required to be paid under Section 4.02 hereof and the Note;
(b) failure by the Company to pay when due any payment required to be made
under this Agreement other than loan payments under Section 4.02 hereof, which
failure shall continue for a period of thirty (30) days after written notice,
specifying such failure and requesting that it be remedied, is given to the
Company by the Issuer or the Trustee, as the case may be;
(c) failure by the Company to observe and perform in any material way any
covenant, condition or agreement on its part to be observed or performed as set
forth herein, other than as referred to in subsections (a) and (b) of this
Section 7.01, which failure shall not be cured to the satisfaction of the Issuer
and the Trustee within the earlier of ten (10) days after actual knowledge
thereof by the Company or written notice, specifying such failure and requesting
that it be remedied, is given to the Company by the Issuer or the Trustee, as
the case may be;
(d) any written representation or written warranty made by the Company in
or with respect to this Agreement shall prove to have been false in any material
respect at the time of execution by the Company of this Agreement;
(e) the occurrence of an event of default under the Note or the Indenture;
(f) the Company shall commence a voluntary case or other proceeding in
bankruptcy or seeking liquidation, reorganization, arrangement, readjustment of
its debts or for any other relief under the federal bankruptcy laws, as amended,
or under any other insolvency act or law, state or federal, now or hereafter
existing, or shall take any other action indicating its consent to, approval of,
or acquiescence in any such case or proceedings, and said proceeding is not
dismissed within thirty (30) days after the commencement thereof; the Company
shall apply for, or consent to or acquiesce in the appointment of a receiver,
liquidator, custodian, sequestrator, or a trustee for all or a substantial part
of its property; the Company shall make an assignment for the benefit of its
creditors; or the Company shall fail, or shall admit in writing its failure, to
pay its debts generally as such debts become due; or
(g) there shall be filed against the Company an involuntary petition in
bankruptcy or seeking liquidation, reorganization, arrangement, readjustment of
its debts or any other relief under the federal bankruptcy laws, as amended, or
under any other insolvency act or law, state or federal,
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now or hereafter existing, and such petition is not set aside within thirty (30)
days after such filing; or a receiver, liquidator, custodian, sequestrator, or
trustee of the Company for all or a substantial part of its property shall be
appointed without the consent or approval of the Company or a warrant of
attachment, execution or similar process against any substantial part of the
property of the Company is issued; and the continuance of any of such events for
thirty (30) days undismissed or undischarged or within such thirty (30) days,
the entering of an order for relief under the United States Bankruptcy Code.
The foregoing provisions of subsection (c) of this Section 7.01 are subject
to the following limitations: if by reason of acts of God; strikes, lockouts or
other industrial disturbances; acts of public enemies; orders of any kind of the
Government of the United States of America or of the State or any department,
agency, political subdivision or official of either of them, or any civil or
military authority; insurrections; riots; epidemics; lightning; earthquakes;
fires; hurricanes; storms; floods; washouts; droughts; arrests; restraint of
government and people; civil disturbances; explosions; breakage or accident to
machinery; partial or entire failure of utilities; or any cause or event not
reasonably within the control of the Company, the Company is unable in whole or
in part to carry out its agreements herein contained, other than the obligations
on the part of the Company contained in Sections 4.02, 4.03, 4.06, 4.12 and 5.02
hereof, the Company shall not be deemed in default during the continuance of
such inability. The Company agrees, however, to use its best efforts to remedy
with all reasonable dispatch the cause or causes preventing it from carrying out
its agreements; provided, that the settlement of strikes, lockouts and other
industrial disturbances shall be entirely within the discretion of the Company,
and the Company shall not be required to make settlements of strikes, lockouts
and other industrial disturbances by acceding to the demands of the opposing
party or parties when such course is in the judgment of the Company unfavorable
to the Company. Any failure of the Company to perform its obligations under
Sections 4.02, 4.03, 4.06, 4.12 and 5.02 hereof shall constitute an Event of
Default as set forth in subsections (a), (b) and (c) above regardless of the
reason for such failure to perform.
SECTION 7.02. REMEDIES. Whenever any Event of Default referred to in
Section 7.01 hereof shall have occurred and be continuing, any one or more of
the following remedial steps may be taken; provided that written notice of the
default has been given to the Company by the Issuer or the Trustee and the
default has not theretofore been cured; and provided further that no remedial
steps shall be taken by the Issuer the effect of which would be to entitle the
Issuer to provide funds necessary for the payment of principal and interest on
Bonds which have not yet matured unless such principal and interest shall have
been declared due and payable in accordance with the Indenture and such
declaration shall not have been rescinded.
(a) If acceleration of the principal amount of the 1998 Series Bonds has
been declared or has occurred pursuant to Sections 10.01 and 10.02 of the
Indenture, the Issuer shall declare all unpaid loan payments and amounts due
under the Note, together with interest then due thereon, to be immediately due
and payable, whereupon the same shall become immediately due and payable.
36
<PAGE>
(b) The Issuer and the Trustee may take any action at law or in equity to
enforce this Agreement, to collect the payments then due and thereafter to
become due, or to enforce performance and observance of any obligation,
agreement or covenant of the Company under this Agreement or the Note.
SECTION 7.03. NO REMEDY EXCLUSIVE. No remedy conferred upon or reserved
to the Issuer by this Agreement is intended to be exclusive of any other
available remedy or remedies, but each and every such remedy shall be cumulative
and shall be in addition to every other remedy given under this Agreement or now
or hereafter existing at law or in equity or by statute. No delay or omission to
exercise any right or power accruing upon any default shall impair any such
right or power or shall be construed to be a waiver thereof, but any such right
and power may be exercised from time to time and as often as may be deemed
expedient. In order to entitle the Issuer to exercise any remedy reserved to it
in this Article VII, it shall not be necessary to give any notice, other than
such notice as may be herein expressly required.
SECTION 7.04. PAYMENT OF FEES AND EXPENSES. If the Company shall default
under any of the provisions of this Agreement and the Issuer, the Bank or the
Trustee shall employ attorneys or incur other expenses for the collection of the
loan payments or for the enforcement of performance or observance of any
obligation or agreement on the part of the Company contained in this Agreement,
the Company will on demand therefor pay the reasonable fees and expenses of the
Issuer, the Bank, the Trustee and their attorneys as they are incurred including
all fees of counsel including those incurred for negotiation, trial, appeals of
ruling of any lower tribunals, administrative hearings, bankruptcy and creditors
reorganization proceedings.
SECTION 7.05. EFFECT OF WAIVER. In the event any agreement contained
in this Agreement shall be breached and such breach shall thereafter be waived,
such waiver shall be limited to the particular breach so waived and shall not be
deemed to waive any other breach hereunder. In view of the assignment of the
Issuer's rights (except the rights of the Issuer to receive payments of
Administration Expenses under Section 4.03 of this Agreement, indemnification
under Section 4.11 of this Agreement and fees and expenses under Section 7.04 of
this Agreement) in and under this Agreement to the Trustee pursuant to the
Indenture, the Issuer shall have no power to waive any default hereunder by the
Company without the consent of the Trustee to such waiver.
37
<PAGE>
ARTICLE VIII
ACCELERATION OF LOAN PAYMENTS; SURVIVAL OF OBLIGATION
SECTION 8.01. ACCELERATION OF LOAN PAYMENTS. Loan payments and amounts
due under the Note shall be accelerated prior to the maturity of the Bonds if
the Bonds shall be subject to redemption pursuant to Section 2.03 of the
Indenture. In such case, the total amount due shall be the sums required
pursuant to Section 2.03 of the Indenture as applicable, including any premium
thereon, if any, and on the dates required by Section 2.03 of the Indenture.
SECTION 8.02. SURVIVAL OF OBLIGATION. All of the Company's
representations and covenants herein shall survive the payment (or deemed
payment) of all of the amounts specified in Section 4.02(a), (b) and (c) hereof
and the performance of all other obligations under this Agreement, the Indenture
and the Bonds.
38
<PAGE>
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. EXCESS PAYMENTS. Any amounts remaining in the Bond Fund and
other funds established under the Indenture after payment in full of the Bonds
(including interest and premiums, if any, thereon, and all other payments
required under the Indenture and this Agreement) or provision for payment
thereof having been made in accordance with the provisions of the Indenture, and
payment of all other reasonable and necessary obligations incurred by the Issuer
to pay for the Cost of the Project, including interest, premiums and other
charges, if any, thereon, and the payment of Administration Expenses, shall
belong to and be paid to the Company by the Trustee provided, however, that such
balance shall be first paid to the Bank to the extent of any amount owing from
the Company to the Bank under the Credit Agreement.
SECTION 9.02. TAX EXEMPTIONS. The Company may take action to secure
certain ad valorem tax and sales tax exemptions available under Section 57-10-
255 of the Act as well as under other provisions of the Mississippi Code of
1972, as amended. The Issuer will assist the Company in securing said tax
exemptions.
SECTION 9.03. NOTICES. All notices, certificates, requests or other
communications hereunder shall be sufficiently given and shall be deemed given
when mailed by registered or certified mail, return receipt requested (except as
otherwise specified herein and in the Indenture), postage prepaid, addressed as
set forth in Annex A. A duplicate copy of each notice, certificate, request or
other communication given hereunder to the Issuer, the Company, the Trustee or
the Bank shall also be given to the others. The Company, the Issuer, the Bank
and the Trustee may, by notice given under this Section 9.03, designate any
further or different addresses to which subsequent notices, certificates,
requests or other communications shall be sent.
SECTION 9.04. PARTIES INTERESTED. This Agreement shall inure to the
benefit of the Issuer, the Bank, the Company, the Trustee and the holders from
time to time of the Bonds, and shall be binding upon the Issuer, the Company and
their respective successors and assigns, subject to the limitation that any
obligation or liability of the Issuer created by or arising out of this
Agreement shall not be a general debt of the Issuer, but shall be payable by the
Issuer solely out of the proceeds derived from this Agreement or the sale of the
Bonds or income earned on invested funds as provided herein or in the Indenture.
