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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, 1999
[_]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)
Delaware 75-2656828
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
39503
13085 Seaway Road, Gulfport, (Zip Code)
Mississippi
(Address of principal executive
offices)
Registrant's telephone number, including area code: (228) 896-0029
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
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<S> <C>
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 21, 1999 was approximately $184,000,000 based on the
closing price per share as reported by the American Stock Exchange.
Common Shares outstanding as of June 21, 1999: 28,856,661.
Portions of the Proxy Statement with respect to the 1999 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 with its
subsidiaries, the "Company") is a provider of design, construction,
conversion, and repair services of vessels, offshore drilling rigs, 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
7,200 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 government 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 has
eight shipyards available for dedication to the new construction of marine
vessels, although several of the Company's vessel 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 with 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
workforce, position it to be a versatile and cost efficient domestic
shipbuilder.
The Company is also 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 has available six shipyards along
the Gulf Coast from Louisiana to Texas for 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 in the new construction, conversion and repair of mobile
offshore drilling rigs and production platforms for the offshore energy
industry. The Company has six shipyards in southeast Texas available for
repair and conversion work on jackup, submersible and semi-submersible
drilling rigs and production units. The Company operates yards in Orange,
Texas and Pascagoula, Mississippi that are principally utilized in 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., Fritz Culver, Inc.,
Utility Steel Fabrication, Inc., and McElroy Machine & Manufacturing Co., Inc.
These companies, which now comprise the Engineered Products Group, design,
manufacture and market cranes, derricks, hoists, windlasses, jacks, linear
winches, fairleads, capstans, tuggers,
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locking devices, turret bearings, control systems, winches and other related
products used in the marine and offshore 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.
Business Strategy
The Company's business 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.
Recent Developments--Proposed Merger
On June 1, 1999, the Company and Friede Goldman International Inc., a
Mississippi corporation ("Friede Goldman"), entered into an Agreement and Plan
of Merger (the "Merger Agreement"). Friede Goldman provides new construction,
conversion, retrofit and repair services for offshore drilling rigs, including
jackups, submersibles, semi-submersibles and drillships.
Pursuant to the terms of the Merger Agreement, the Company will merge with
and into Friede Goldman (the "Merger") and upon consummation of the Merger,
Friede Goldman will be the surviving corporation. As of the effective date of
the Merger, each outstanding share of common stock, par value $0.01 per share,
of the Company, other than shares held in the Company's treasury or owned by
Friede Goldman or any wholly owned subsidiary of Friede Goldman, will be
converted into the right to receive 0.4614 shares of common stock, par value
$0.01 per share, of Friede Goldman ("Friede Goldman Common Stock").
Consummation of the Merger is subject to various conditions, including the
expiration or termination of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the approval of the Merger
by the stockholders of the Company and of Friede Goldman.
Acquisitions
Since its separation from Trinity, the Company has acquired, through either
stock or asset purchases, 10 companies including the acquisition of Trinity
Marine Orange, Inc. in May 1998. The aggregate purchase price for acquisitions
was approximately $167 million, of which approximately $124 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
During the first quarter of fiscal 1998, the Company acquired TDI, a
provider of new construction, conversion and repair services for mobile
offshore drilling rigs and production platforms for the offshore energy
industry.
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
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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,
which now comprise the Engineered Products Group, design, manufacture and
market cranes, derricks, hoists, windlasses, jacks, linear winches, fairleads,
capstans, tuggers, locking devices, turret bearings, control systems, winches
and other related products used in the marine and offshore construction
industries.
Calcasieu Shipyard Acquisition
In February 1998, the Company acquired all of the outstanding stock of three
companies comprising the operations of Calcasieu Shipyard ("Calcasieu") of
Sulphur, Louisiana. Calcasieu is a full-service shipyard providing vessel
repair and conversion services, vessel gas freeing and cleaning services, and
specialized new construction.
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 is being used in
the new construction of mobile offshore drilling and production units as well
as to fabricate components for rigs under construction at other Company
shipyards.
Products and Markets
The Company specializes in the new 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 luxury megayachts under the name "Trinity
Yachts."
The Vessels segment also provides a wide variety of repair and conversion
services for vessels and barges that service the offshore energy and
commercial markets.
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Revenue from the Vessels segment amounted to $516 million in fiscal 1999,
and at March 31, 1999 the Company's vessel backlog was $315 million or 48% of
total backlog.