No covenant, stipulation, obligation or agreement contained in the Bonds,
the Indenture or this Agreement shall be deemed or construed to be a covenant,
stipulation, obligation or agreement of any present or future member, agent, or
employee of the Issuer in his individual capacity, and neither the present or
future members of the Issuer nor any official executing the Bonds shall be
liable personally, for any breach or non-observance or failure to comply with
the above mentioned covenants, stipulations, obligations, or on the Bonds or be
subject to any personal liability or accountability by reason of the issuance
thereof or by reason of the said covenants, stipulations, obligations or
agreements, above mentioned. Nothing in the provisions of the Indenture or this
Agreement or the Bonds shall obligate the Issuer, or any member, agent or
employee thereof to expend any funds other than those available therefor, which
are derived exclusively from the sale
39
<PAGE>
of said Bonds or from the Company or Trustee under the terms and provisions of
this Agreement and the Indenture or those derived from the loan payments from
the Company. No present or future member, agent or employee of the Issuer shall
incur any personal liability in acting or proceeding or in not acting or
proceeding, in good faith, reasonably, under the provisions of the Bonds or the
Indenture or this Agreement. If in or by or as a result of the execution of the
Bonds or of the Indenture or this Agreement or any other document in connection
with this transaction or any other related transaction, the Issuer or any
member, agent or employee thereof shall become obligated in excess of or
contrary to the provisions of the statutory authority granted by the Act then
such excess or contrary obligation shall not be binding on or enforceable
against the Issuer or any present or future member, agent, employee or official
thereof.
SECTION 9.05. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which, when so executed and delivered, shall be an
original; but such counterparts shall together constitute but one and the same
Agreement.
SECTION 9.06. SEVERABILITY OF INVALID PROVISIONS. If any clause,
provision or section of this Agreement be held illegal or invalid by any court,
the invalidity of such clause, provision or section shall not affect any of the
remaining clauses, provisions or sections hereof, and this Agreement shall be
construed and enforced as if such illegal or invalid clause, provision or
section had not been contained herein.
SECTION 9.07. GOVERNING LAW. This Agreement shall be governed as to
validity, construction and performance by the laws of the State.
40
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written on the cover page
hereof.
(SEAL) MISSISSIPPI BUSINESS FINANCE
CORPORATION
Attest
________________________ By________________________
Secretary Executive Director
(SEAL) HALTER MARINE GROUP, INC.
Attest
By By
---------------------- ------------------------
Title___________________ Title___________________
41
<PAGE>
ANNEX A
TO
LOAN AGREEMENT
If to the Issuer - Mississippi Business Finance Corporation
1306 Walter Sillers Building
Post Office Box 849
Jackson, Mississippi 39201
If to the Company - Halter Marine Group, Inc.
13085 Seaway Road
Gulfport, Mississippi 39505
If to the Trustee - SouthTrust Bank, National Association
100 Office Park Drive
Lower Level
Birmingham, Alabama (35223)
Post Office Box 2554
Birmingham, Alabama 35290
If to the Bank - The First National Bank of Chicago
One First National Plaza, Suite 0801
Chicago, Illinois 60670
42
<PAGE>
EXHIBIT A
BUILDING DESCRIPTION
All buildings presently located on the Project Site and all buildings
subsequently located on the Project Site and financed with the proceeds of the
1998 Series Bonds, and all Additional Bonds, and all additions, modifications
and improvements thereto financed with the proceeds of the 1998 Series Bonds and
all Additional Bonds, as they may at any time exist.
43
<PAGE>
EXHIBIT B
THE PROJECT SITE
All real property presently owned by the Company in Jackson County, Mississippi,
Harrison County, Mississippi and Hancock County, Mississippi, and all additional
real property owned by the Company and acquired with the proceeds of the 1998
Series Bonds and all Additional Bonds.
44
<PAGE>
EXHIBIT C
PERMITTED LIENS, CHARGES AND ENCUMBRANCES
1. All Permitted Encumbrances and other allowed liens, charges and
encumbrances under this Agreement and the Credit Agreement.
2. Any prior reservation or conveyance of minerals of every kind and
character, including, but not limited to, oil, gas, sand and gravel,
in, on, and under the Project Site.
3. Any lien, or right to a lien, for services, labor or material
heretofore or hereafter furnished, imposed by law and not shown by the
public records.
4. Encroachments, variation in area or in measurements, boundary line
disputes, roadways and matters not of record, including lack of
access, which would be disclosed by accurate survey and inspection of
the Project Site.
5. Easements or other uses of the Project Site not visible from the
surface, or easements or claims of easements, not shown by the public
records.
45
<PAGE>
EXHIBIT D
HALTER MARINE GROUP, INC.
PROMISSORY NOTE
Date: March __, 1998 $30,000,000
No. 1
FOR VALUE RECEIVED Halter Marine Group, Inc., a corporation organized and
existing under the laws of the State of Delaware (the "Company"), hereby
promises to pay to the order of the Mississippi Business Finance Corporation
(the "Issuer") or its assigns, the principal sum of $30,000,000 together with
interest on the unpaid principal balance thereof from the date hereof until
fully and finally paid, together with Make-Whole Premium (as defined in the
Indenture, as hereinafter defined), if applicable, together with all taxes
levied or assessed on this Note or the debt evidenced hereby against the holder
hereof and all other amounts payable by the Company under the Agreement (as
hereinafter defined). This Note shall bear interest at the prevailing rate or
rates of interest on the Bonds (as hereinafter defined) except as otherwise
provided hereunder.
This Note has been executed under and pursuant to a Loan Agreement, dated
as of January 1, 1998, between the Issuer and the Company (the "Agreement")
which Agreement is incorporated herein in its entirety by reference. This Note
is issued to evidence the obligation of the Company under the Agreement to repay
the loan made by the Issuer from the proceeds of its $30,000,000 Taxable Revenue
Bonds, Series 1998 (Halter Marine Group, Inc. Project) (the "Bonds"), together
with interest thereon at the interest rate or rates as defined and set forth in
the Indenture (as hereinafter defined), Make-Whole Premium, if applicable, and
all other amounts, fees, penalties, premiums, adjustments, expenses, counsel
fees and other payments of any kind required to be paid by the Company under the
Agreement. The Agreement includes provisions for prepayment of this Note as a
whole or in part as more particularly described in Section 2.03 of the
Indenture. In the event that the terms of this Note conflict with the terms of
the Indenture or the Agreement the terms of the Indenture or the Agreement shall
control.
The Agreement and this Note have been or will be assigned to SouthTrust
Bank, National Association, as Trustee (the "Trustee") pursuant to an Indenture,
dated as of January 1, 1998, by and between the Issuer and the Trustee (the
"Indenture"). Such assignment is made as security for the payment of the Bonds
issued by the Issuer pursuant to the Indenture.
As provided in the Agreement and subject to the provisions thereof,
payments hereon are to be made at the Corporate Trust Office of the Trustee in
an amount which, together with other
46
<PAGE>
moneys available therefor pursuant to the Indenture, will equal the amount
payable as principal of, Make-Whole Premium, if applicable, and interest on the
Bonds outstanding on such due date.
The Company shall make payments on this Note on the dates and in the
amounts specified herein and in the Agreement and in addition shall make such
other payments as are required pursuant to the Agreement, the Indenture and the
Bonds. Upon the occurrence of an Event of Default, as defined in the Indenture
or the Agreement, the principal of, Make-Whole Premium, if applicable, and
interest on this Note may be declared immediately due and payable as provided in
the Agreement. Upon any such declaration the Company shall pay all costs,
disbursements, expenses and reasonable counsel fees of the Issuer and the
Trustee in seeking to enforce their rights under the Agreement and this Note.
The Company (a) waives diligence, demand, presentment for payment, notice
of nonpayment, protest and notice of protest and (b) agrees that the time for
payment of this Note may be extended at the sole discretion of the Trustee
without impairing its liability hereon. Any delay on the part of the Issuer or
the Trustee in exercising any right hereunder shall not operate as a waiver of
any such right, and any waiver granted with respect to one default shall not
operate as a waiver in the event of any subsequent or continuing default.
This Note shall be governed and construed in accordance with the laws of
the State of Mississippi.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed in
its name and, if applicable, its corporate seal to be hereunto affixed and
attested to by its duly authorized officers all as of the day and year first
above written.
(SEAL) HALTER MARINE GROUP, INC.
Attest
___________________________ By___________________________
Title______________________ Title________________________
47
<PAGE>
[The following language will be contained on the face of the Note]
ASSIGNMENT
FOR VALUE RECEIVED, pay this Promissory Note to SouthTrust Bank, National
Association, as Trustee under the Indenture herein mentioned, without recourse.
(SEAL) MISSISSIPPI BUSINESS FINANCE
CORPORATION
Dated: March _______, 1998
By____________________________
Executive Director
48
<PAGE>
ACKNOWLEDGMENT OF COMPANY
STATE OF MISSISSIPPI )
) SS:
COUNTY OF HINDS )
Personally appeared before me, the undersigned authority in and for the
said county and state, on this 3rd day of March, 1998, within my jurisdiction,
the within named Keith L. Voigts and Don M. Patterson, respectively, who
acknowledged they are the Senior Vice-President and Treasurer and Vice-
President/Taxation, of Halter Marine Group, Inc., a Delaware corporation, and
that for and on behalf of said corporation and as its act and deed, they
executed the above and foregoing instrument, after first having been duly
authorized by said corporation so to do.
____________________________
Notary Public
(SEAL)
My Commission Expires:
______________________________
49
<PAGE>
ACKNOWLEDGMENT OF ISSUER
STATE OF MISSISSIPPI )
) SS:
COUNTY OF HINDS )
Personally appeared before me, the undersigned authority in and for the
said county and state, on this the 3rd day of March, 1998, within my
jurisdiction, the within named William T. Barry and James Vernon Smith, Sr., who
acknowledged they are the Executive Director and Secretary, respectively, of the
Mississippi Business Finance Corporation, a Mississippi public corporation, and
that for and on behalf of said corporation and as its act and deed, they
executed the above and foregoing instrument, after first having been duly
authorized by said corporation so to do.
_________________________
Notary Public
(SEAL)
My Commission Expires:
- ----------------------
50
<PAGE>
HALTER MARINE GROUP, INC.
PROMISSORY NOTE
Date: March 3, 1998 $30,000,000
No. 1
FOR VALUE RECEIVED Halter Marine Group, Inc., a corporation organized and
existing under the laws of the State of Delaware (the "Company"), hereby
promises to pay to the order of the Mississippi Business Finance Corporation
(the "Issuer") or its assigns, the principal sum of $30,000,000 together with
interest on the unpaid principal balance thereof from the date hereof until
fully and finally paid, together with Make-Whole Premium (as defined in the
Indenture, as hereinafter defined), if applicable, together with all taxes
levied or assessed on this Note or the debt evidenced hereby against the holder
hereof and all other amounts payable by the Company under the Agreement (as
hereinafter defined). This Note shall bear interest at the prevailing rate or
rates of interest on the Bonds (as hereinafter defined) except as otherwise
provided hereunder.
This Note has been executed under and pursuant to a Loan Agreement, dated
as of January 1, 1998, between the Issuer and the Company (the "Agreement")
which Agreement is incorporated herein in its entirety by reference. This Note
is issued to evidence the obligation of the Company under the Agreement to repay
the loan made by the Issuer from the proceeds of its $30,000,000 Taxable Revenue
Bonds, Series 1998 (Halter Marine Group, Inc. Project) (the "Bonds"), together
with interest thereon at the interest rate or rates as defined and set forth in
the Indenture (as hereinafter defined), Make-Whole Premium, if applicable, and
all other amounts, fees, penalties, premiums, adjustments, expenses, counsel
fees and other payments of any kind required to be paid by the Company under the
Agreement. The Agreement includes provisions for prepayment of this Note as a
whole or in part as more particularly described in Section 2.03 of the
Indenture. In the event that the terms of this Note conflict with the terms of
the Indenture or the Agreement the terms of the Indenture or the Agreement shall
control.
The Agreement and this Note have been or will be assigned to SouthTrust
Bank, National Association, as Trustee (the "Trustee") pursuant to an Indenture,
dated as of January 1, 1998, by and between the Issuer and the Trustee (the
"Indenture"). Such assignment is made as security for the payment of the Bonds
issued by the Issuer pursuant to the Indenture.
As provided in the Agreement and subject to the provisions thereof,
payments hereon are to be made at the Corporate Trust Office of the Trustee in
an amount which, together with other moneys available therefor pursuant to the
Indenture, will equal the amount payable as principal of, Make-Whole Premium, if
applicable, and interest on the Bonds outstanding on such due date.
<PAGE>
The Company shall make payments on this Note on the dates and in the
amounts specified herein and in the Agreement and in addition shall make such
other payments as are required pursuant to the Agreement, the Indenture and the
Bonds. Upon the occurrence of an Event of Default, as defined in the Indenture
or the Agreement, the principal of, Make-Whole Premium, if applicable, and
interest on this Note may be declared immediately due and payable as provided in
the Agreement. Upon any such declaration the Company shall pay all costs,
disbursements, expenses and reasonable counsel fees of the Issuer and the
Trustee in seeking to enforce their rights under the Agreement and this Note.
The Company (a) waives diligence, demand, presentment for payment, notice
of nonpayment, protest and notice of protest and (b) agrees that the time for
payment of this Note may be extended at the sole discretion of the Trustee
without impairing its liability hereon. Any delay on the part of the Issuer or
the Trustee in exercising any right hereunder shall not operate as a waiver of
any such right, and any waiver granted with respect to one default shall not
operate as a waiver in the event of any subsequent or continuing default.
This Note shall be governed and construed in accordance with the laws of
the State of Mississippi.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed in
its name and, if applicable, its corporate seal to be hereunto affixed and
attested to by its duly authorized officers all as of the day and year first
above written.
(SEAL) HALTER MARINE GROUP, INC.
ATTEST
___________________________ By____________________________
Title______________________ Title_________________________
ASSIGNMENT
FOR VALUE RECEIVED, pay this Promissory Note to SouthTrust Bank, National
Association, as Trustee under the Indenture herein mentioned, without recourse.
(SEAL) MISSISSIPPI BUSINESS FINANCE
CORPORATION
Dated: March 3, 1998
By____________________________
Executive Director
2
<PAGE>
EXHIBIT 10.11
HALTER MARINE GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
<PAGE>
CERTIFICATE
I, ____________________, Secretary of Halter Marine Group, Inc., hereby
certify that the attached document is a correct copy of the Halter Marine Group,
Inc. Nonqualified Deferred Compensation Plan effective as of April 1, 1998.
Dated this ______ day of ____________, 1998.
_____________________________
Secretary as Aforesaid
(Corporate Seal)
<PAGE>
HALTER MARINE GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
Page
Article 1 Introduction................................................ 1
1.1 History and Purpose of the Plan, Effective Date....... 1
1.2 Plan Administrator, Plan Year......................... 1
1.3 The Employers......................................... 1
1.4 Supplements........................................... 2
Article 2 Plan Participation.......................................... 2
2.1 Eligibility........................................... 2
2.2 Adopting Subsidiaries................................. 3
2.3 Cessation of Active Participation..................... 3
Article 3 Participants' Accounts; Deferrals and Crediting............. 4
3.1 Participants' Accounts................................ 4
3.2 Deferral Contributions................................ 4
3.3 Deferral Election..................................... 5
3.4 Matching Contributions................................ 7
3.5 Discretionary Contributions........................... 7
3.6 Debiting of Distributions............................. 7
3.7 Crediting of Earnings or Losses on Contributions...... 7
3.8 Errors in Accounts.................................... 8
Article 4 Investment Funds............................................ 8
4.1 Selection by Benefits Committee....................... 8
4.2 Participant Direction of Deemed Investments........... 8
Article 5 Payment of Account Balances................................. 9
5.1 Benefit Payments Upon Termination of Service for
Reasons Other Than Death.............................. 9
5.2 Form of Distribution.................................. 10
5.3 Death Benefits........................................ 11
5.4 In-Service Distributions.............................. 12
5.5 Beneficiary Designation............................... 13
<PAGE>
Article 6 Claims...................................................... 14
6.1 Initial Claim......................................... 14
6.2 Appeal................................................ 14
6.3 Satisfaction of Claims................................ 15
Article 7 No Funding of Plan Benefits................................. 15
Article 8 Benefits Committee.......................................... 15
8.1 Benefits Committee's Duties........................... 15
8.2 Action by Plan Administration......................... 16
8.3 Information Required for Plan Administration.......... 17
8.4 Decision of Benefits Committee Final.................. 17
8.5 Interested Benefits Committee Member.................. 17
8.6 Indemnification....................................... 17
Article 9 Relating to the Employers................................... 18
9.1 Action by Employers................................... 18
9.2 Additional Employers.................................. 18
Article 10 Amendment and Termination.................................... 18
10.1 Amendment............................................. 18
10.2 Termination........................................... 19
10.3 Distribution on Termination........................... 19
Article 11 General Provisions........................................... 20
11.1 Notices............................................... 20
11.2 Nonalienation of Plan Benefits........................ 20
11.3 Payment with Respect to Incapacitated Persons......... 20
11.4 No Employment or Benefit Guaranty..................... 20
11.5 Litigation............................................ 20
11.6 Headings.............................................. 21
11.7 Evidence.............................................. 21
11.8 Gender and Number..................................... 21
11.9 Waiver of Notice...................................... 21
11.10 Applicable Law........................................ 21
11.11 Severability.......................................... 21
11.12 Withholding for Taxes................................. 21
11.13 Successors............................................ 21
11.14 Effect on Other Employee Benefit Plans................ 21
-ii-
<PAGE>
HALTER MARINE GROUP, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
Article 1
Introduction
1.1 History and Purpose of the Plan, Effective Date. Halter Marine Group,
Inc. (the "Company") has had in effect since January 1, 1997, the Supplemental
Profit Sharing Plan for Employees of Halter Marine Group, Inc. and Certain
Affiliates. This document represents a complete amendment and restatement of
such plan into the Halter Marine Group, Inc. Nonqualified Deferred Compensation
Plan (the "Plan"), effective as of April 1, 1998 (the "Effective Date"), with
respect to employees who have not yet retired, terminated employment or died as
of such date. The rights of anyone covered under the Plan prior to the
Effective Date, who retired, terminated employment or died before that date,
shall be determined in accordance with the terms and provisions of the Plan in
effect immediately prior to the Effective Date, except as otherwise specifically
provided herein. The purpose of the Plan on and after the Effective Date is to
provide certain Eligible Employees (as defined in Section 2.1) with an
opportunity (i) to defer the receipt and income taxation of a portion of such
employees' annual compensation, (ii) to receive, on a deferred basis, matching
contributions made with respect to at least a portion of such employees' own
deferrals, and (iii) to receive, on a deferred basis, discretionary employer
contributions. The Plan is intended to be a plan that is unfunded and that is
maintained primarily for the purpose of providing deferred compensation to a
select group of management or highly compensated employees.