Rigs
The Company's Rigs segment engages in the new construction of mobile
offshore drilling rigs including jack-up, semi-submersible and drill barges.
The Rigs segment also performs conversion and repair of mobile offshore rigs
including conversion of 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 the Rigs segment was $356 million in fiscal 1999, and at March
31, 1999 the Company's rig backlog was $268 million or 41% of total backlog.
Engineered Products
The Company's Engineered Products segment designs, manufactures and markets
cranes, derricks, hoists, windlasses, jacks, linear winches, fairleads,
capstans, tuggers, locking devices, turret bearings, control systems, winches
and other related products used in the marine and offshore construction
industries. Brand names include American, AmClyde, Clyde, Wiley, Lucker,
Sauerman, Unit Mariner, J & B, McElroy, Fritz Culver, and Hepburn.
Revenue from the Engineered Products segment was $127 million in fiscal
1999, and at March 31, 1999, the Company's engineered products backlog was $73
million or 11% of total backlog.
Operations
The Company has conducted new construction operations for vessels and rigs
at 10 shipyards located along the Gulf Coast. The Company strategically
allocates its projects to its yards as required by market conditions and its
level of backlog. During fiscal 1999, the Company reallocated production to
certain shipyards enabling it to temporarily close certain of its yards in
Texas and Florida. The Company's new construction shipyards employ advanced
manufacturing techniques, including modular construction methods, advanced
welding techniques, panel line fabrication, computerized plasma arc metal
cutting and automated sandblasting and painting. The Company has 12 shipyards
available for conducting its vessel and rig repair and conversion operations.
These shipyards have available 18 dedicated drydocks. The Company's multiple
shipyards, combined with its large engineering team, provide significant
flexibility and efficiency in the new construction, repair and conversion of a
wide variety of vessels and rigs. The Company believes that these factors,
together with its skilled and experienced workforce, make it one of the most
versatile and cost-efficient domestic shipbuilders. In addition to its
domestic operations, the Company's operations include four international joint
ventures in Argentina, China, Italy, and the Philippines.
The Company's shipyards are well-maintained facilities. The Company spent
approximately $45 million on capital improvements for its existing shipyard
facilities during fiscal 1999, and has budgeted approximately $20 million for
capital improvements (excluding acquisitions) for these facilities during
fiscal 2000.
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 marine engineering department which has
been instrumental in helping it maintain its reputation
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as a technical leader in the engineering and design of vessels and engineered
products. The Company's engineering department consists of approximately 294
employees, 85 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 provides consulting
services in 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,
Gulfport and Orange 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 Group
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;
Slidell, Louisiana; Covington, Louisiana; and Gulfport, Mississippi. The
Company's sales and marketing forces consist of approximately 54 employees.
The Company has contractual arrangements in certain countries to assist it
with its international marketing efforts.
Competition
The Company faces substantial competition in all of its business segments.
In the Vessels segment, the Company offers a wide range of products and the
number and identity of competitors on particular projects vary greatly,
depending upon the type of vessel and size of project. There are at least ten
domestic shipyards that compete with the Company for domestic shipbuilding
contracts. In pursuing international contracts, the Company also competes with
many foreign shipyards, some of which are subsidized by their governments.
The number of competitors in the Company's Rigs segment varies greatly
depending upon market conditions as well as the size, type and location of the
project. In the new rig construction and rig conversion businesses, the
Company competes in a global market with companies principally based in the
United States, Europe and Asia. The Company has identified numerous companies
that are currently building or have built new drilling rigs, and have
performed or are currently performing major conversion jobs. Some of the
Company's foreign competitors are subsidized by their governments.
The Company's Engineered Products segment competes primarily with at least
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.
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Contract Structure and Pricing
The Company's contracts are generally obtained through a competitive bid
process. Most of the contracts for new construction entered into 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.
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 commercial contracts generally provide for cancellation in the
event of default by the Company. Certain of the Company's commercial contracts
also provide for cancellation in the event of the Company's failure to deliver
the product within a specified time frame, whether or not a default has
occurred.
The Company's contracts for repair and conversion services include both
fixed price and time and materials contracts. Time and materials contracts
include an amount 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, 1999, the Company had a total workforce of 7,296 employees,
of whom 1,318 were salaried and 5,978 were employed on an hourly basis. None
of the Company's employees is represented by any collective bargaining unit.
Total workforce at March 31, 1998 included contract labor of approximately
1,288.