1.2 Plan Administrator, Plan Year. The Plan is administered by the Halter
Marine Group, Inc. Benefits Committee (the "Benefits Committee") which is
appointed by the Board of Directors of the Company. Prior to the Effective
Date, the Plan was administered on the basis of a Plan Year (the "Plan Year")
which corresponded with the Company's fiscal year. As of the Effective Date,
the Plan Year will be the calendar year except for the short Plan Year beginning
on the Effective Date and ending on December 31, 1998. Article 8 describes
certain specific powers, duties and responsibilities of the Benefits Committee
with respect to the administration of the Plan.
1.3 The Employers. Each Subsidiary of the Company which was an Employer
under the Plan immediately prior to the Effective Date will continue as an
adopting Employer in accordance with the terms of the Plan. With the consent of
the Company, the Plan may be adopted in accordance with the provisions of
Section 9.2 by any other Subsidiary of the Company for the benefit of its
Eligible Employees. For this purpose, a "Subsidiary" means any corporation more
than 50 percent of the voting stock of which is directly or indirectly owned by
the Company. The Company and its Subsidiaries that adopt the Plan are referred
to herein collectively as the "Employers" and individually as an "Employer".
<PAGE>
1.4 Supplements. From time to time supplements may by amendment be
attached to and form a part of this Plan. Such supplements may modify or
supplement the provisions of the Plan as they apply to particular groups of
Eligible Employees (as defined in Section 2.1) or groups of Participants (as
defined in Section 2.1), shall specify the person affected by such supplements
and shall supersede the other provisions of the Plan to the extent necessary to
eliminate inconsistencies between the Plan provisions and the provisions of such
supplements.
Article 2
Plan Participation
2.1 Eligibility. Each Eligible Employee who was an active Participant
under the Plan immediately prior to the Effective Date shall continue as an
active Participant in accordance with the terms of the Plan. Each Eligible
Employee on the Effective Date who was not an active Participant immediately
prior to the Effective Date shall become an active Participant in the Plan as of
the Effective Date. Each other Eligible Employee shall become an active
Participant in the Plan as of the date he is notified by the Benefits Committee
that he has been selected by the Benefits Committee to become a Plan
Participant. The Benefits Committee shall consider such factors as it, in its
sole discretion, considers pertinent in selecting Eligible Employees to
participate in the Plan. "Eligible Employee" means, for a Plan Year or portion
of a Plan Year, an individual:
(a) who is an employee of an Employer, exclusive of any employee who
provides services to an Employer under a contract or arrangement with
either the individual or with an agency or leasing organization that treats
the individual as either an individual contractor or an employee of such
agency or leasing organization, even if such individual is later determined
to have been a common law employee of the Employer rather than an
independent contractor or an employee of such agency or leasing
organization;
(b) who is a member of a select group of management or highly
compensated employees; and
(c) either (i) who, for such Plan Year, is a highly compensated
employee under Section 414(q) of the Internal Revenue Code of 1986, as
amended (the "Code"), or has satisfied such other minimum compensation or
other classification requirements established from time to time by the
Benefits Committee, or (ii) who otherwise is designated by the Benefits
Committee, in its sole discretion, as eligible to participate in the Plan.
"Participant" means any individual who has been admitted to, and has not been
removed from, participation in the Plan pursuant to this Article 2. A
Participant must complete such forms and
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provide such data in a timely manner as is required by the Benefits Committee.
Such forms and data may include, without limitation, his acceptance of the terms
and conditions of the Plan and his designation of a beneficiary to receive any
death benefits payable hereunder.
2.2 Adopting Subsidiaries. For employees of Subsidiaries that become
Employers after the Effective Date, each Eligible Employee employed by an
Employer on the date such Employer first becomes an Employer shall become a
Participant in the Plan as of such Employer's effective date under the Plan.
Each other Eligible Employee of such Employer shall become a Participant in the
Plan in accordance with Section 2.1.
2.3 Cessation of Active Participation.
(a) Cessation of Eligible Status. A Participant's active
participation in the Plan shall cease as of the date his employment with all
Employers terminates. In addition, the Benefits Committee may remove a
Participant from active participation in the Plan if, as of any day during a
Plan Year, he ceases to satisfy the criteria which qualified him as an Eligible
Employee. Upon cessation of, or removal from, active participation in the Plan,
a Participant's deferrals under the Plan shall cease.
(b) Inactive Participant Status. Even if his active participation in
the Plan ends, an employee shall remain an inactive Participant in the Plan
until the earlier of (i) the date the full amount of his Plan Accounts (as
defined in Section 3.1) is distributed from the Plan, or (ii) the date he again
becomes an Eligible Employee and recommences participation in the Plan. During
the period of time that an employee is an inactive Participant in the Plan, his
Plan Accounts shall continue to be credited with earnings and losses pursuant to
the terms of Section 3.7, and he shall continue to be eligible to direct the
manner in which his Accounts shall be deemed invested pursuant to Section 4.2.
(c) Participation after Reemployment. If an Eligible Employee
terminates employment with all Employers (either before or after he becomes a
Participant) and then is reemployed as an Eligible Employee by an Employer, he
shall become eligible to participate or to recommence his participation in the
Plan as of the date, on or after his reemployment date, that he is notified by
the Benefits Committee that he has been reselected by the Benefits Committee to
become a Plan Participant.
(d) Application of ERISA. It is the intent of the Employers that the
Plan be exempt from Parts 2, 3, and 4 of Subtitle B of Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), as an unfunded
plan that is maintained by an Employer primarily for the purpose of providing
deferred compensation for a select group of management or highly compensated
employees (the "ERISA exemption"). Notwithstanding anything to the contrary in
this Article 2 or in any other provision of the Plan, the Benefits Committee may
in its sole discretion exclude any one or more Eligible Employees from
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eligibility to participate or from participation in the Plan, may exclude any
Participant from continued participation in the Plan, and may take any further
action it considers necessary or appropriate if the Benefits Committee
reasonably determines in good faith that such exclusion or further action is
necessary in order for the Plan to qualify for, or to continue to qualify for,
the ERISA exemption.
Article 3
Participants' Accounts; Deferrals and Crediting
3.1 Participants' Accounts. The Benefits Committee shall establish and
maintain on behalf of each Participant the following separate bookkeeping
accounts (an "Account") under the Plan:
(i) Deferral Contribution Account. If the Participant was a
Participant immediately prior to the Effective Date, his "Salary Reduction
Contribution Account" under the Plan as in effect immediately prior to the
Effective Date shall be renamed his "Deferral Contribution Account." Each
other Participant shall have a "Deferral Contribution Account" maintained
on his behalf under the Plan. With respect to any Participant, this
Account shall represent the amount of his Deferral Contributions (as
defined in Section 3.2) and earnings or losses attributable thereto.
(ii) Employer Contribution Account. If the Participant was a
Participant immediately prior to the Effective Date, his "Employer
Contribution Account" under the Plan as in effect immediately prior to the
Effective Date shall continue to be maintained on his behalf under the
Plan. Each other Participant shall have an "Employer Contribution Account"
maintained on his behalf under the Plan. With respect to any Participant,
this Account shall represent the amount of his Matching Contributions (as
defined in Section 3.4), his Discretionary Contributions (as defined in
Section 3.5), if any, and earnings or losses attributable thereto.
The Benefits Committee, in its discretion, may also establish and maintain such
additional separate bookkeeping accounts for the Participant as it shall deem
desirable. Participants shall at all times from and after the Effective Date
have 100 percent vested interests in their Accounts. Each Account of a
Participant shall be maintained until the value thereof has been distributed to
or on behalf of such Participant or his beneficiary.
3.2 Deferral Contributions. Each Participant may irrevocably elect to
have Deferral Contributions made on his behalf for a Plan Year by completing and
submitting to the Benefits Committee (or its designee) a Deferral Election (as
defined in Section 3.3) setting forth the terms of his election. A "Deferral
Contribution" means that portion of a Participant's Net Base Salary and Net
Bonus that the Participant elects to defer receipt of, in lieu of receiving such
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compensation currently. "Net Base Salary" means the Participant's annual base
salary from his Employer for the Plan Year, net of employment tax deductions,
wage withholding and any other payroll deductions, paid or payable in a regular
salary paycheck while an active Participant in the Plan. "Net Bonus" means the
Participant's annual bonus, if any, from his Employer for the Employer's fiscal
year, net of employment tax deductions, wage withholding and any other payroll
deductions, paid or payable in a bonus paycheck while an active Participant in
the Plan. A Participant may elect to defer, through pay reduction each payroll
period, no less than two percent nor more than 100 percent, in whole
percentages, of his Net Base Salary for such payroll period and may elect to
defer, through pay reduction each annual bonus period, no less than one percent
nor more than 100 percent, in whole percentages, of his Net Bonus for such
annual bonus period. Deferral Contributions may only be made while the
Participant is actively employed by the Employer. For purposes of the Plan, a
Participant will be considered actively employed during a period of paid leave
of absence or salary continuation. A Participant will not be considered
actively employed during a period of unpaid leave of absence or of Disability
(as defined in Section 5.2(b)).
3.3 Deferral Election. A Participant must complete and submit a written
Deferral Election to the Benefits Committee providing for the reduction of his
Net Base Salary and Net Bonus for the appropriate amount of Deferral
Contributions. The following terms and conditions shall apply to Deferral
Elections:
(a) Deferral Election For Short Plan Year. This subsection (a)
applies to active Participants on the Effective Date. An active
Participant on the Effective Date may make a Deferral Election with respect
to (i) his Net Base Salary for the short Plan Year beginning on the
Effective Date and ending on December 31, 1998 and (ii) his Net Bonus, if
any, payable during the short Plan Year and for the Employer's fiscal year
commencing in the short Plan Year. Such Deferral Election shall be
effective for (i) the first regular salary paycheck earned after the date
the Deferral Election becomes effective; (ii) the bonus paycheck, if any,
paid after the date the Deferral Election becomes effective; and (iii) the
bonus paycheck, if any, earned for the Employer's fiscal year commencing
after the date the Deferral Election becomes effective. To be effective,
the Participant's Deferral Election under the Plan for the short Plan Year
must be made before the Effective Date. If a Participant in the Plan on
the Effective Date fails to submit a Deferral Election in a timely manner,
he shall be deemed to have elected not to make Deferral Contributions for
the short Plan Year.
(b) Initial Deferral Election. This subsection (b) applies to an
Eligible Employee who becomes a Participant after the Effective Date. The
Participant's initial Deferral Election under the Plan with respect to his
Net Base Salary for any Plan Year shall be effective for the first regular
salary paycheck earned after
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the date the Deferral Election becomes effective. The Participant's
initial Deferral Election under the Plan with respect to his Net Bonus, if
any, for the Employer's fiscal year commencing in any Plan Year shall be
effective for the bonus paycheck earned after the date the Deferral
Election becomes effective. To be effective, a Participant's initial
Deferral Election under the Plan with respect to his Net Base Salary must
be made within the time period prescribed by the Benefits Committee
(generally, before the first day of the Plan Year for which Deferral
Contributions attributable to Net Base Salary will be made or, if later
during such Plan Year, before the date on which his participation becomes
effective pursuant to Section 2.1 or 2.2). To be effective, a
Participant's initial Deferral Election under the Plan with respect to his
Net Bonus, if any, must be made within the time period prescribed by the
Benefits Committee (generally, before the first day of the Employer's
fiscal year commencing in the Plan Year for which the Net Bonus to be
deferred will be earned). If an Eligible Employee who becomes a
Participant after the Effective Date fails to submit an initial Deferral
Election in a timely manner, he shall be deemed to have elected not to make
Deferral Contributions for that Plan Year.
(c) Subsequent Deferral Election. A Participant's subsequent Deferral
Election with respect to his Net Base Salary for any Plan Year must be made
on or before the last day of the Plan Year immediately preceding the Plan
Year for which the Net Base Salary to be deferred is payable. A
Participant's subsequent Deferral Election with respect to his Net Bonus,
if any, for the Employer's fiscal year commencing in any Plan Year must be
made before the first day of such fiscal year for which the Net Bonus to be
deferred is earned.
(d) Term. Each Participant's Deferral Election shall remain in effect
for the Net Base Salary earned during a Plan Year and for the Net Bonus, if
any, earned during the Employer's fiscal year commencing in a Plan Year
until the earlier of (i) the date the Participant ceases to be an active
Participant, or (ii) the revocation of such Deferral Election made by the
Participant. If a Participant is transferred from the employment of one
Employer to the employment of another Employer, his Deferral Election with
the first Employer will remain in effect and will apply to his Net Base
Salary and Net Bonus, if any, from the second Employer until the earlier of
those events set forth in the preceding sentence.
(e) Crediting Contributions. For each Plan Year that a Participant
has a Deferral Election in effect, the Benefits Committee shall credit the
amount of such Participant's Deferral Contributions to his Deferral
Contribution Account on or before the 15th business day of the month
following the month in which such amount would have been paid to him but
for his Deferral Election (or such other
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date or time as the Benefits Committee, in its sole discretion, determines
from time-to-time).
3.4 Matching Contributions. For each payroll period that a Participant
makes a Deferral Contribution attributable to his Net Base Salary, the Benefits
Committee shall credit to such Participant's Employer Contribution Account a
Matching Contribution. "Matching Contribution" means an amount contributed by
an Employer equal to 50 percent of a Participant's Deferral Contributions for a
payroll period attributable to his Net Base Salary which on a cumulative annual
basis have not exceeded the first six percent of his Base Salary for such Plan
Year. "Base Salary" means the Participant's annual base salary from his
Employer for the Plan Year, including any amounts deferred under this Plan or
any other nonqualified deferred compensation plan and any amounts contributed by
the Employer on the Participant's behalf pursuant to a salary deferral agreement
which amounts are not includible in the Participant's income under Code Section
125 or 402(e)(3). Matching Contributions shall be credited to Participants'
Employer Contribution Accounts on or before the 15th business day of the month
following the month in which the respective payroll period ended (or such other
date or time as the Benefits Committee, in its sole discretion, determines from
time-to-time).
3.5 Discretionary Contributions. As of the last business day of each Plan
Year (or such other date or time as the Benefits Committee, in its sole
discretion, determines from time-to-time), the Benefits Committee shall credit
any Discretionary Contributions made with respect to a Participant for such Plan
Year to such Participant's Employer Contribution Account. "Discretionary
Contribution" means a discretionary amount contributed to the Plan by an
Employer with respect to a Participant. An Employer may, but is not obligated
to, make a Discretionary Contribution for a Plan Year for any one or more
Participants, which Discretionary Contributions may be different amounts or
different percentages of compensation for each such Participant.
3.6 Debiting of Distributions. As of each business day, the Benefits
Committee shall debit each Participant's Accounts for any amount distributed
from such Accounts since the immediately preceding business day.
3.7 Crediting of Earnings or Losses on Contributions. As of each business
day, the Benefits Committee shall credit to each Participant's Accounts the
amount of earnings or losses applicable thereto for the period since the
immediately preceding business day. To effect such crediting of earnings and
losses, the Benefits Committee shall, as of each business day, first subtract
all distributions since the immediately preceding business day from the Account,
add to the Account the amount of the contributions, and allocate the net
earnings or losses to the Participant's Account based on the individual account
activity of the Account during such period pursuant to a share accounting method
under which each Participant's deemed investment in an Investment Fund (as
defined in Section 4.1) shall be accounted for in deemed shares in funds
selected by the Benefits Committee and offered within the Plan for purposes of
calculating
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earnings and losses for Participants' Accounts. For this purpose, the Benefits
Committee shall adopt uniform rules which conform generally to accepted
accounting practices.
3.8 Errors in Accounts. If an error or omission is discovered in the
Account of a Participant, in the amount of a Participant's deferrals, or in the
amount of Matching Contributions or Discretionary Contributions credited to the
Participant's Account, the Benefits Committee, in its sole discretion, shall
cause appropriate, equitable adjustments to be made as soon as administratively
practicable following the discovery of such error or omission.
Article 4
Investment Funds
4.1 Selection by Benefits Committee. From time to time, the Benefits
Committee shall select two or more investment funds (the "Investment Funds") for
purposes of determining the rate of return on amounts deemed invested in
accordance with the terms of the Plan. The Benefits Committee will notify
Participants in writing prior to the beginning of each Plan Year and at such
other times as the Benefits Committee deems necessary or desirable of the
Investment Funds available under the Plan for such Plan Year. The Benefits
Committee may change, add or remove Investment Funds on a prospective basis at
any time and in any manner it deems appropriate.
4.2 Participant Direction of Deemed Investments. Each Participant
generally may direct the manner in which his Accounts shall be deemed invested
in and among the Investment Funds; provided, such investment directions shall be
made in accordance with the following terms:
(a) Nature of Participant Direction. The selection of Investment
Funds by a Participant shall be for the sole purpose of determining the
rate of return to be credited to his Accounts, and shall not be treated or
interpreted in any manner whatsoever as a requirement or direction to
actually invest assets in any Investment Fund or any other investment
media. The Plan, as an unfunded, nonqualified deferred compensation plan,
at no time shall have any actual investment of assets relative to the
benefits or Accounts hereunder.
(b) Investment of Contributions. Except as otherwise provided in this
Section 4.2, each Participant may make an investment election, made in such
form as the Benefits Committee may direct or permit, prescribing the
percentage of his future contributions that will be deemed invested in each
Investment Fund. An initial investment election of a Participant shall be
made as of the date the Participant commences or recommences participation
in the Plan and shall apply to all contributions credited to such
Participant's Accounts after such date. Such
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Participant may make subsequent investment elections at such times as
permitted by the Benefits Committee, and such elections shall apply to all
such specified contributions credited to such Participant's Accounts after
the effective date of such election. Any investment election timely and
properly made pursuant to this subsection with respect to future
contributions shall remain effective until changed by the Participant.
(c) Investment of Existing Account Balances. Each Participant who was
a Participant under the Plan prior to the Effective Date shall make an
investment election, effective as of the Effective Date, prescribing the
percentage of his existing Account balances that will be deemed invested in
each Investment Fund as of the Effective Date. Each Participant may make
an investment election, effective as of the date the Participant commences
or recommences participation in the Plan, prescribing a different
percentage of his existing Account balances that will be deemed invested in
each Investment Fund. Such Participant may make subsequent investment
elections at such times as permitted by the Benefits Committee prescribing
a different percentage of his existing Account balances that will be deemed
invested in each Investment Fund. Each such election which is timely and
properly made shall remain in effect until changed by such Participant.
(d) Benefits Committee Discretion. The Benefits Committee shall have
complete discretion to adopt and revise procedures to be followed in making
such investment elections. Such procedures may include, but are not
limited to, the process of making elections, the permitted frequency of
making elections, the incremental size of elections, the deadline for
making elections and the effective date of such elections. Any procedures
adopted by the Benefits Committee that are inconsistent with the deadlines
or procedures specified in this Section 4.2 shall supersede such provisions
of this Section 4.2 without the necessity of a Plan amendment.
Article 5
Payment of Account Balances
5.1 Benefit Payments Upon Termination of Service for Reasons Other Than
Death.
(a) General. In accordance with the terms of subsection (b) hereof, if a
Participant's employment with the Employers and all other members of the HMG
Group terminates for any reason other than death (including the cessation of his
employer's membership in the HMG Group), he (or his beneficiary, if he dies
after such termination of employment but before distribution of his Accounts)
shall be entitled to receive a distribution of the total of (i) the entire
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amount credited to his Accounts, as adjusted for earnings or losses attributable
thereto, determined as of the business day on which such distribution is
processed; plus (ii) the amount of Deferral Contributions, Matching
Contributions and Discretionary Contributions, if any, made since such business
day; and minus (iii) the amount of any distributions made to the Participant
since such business day. For purposes of this subsection, the "business day on
which such distribution is processed" refers to the business day established for
such purpose by administrative practice, even if actual payment is made at a
later date due to delays in valuation, administration or any other procedure.
"HMG Group" means the Company and all other companies that are members of the
same controlled group of corporations (within the meaning of Code Section
414(b)) or under common control (within the meaning of Code Section 414(c)) with
the Company.
(b) Timing of Distribution. The distribution of the benefit payable to a
Participant under this Section shall be made or commenced not later than 60 days
after the date the Participant's employment with the Employers and all other
members of the HMG Group terminates for any reason other than death.
5.2 Form of Distribution.
(a) Lump Sum Payment. Except as provided in subsection (b) or (c) hereof,
the benefit payable to a Participant under Section 5.1 shall be distributed in
the form of a lump sum payment.
(b) Annual Installments. A Participant may elect, at the time he makes his
Deferral Election, or at any later time that is at least one year before his
retirement date, to have any benefit payable under Section 5.1 on account of the
Participant's retirement on or after attainment of age 55 paid in the form of
annual installments over a five or ten year period; provided, if the
Participant's Account balances are less than $50,000 on his employment
termination date, his entire Account balances shall be paid in the form of a
lump sum payment as provided in Section 5.2(a) hereof. In the event a
Participant elects to have any benefit payable under Section 5.1 paid in the
form of annual installments, such Participant may elect, at any time that is at
least one year before his retirement date, to have his benefit paid in the form
of a lump sum payment. In the event a Participant elects to have any benefit
payable under Section 5.1 on account of his retirement on or after attainment of
age 55 paid in the form of a lump sum payment, such Participant may elect, at
any time that is at least one year before his retirement date, to have his
benefit paid in the form of annual installments over a five or ten year period.
(i) The installment payments shall be made in annual installments
(adjusted for earnings or losses between payments in accordance with
Section 3.7), commencing not later than 60 days after the Participant's
termination of employment, and continuing each successive January
thereafter.
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(ii) If a Participant dies after payment of his Account balances from the
Plan has begun, but before his entire Account balances have been
distributed, the remaining amount of his Account balances shall be
distributed to the Participant's beneficiary in the form of a lump sum
payment on the Participant's next scheduled payment date as determined in
accordance with subsection (b)(i) hereof.
(iii) Notwithstanding anything in this subsection (b) to the
contrary, if the Benefits Committee, in its sole discretion, determines
that a Participant has a "Disability" at the time his employment
terminates, his entire Accounts shall be paid in the form of a lump sum
payment as provided in Section 5.2(a) hereof. For purposes of the Plan,
"Disability" shall mean that a Participant has incurred a physical or
mental impairment which entitles him to disability benefits under the
Employer's long term disability plan (or would so entitle him if he had
paid the employee portion of the cost of such plan coverage). In making
such determination, the Benefits Committee, in its sole discretion, may
require such medical proof as it deems necessary, including the certificate
of one or more licensed physicians selected by the Benefits Committee. The
decision of the Benefits Committee as to Disability shall be final and
binding.
(c) Pre-Effective Date Election. This subsection (c) applies only to a
Participant who was a Participant prior to the Effective Date. Notwithstanding
anything to the contrary in subsection (a) or (b) above, if such Participant
selected a form of distribution available under the terms of the Plan as in
effect immediately prior to the Effective Date, which form of distribution is
not available under this Article 5, the benefit payable to him under Section 5.1
shall be paid in accordance with such selection unless the Participant at any
later time that is at least one year before the date his employment with the
Employers and all other members of the HMG Group terminates elects to have such
benefit distributed in the form of a lump sum payment or, subject to the terms
and conditions of subsection (b), annual installments over a five or ten year
period.
5.3 Death Benefits. If a Participant dies before payment of his entire
Account balances from the Plan is made, such Participant's beneficiary shall be
entitled to receive a lump sum distribution of the total of (i) the entire
amount credited to such Participant's Accounts, as adjusted for earnings or
losses attributable thereto, determined as of the business day on which such
distribution is processed; plus (ii) the amount of Deferral Contributions,
Matching Contributions and Discretionary Contributions made since such business
day, if any; and minus (iii) the amount of any distributions made to the
Participant since such business day. For purposes of this Section, the
"business day on which such distribution is processed" refers to the business
day established for such purpose by administrative practice, even if actual
payment is made at a later date due to delays in valuation, administration or
any other procedure. The benefit shall be distributed to such beneficiary not
later than 60 days after the date of the Participant's death.
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5.4 In-Service Distributions.
(a) Hardship Distributions. Upon receipt of an application for an in-
service hardship distribution and the Benefits Committee's decision, made in its
sole discretion, that a Participant has suffered a "Financial Hardship", the
Participant shall be entitled to receive an in-service distribution from his
Account balances. "Financial Hardship" shall mean a severe financial hardship
to the Participant resulting from a sudden and unexpected illness or accident of
the Participant or the Participant's dependent (as defined in Code Section
152(a)), loss of the Participant's property due to casualty, or other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the Participant. Financial Hardship shall be determined
by the Benefits Committee on the basis of the facts of each case, including
information supplied by the Participant in accordance with uniform guidelines
prescribed from time to time by the Benefits Committee; provided, the
Participant will be deemed not to have a Financial Hardship to the extent that
such hardship is or may be relieved (i) through reimbursement or compensation by
insurance or otherwise; (ii) by liquidation of the Participant's assets, to the
extent the liquidation of assets would not itself cause severe financial
hardship; or (iii) by cessation of deferrals under the Plan. Examples of what
are not considered to be Financial Hardships include the need to send a
Participant's child to college or the desire to purchase a home. Such
distribution shall be paid in a lump sum payment not later than 60 days after
the Benefits Committee determines that the Participant has incurred a Financial
Hardship. The amount of such lump sum payment shall not exceed the total of (i)
the entire amount credited to the Participant's Accounts, as adjusted for
earnings or losses attributable thereto, determined as of the business day on
which such distribution is processed; plus (ii) the amount of Deferral
Contributions, Matching Contributions and Discretionary Contributions made since
such business day, if any; and minus (iii) the amount of any distributions made
to the Participant since such business day; and, the amount of such lump sum
payment shall be further limited to the amount that the Benefits Committee
determines is reasonably necessary to meet the Participant's requirements
resulting from the Financial Hardship. For purposes of this subsection, the
"business day on which such distribution is processed" refers to the business
day established for such purpose by administrative practice, even if actual
payment is made at a later date due to delays in valuation, administration or
any other procedure. The amount of such distribution shall reduce the
Participant's Account balances as provided in Section 3.6.
(b) Distributions with Forfeiture. Notwithstanding any other provision of
this Article 5 to the contrary, a Participant may elect, at any time prior to
the complete distribution of his Plan Accounts, to receive a distribution of 90
percent of the total of (i) the entire amount credited to his Accounts, as
adjusted for earnings or losses attributable thereto, determined as of the
business day on which such distribution is processed; plus (ii) the amount of
Deferral Contributions, Matching Contributions and Discretionary Contributions
made since such business day, if any; and minus (iii) the amount of any
distributions made to the Participant since such business day. Such
distribution shall be made not later than 60 days after the date of the
Participant's election under this subsection (b). As of the business day as of
which such
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distribution is processed, an amount equal to ten percent of such Participant's
total Account balances as of such date shall be permanently and irrevocably
forfeited, and such Participant shall not be eligible to make Deferral
Contributions under the Plan after such distribution. For purposes of this
subsection, the "business day on which such distribution is processed" refers to
the business day established for such purpose by administrative practice, even
if actual payment is made at a later date due to delays in valuation,
administration or any other procedure.
(c) Specified In-Service Distributions. Notwithstanding any other
provision of this Article 5 to the contrary, a Participant may elect on his
Deferral Election to receive an in-service distribution of a specified
percentage (up to 100 percent) or a specified amount of the Deferral
Contributions made pursuant to such Deferral Election, as adjusted for earnings
or losses attributable thereto and reduced for any distributions thereof under
subsection (a) or (b) above, determined as of the business day on which such
distribution is processed. Such distribution shall be made in a lump sum
payment not later than 60 days after the first day of the Plan Year designated
by the Participant on his Deferral Election provided that such Plan Year begins
after the third anniversary of the date the Deferral Contribution to be
distributed would have been paid to the Participant but for his Deferral
Election. For purposes of this subsection, the "business day on which such
distribution is processed" refers to the business day established for such
purpose by administrative practice, even if actual payment is made at a later
date due to delays in valuation, administration or any other procedure. The
amount of such distribution shall reduce the Participant's Deferral Contribution
Account balance as provided in Section 3.6. Any portion of the Participant's
Deferral Contribution Account which is not distributed under this subsection (c)
shall be distributed in accordance with Section 5.1 or 5.3, whichever is
applicable, and shall remain available for distributions under this Section 5.4
except for any other in-service distributions under this Section 5.4(c). If the
Participant's employment with the Employers and all other members of the HMG
Group terminates for any reason prior to the payment of his in-service
distribution hereunder, his in-service distribution election shall be cancelled
and of no effect and the Participant's Deferral Contribution Account shall be
distributed in accordance with Section 5.1 or 5.3, whichever is applicable.
(d) Deductible Limit. Notwithstanding anything in the Plan to the
contrary, the distribution of a Participant's benefit hereunder prior to his
termination of employment with the Employer and all other members of the HMG
Group shall be limited to an amount that would not cause the Participant to
receive compensation that the Benefits Committee determines would not be
deductible under Code Section 162(m).
5.5 Beneficiary Designation. Participants shall designate and from time
to time may redesignate their beneficiaries to receive any death benefits that
may be payable under the Plan upon such Participant's death in such form and
manner as the Benefits Committee may determine. In the case of a Participant
who is legally married on the date of his death, his beneficiary shall be his
surviving spouse unless such spouse validly consents in writing to a
-13-
<PAGE>
different beneficiary designation or the Participant establishes to the
satisfaction of the Benefits Committee that the consent cannot be obtained
because there is no spouse, the spouse cannot be found or some other reasonable
excuse. In the event that:
(i) a Participant dies without designating a beneficiary;
(ii) the beneficiary designated by a Participant is not alive when a
payment is to be made to such person under the Plan, and no contingent
beneficiary has been designated; or
(iii) the beneficiary designated by a Participant cannot be located by
the Benefits Committee within one year from the date benefits are to be
paid to such person;
then, in any of such events, the beneficiary of such Participant with respect to
any benefits that remain payable under the Plan shall be the Participant's
surviving spouse, if any, and if not, the estate of the Participant.
Article 6
Claims
6.1 Initial Claim. Claims for benefits under the Plan may be filed with
the Benefits Committee on forms or in such other written documents, as the
Benefits Committee may prescribe. The Benefits Committee shall furnish to the
claimant written notice of the disposition of a claim within 90 days after the
application therefor is filed. In the event the claim is denied, the notice of
the disposition of the claim shall provide the specific reasons for the denial,
citations of the pertinent provisions of the Plan, and, where appropriate, an
explanation as to how the claimant can perfect the claim or submit the claim for
review.
6.2 Appeal. Any Participant or beneficiary who has been denied a benefit
shall be entitled, upon request to the Benefits Committee, to appeal the denial
of his claim. The claimant (or his duly authorized representative) may review
pertinent documents related to the Plan and in the Benefits Committee's
possession in order to prepare the appeal. The request for review, together with
a written statement of the claimant's position, must be filed with the Benefits
Committee no later than 60 days after receipt of the written notification of
denial of a claim provided for in Section 6.1. The Benefits Committee's
decision shall be made within 60 days following the filing of the request for
review. If unfavorable, the notice of the decision shall explain the reasons
for denial and indicate the provisions of the Plan or other documents used to
arrive at the decision.
-14-
<PAGE>
6.3 Satisfaction of Claims. Any payment to a Participant or beneficiary
shall to the extent thereof be in full satisfaction of all claims hereunder
against the Benefits Committee and the Employers, any of whom may require such
Participant or beneficiary, as a condition to such payment, to execute a receipt
and release therefor in such form as shall be determined by the Benefits
Committee or the Employers. If receipt and release is required but the
Participant or beneficiary (as applicable) does not provide such receipt and
release in a timely enough manner to permit a timely distribution in accordance
with the general timing of distribution provisions in the Plan, the payment of
any affected distribution may be delayed until the Benefits Committee or the
Employers receive a proper receipt and release.
Article 7
No Funding of Plan Benefits
Nothing herein shall require the Employers to segregate or set aside any
funds or other property for the purpose of paying any benefits under the Plan.
Nothing contained in this Plan, and no action taken pursuant to its provisions
by the Employers or the Benefits Committee shall create, nor be construed to
create, a trust of any kind or a fiduciary relationship between the Employers
and the Participant, his beneficiary, or any other person. Benefits hereunder
shall be paid from assets which shall continue, for all purposes, to be a part
of the general, unrestricted assets of the Employers. The obligation of the
Employers hereunder shall be an unfunded and unsecured promise to pay money in
the future. To the extent that the Participant or his beneficiary is entitled
to receive payments from the Employers under the provisions hereof, such right
shall be no greater than the right of any unsecured general creditor of the
Employers; no such person shall have nor acquire any legal or equitable right,
interest or claim in or to any property or assets of the Employers. It is
intended that the Plan be unfunded for tax purposes and for purposes of Title I
of ERISA.
Article 8
Benefits Committee
8.1 Benefits Committee's Duties. The Benefits Committee is the plan
administrator. Except as otherwise specifically provided and in addition to the
powers, rights and duties specifically given to the Benefits Committee elsewhere
in the Plan, the Benefits Committee shall have the following discretionary
powers, rights and duties:
(a) To construe and interpret the Plan, to decide all questions of
Plan eligibility, to determine the amount, manner and time of payment of
any benefits under the Plan, and to remedy ambiguities, inconsistencies or
omissions in its sole and complete discretion.
-15-
<PAGE>
(b) To adopt such rules of procedure as may be necessary for the
efficient administration of the Plan and as are consistent with the Plan,
and to enforce the Plan in accordance with its terms and such rules.
(c) To make determinations as to the right of any person to a benefit,
to afford any person dissatisfied with such determination the right to a
hearing thereon, and to direct payments or distributions in accordance with
the provisions of the Plan.
(d) To furnish the Employers and Participants with such information as
may be required by them for tax or other purposes in connection with the
Plan.
(e) To enroll Participants in the Plan, distribute and receive Plan
administration forms and comply with all applicable governmental reporting
and disclosure requirements.
(f) To employ agents, attorneys, accountants, actuaries or other
persons (who also may be employed by an Employer), and to allocate or
delegate to them such powers, rights and duties as the Benefits Committee
considers necessary or advisable to properly carry out the administration
of the Plan, provided that any such allocation or delegation and the
acceptance thereof must be in writing.
(g) To report at least annually to the Board of Directors of the
Company or to such person or persons as the Board of Directors of the
Company designates as to the administration of the Plan, any significant
problems which have developed in connection with the administration of the
Plan and any recommendations which the Benefits Committee may have as to
the amendment of the Plan or the modification of Plan administration. At
least once for each Plan Year, the Benefits Committee shall cause a written
statement of a Participant's Account balances to be distributed to the
Participant.
8.2 Action by Plan Administration. During a period in which two or more
Benefits Committee members are acting, any action by the Benefits Committee will
be subject to the following provisions:
(a) The Benefits Committee may act by meeting (including a meeting
from different locations by telephone conference) or by document signed
without meeting, and documents may be signed through the use of a single
document or concurrent documents; provided, action shall be taken only upon
the vote or other affirmative expression of a majority of the Benefits
Committee members qualified to vote with respect to such action.
-16-
<PAGE>
(b) A Benefits Committee member by writing may delegate part or all of
his rights, powers, duties and discretion to any other Benefits Committee
member, with such other Benefits Committee member's consent.
(c) No member of the Benefits Committee shall be liable or responsible
for an act or omission of other Benefits Committee members in which the
former has not concurred.
(d) The Benefits Committee shall choose a secretary who shall keep
minutes of the Benefits Committee's proceedings and all records and
documents pertaining to the administration of the Plan. The secretary may
execute any certificate or other written direction on behalf of the
Benefits Committee.
8.3 Information Required for Plan Administration. The Employers shall
furnish the Benefits Committee with such data and information as the Benefits
Committee considers necessary or desirable to perform its duties with respect to
Plan administration. The records of an Employer as to an employee's or
Participant's period or periods of employment, termination of employment and the
reason therefor, leaves of absence, reemployment and base salary and bonus will
be conclusive on all persons unless determined to the Benefits Committee's
satisfaction to be incorrect. Participants and other persons entitled to
benefits under the Plan also shall furnish the Benefits Committee with such
evidence, data or information as the Benefits Committee considers necessary or
desirable for the Benefits Committee to perform its duties with respect to Plan
administration.
8.4 Decision of Benefits Committee Final. Subject to applicable law and
Article 6, any interpretation of the provisions of the Plan and any decision on
any matter within the discretion of the Benefits Committee made by the Benefits
Committee in good faith shall be binding on all persons. A misstatement or
other mistake of fact shall be corrected when it becomes known and the Benefits
Committee shall make such adjustment on account thereof as the Benefits
Committee considers equitable and practicable.
8.5 Interested Benefits Committee Member. If a member of the Benefits
Committee is also a Participant in the Plan, he may not decide or determine any
matter or question concerning his benefits unless such decision or determination
could be made by him under the Plan if he were not a Benefits Committee member.
8.6 Indemnification. No person (including any present or former Benefits
Committee member, and any present or former director, officer or employee of any
Employer) shall be personally liable for any act done or omitted to be done in
good faith in the administration of the Plan. Each present or former director,
officer or employee of any Employer to whom the Benefits Committee or an
Employer has delegated any portion of its responsibilities under the Plan and
each present or former Benefits Committee member shall be indemnified and saved
-17-
<PAGE>
harmless by the Employers (to the extent not indemnified or saved harmless under
any liability insurance or other indemnification arrangement with respect to the
Plan) from and against any and all claims of liability to which they are
subjected by reason of any act done or omitted to be done in good faith in
connection with the administration of the Plan, including all expenses
reasonably incurred in their defense if the Employers fail to provide such
defense. No member of the Benefits Committee shall be liable for any act or
omission of any other member of the Benefits Committee, nor for any act or
omission upon his own part, excepting his own willful misconduct.
Article 9
Relating to the Employers
9.1 Action by Employers. Any action required or permitted of an Employer
under the Plan shall be by resolution of its Board of Directors or by a duly
authorized committee of its Board of Directors, or by a person or persons
authorized by resolution of its Board of Directors or such committee.
9.2 Additional Employers. Any Subsidiary of the Company that is not an
Employer may adopt the Plan and become an Employer hereunder by filing with the
Benefits Committee a certified copy of a resolution of the Board of Directors of
the Subsidiary providing for its adoption of the Plan and a certified copy of a
resolution of the Board of Directors of the Company consenting to such adoption.
Article 10
Amendment and Termination
10.1 Amendment. While the Employers expect and intend to continue the
Plan, the Company must necessarily reserve and hereby does reserve the right to
amend the Plan from time to time. Any amendment of the Plan will be by
resolution of the Board of Directors of the Company or any committee of the
Board of Directors to whom such authority has been delegated. Notwithstanding
the preceding sentence, the Benefits Committee may amend the Plan in the
following respects without the approval of the Board of Directors of the
Company: (i) amendments required by law; (ii) amendments that relate to the
administration of the Plan and that do not materially change the cost of the
Plan; and (iii) amendments that are designed to resolve possible ambiguities,
inconsistencies, or omissions in the Plan and that do not materially increase
the cost of the Plan. No amendment shall reduce the value of a Participant's
Account balances to less than the amount (as subsequently adjusted for earnings
and losses attributable thereto) he would be entitled to receive if he had
resigned from the employ of all of the Employers on the day of the amendment.
-18-
<PAGE>
10.2 Termination. The Plan will terminate as to all Employers on any date
specified by the Company if advance written notice of the termination is given
to the Benefits Committee and any other Employers. The Plan will terminate as
to an individual Employer on the first to occur of the following:
(a) The date it is terminated by that Employer if advance written
notice of the termination is given to the Company, the Benefits Committee
and the other Employers.
(b) The date that Employer is judicially declared bankrupt or
insolvent.
(c) The dissolution, merger, consolidation or reorganization of that
Employer, or the sale by that Employer of all or substantially all of its
assets, except that:
(i) in any such event arrangements may be made with the consent
of the Company whereby the Plan will be continued by any successor to
that Employer or any purchaser of all or substantially all of its
assets without a termination thereof, in which case the successor or
purchaser will be substituted for that Employer under the Plan; and
(ii) if any Employer is merged, dissolved or in any way
reorganized into, or consolidated with, any other Employer, the Plan
as applied to the former Employer will automatically continue in
effect without a termination thereof.
Notwithstanding the foregoing, if any of the events described above should occur
but some or all of the Participants employed by an Employer are transferred to
employment with one or more of the other Employers coincident with or
immediately after the occurrence of such event, the Plan as applied to those
Participants will automatically continue in effect without a termination
thereof.
10.3 Distribution on Termination. On termination of the Plan as respects
all Employers (and, at the discretion of the Company, on a termination of the
Plan as respects any Employer that does not result in the termination of the
Plan as respects all Employers), each affected Participant's Accounts shall be
distributed in a lump sum payment as soon as practicable after the date the Plan
is terminated. The amount of any such distribution shall be determined as of
the business day on which such distribution is processed. For purposes of this
Section, the "business day on which such distribution is processed" refers to
the business day established for such purpose by administrative practice, even
if actual payment is made at a later date due to delays in valuation,
administration or any other procedure. Such determination shall be binding on
all Participants and beneficiaries.
-19-
<PAGE>
Article 11
General Provisions
11.1 Notices. Any notice or document relating to the Plan required to be
given to or filed with the Benefits Committee or any Employer shall be
considered as given or filed if delivered or mailed by registered or certified
mail, postage prepaid, to the Benefits Committee, in care of the Company.
11.2 Nonalienation of Plan Benefits. The rights or interests of any
Participant or any Participant's beneficiaries to any benefits or future
payments under the Plan shall not be subject to attachment or garnishment or
other legal process by any creditor of any such Participant or beneficiary nor
shall any such Participant or beneficiary have any right to alienate,
anticipate, commute, pledge, encumber or assign any of the benefits or rights
which he may expect to receive under the Plan, except as may be required by the
tax withholding provisions of the Code or a state's income tax act.
11.3 Payment with Respect to Incapacitated Persons. If any person entitled
to benefits under the Plan is under a legal disability or, in the Benefits
Committee's opinion, is incapacitated in any way so as to be unable to manage
his financial affairs, the Benefits Committee may direct the payment of such
benefits to such person's legal representative or to a relative or friend of
such person for such person's benefit, or the Benefits Committee may direct the
application of such benefit for the benefit of such person in any manner which
the Benefits Committee may select that is consistent with the Plan. Any
payments made in accordance with the foregoing provisions of this Section 11.3
shall be a full and complete discharge of any liability for such payments.
11.4 No Employment or Benefit Guaranty. None of the establishment of the
Plan, any modification thereof, the creation of any fund or account, or the
payment of any benefits shall be construed as giving to any Participant or other
person any legal or equitable right against the Employers or the Benefits
Committee except as provided herein. Under no circumstances shall the
maintenance of this Plan constitute a contract of employment or shall the terms
of employment of any Participant be modified or in any way affected hereby.
Accordingly, participation in the Plan will not give any Participant a right to
be retained in the employ of any Employer.
11.5 Litigation. In any action or proceeding regarding any Plan benefits
or the administration of the Plan, employees or former employees of the
Employers, their beneficiaries and any other persons claiming to have an
interest in the Plan shall not be necessary parties and shall not be entitled to
any notice of process. Any final judgment which is not appealed or appealable
and which may be entered in any such action or proceeding shall be binding and
conclusive on the parties hereto and on all persons having or claiming to have
any interest in the
-20-
<PAGE>
Plan. Acceptance of participation in the Plan shall constitute a release of the
Employers, the Benefits Committee and their agents from any and all liability
and obligation not involving willful misconduct or gross neglect.
11.6 Headings. The headings of the various Articles and Sections in the
Plan are solely for convenience and shall not be relied upon in construing any
provisions hereof. Any reference to a Section shall refer to a Section of the
Plan unless specified otherwise.
11.7 Evidence. Evidence required of anyone under the Plan shall be signed,
made or presented by the proper party or parties and may be by certificate,
affidavit, document or other information which the person acting thereon
considers pertinent and reliable.
11.8 Gender and Number. Words denoting the masculine gender shall include
the feminine and neuter genders, the singular shall include the plural and the
plural shall include the singular wherever required by the context.
11.9 Waiver of Notice. Any notice required under the Plan may be waived by
the person entitled to notice.
11.10 Applicable Law. The Plan shall be construed in accordance with the
laws of the State of Mississippi.
11.11 Severability. Whenever possible, each provision of the Plan shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of the Plan is held to be invalid, illegal or unenforceable
in any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
or any other jurisdiction, and the Plan shall be reformed, construed and
enforced in such jurisdiction so as to best give effect to the intent of the
Company under the Plan.
11.12 Withholding for Taxes. Notwithstanding any other provisions of the
Plan, any Employer may withhold from any payment to be made under the Plan such
amount or amounts as may be required for purposes of complying with the tax
withholding provisions of the Code, any state or local income tax act or any
applicable similar laws.
11.13 Successors. The Plan is binding on all persons entitled to benefits
hereunder and their respective heirs and legal representatives, on the Benefits
Committee and its successor and on the Employers and their successors, whether
by way of merger, consolidation, purchase or otherwise.
11.14 Effect on Other Employee Benefit Plans. Any benefit paid or
payable under this Plan shall not be included in a Participant's or employee's
compensation for purposes of computing benefits under any employee benefit plan
maintained or contributed to by an Employer except as may otherwise be required
under the terms of such employee benefit plan.
-21-
<PAGE>
EXHIBIT 21
HALTER MARINE GROUP, INC.
SUBSIDIARIES OF THE COMPANY
ENTITY STATE OF INCORPORATION
------ ----------------------
AmClyde Engineered Products Company, Inc. Delaware
Bludworth Bond Shipyard, Inc. Texas
Equitable Shipyard, L.L.C. Louisiana
Fritz Culver, Inc. Louisiana
Gretna Machine and Iron Works, L.L.C. Louisiana
Gulf Coast Fabrication, Inc. Mississippi
Halter-Calcasieu, L.L.C. Louisiana
Halter Engineered Products Group, Inc. Delaware
Halter Marine International, Inc. Barbados
Halter Gulf Repair, Inc. Delaware
Halter Marine Gulfport, Inc. Nevada
Halter Marine, Inc. Nevada
Halter Marine Louisiana, Inc. Louisiana
Halter Marine Panama City, Inc. Delaware
Halter Marine Pascagoula, Inc. Delaware
Halter Marine Services, Inc. Mississippi
Latboats, Inc. Marshall Islands
Marine Cleaning, L.L.C. Louisiana
Marinsco, Inc. Louisiana
Maritime Holdings, Inc. Delaware
Offshore Marine Indemnity Company Vermont
TDI-Halter, L.P. Louisiana
TDI International, Inc. Cayman Islands
TDI-NASS, JV Bahrain
Trinity Marine Orange, Inc. Delaware
Trinity Yachts, Inc. Delaware
Utility Steel Fabrication, Inc. Louisiana
Washington Marine Fabricators, Inc. Washington
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-3 No. 333-38491, Form S-3 No. 333-39379 and Form S-8 No. 333-35975) of
Halter Marine Group, Inc. of our report dated April 28, 1998, with respect to
the consolidated financial statements of Halter Marine Group, Inc. included in
this Annual Report (Form 10-K) for the year ended March 31, 1998.
/s/ Ernst & Young LLP
New Orleans, Louisiana
June 24, 1998
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<PAGE>
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 499,601
<SECURITIES> 0
<RECEIVABLES> 115,389
<ALLOWANCES> 0
<INVENTORY> 100,921
<CURRENT-ASSETS> 272,580
<PP&E> 125,962
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<CURRENT-LIABILITIES> 121,523
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0
0
<COMMON> 288
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<TOTAL-LIABILITY-AND-EQUITY> 499,601
<SALES> 670,238
<TOTAL-REVENUES> 670,238
<CGS> 589,579
<TOTAL-COSTS> 41,414
<OTHER-EXPENSES> 932
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<INCOME-TAX> 9,197
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