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, 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
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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
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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.
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 new 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
the U.S. shipbuilders in competing successfully for domestic and international
commercial projects against foreign shipyards, many of which are heavily
subsidized by their governments. Similarly, the rig industry is extremely
competitive and the Company also must compete for domestic and international
projects against foreign shipyards, many of which are heavily subsidized by
their governments. As a result of these factors, competition for domestic and
international commercial projects has increased significantly, particularly in
light of market conditions which
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have decreased the number of available projects in the short term. 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 9.1%, 17.1%, and 37.4% of the Company's consolidated revenue in
fiscal 1999, 1998, and 1997, 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.
During fiscal 1998, revenue derived from one customer for offshore support
vessels accounted for approximately 11% of the Company's consolidated revenue.
During fiscal 1999 and 1997, revenue generated from this customer was less
than 10%. There can be no assurance that the Company will be successful in
obtaining new contracts with this customer, all of which are competitively
bid.
Dependence on the Offshore Oil and Gas Industry
A significant portion of the Company's current contracts relate to the new
construction of offshore support vessels and the new construction, repair and
conversion of mobile offshore drilling 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. The
level of offshore drilling activity has declined from higher levels of
activity experienced in 1997 and 1998. A substantial reduction of offshore
drilling and development activity would reduce demand for the Company's
offshore-related products and could have a material adverse effect on the
Company's financial condition and results of operations.
Availability of Shipyard Workers
While the Company's shipyards are not currently experiencing 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 shortages will be experienced at one
or more of the Company's shipyards in the future.
Integration of Acquisitions and Management of Growth
The Company's growth strategy has emphasized the acquisition of other
offshore marine construction and equipment 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.
10
<PAGE>
On June 1, 1999, the Company and Friede Goldman entered into the Merger
Agreement. Consummation of the Merger is subject to various conditions. See
"Recent Developments--Proposed Merger".
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 estimating 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 criteria and 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
used in its Vessels and Rigs segments, revenue from contracts is measured by
the percentage of labor hours incurred as compared to estimated total labor
hours for each contract. Under the percentage of completion method used in its
Engineered Products segment, revenue from contracts is measured by the
percentage of cost incurred as compared to estimated total cost 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 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 accounts for its backlog of new construction projects for
vessels, rigs and engineered products by including 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 the 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. The Company's level of
backlog is entirely dependent upon the Company's ability to contract for new
projects as current projects are completed. No assurance can be given that the
Company will be able to successfully replace existing backlog at any
particular rate or level in the short or long term.
Dependence on Key Personnel
The Company believes that its success in the future will be attributable to
and dependent upon, to a significant extent, the efforts and abilities of its
management team, including its current executive officers. John
11
<PAGE>
Dane III, the Company's Chairman, President and Chief Executive Officer has
entered into a non-competition agreement with the Company. In connection with
the TDI acquisition and the acquisition of certain assets of AmClyde
Engineered Products, Inc., the Company entered into employment and non-
competition agreements with the chief executive officers of each of those
operating groups.
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 54,600 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 has
available eight shipyards for the new construction of marine vessels, although
several of these facilities also can perform work for the Rigs and Engineered
Products segments. The Vessels segment has available six shipyards for the
repair and conversion of vessels and barges.
The Company's Rigs segment is headquartered in Port Arthur, Texas. The Rigs
segment has available eight shipyards where it can perform new construction
and repair and conversion work on mobile offshore drilling units including
jack-up, submersible, semi-submersible and drill barges. In addition to the
yards dedicated to the Rigs segment, facilities included in the Vessels
segment can 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..... 225,000 Lease 2016
New Orleans, Louisiana
Halter Moss Point Shipyard................. 121,665 Own --
Moss Point, Mississippi
Lockport Shipyard.......................... 97,000 Own --
Lockport, Louisiana
Moss Point Marine Shipyard................. 75,000 Own --
Escatawpa, Mississippi
Gulfport Shipyard.......................... 554,500 Own --
Gulfport, Mississippi
Panama City Shipyard....................... 35,000 Own --
Panama City, Florida(1)
Gulf Coast Fabrication Shipyard............ 15,000 Own --
Pearlington, Mississippi
Rigs Segment
TDI-Halter Orange Shipyard................. 600,000 Own --
Orange, Texas
Pascagoula Shipyard........................ 220,000 Own --
Pascagoula, Mississippi
</TABLE>
- --------
(1) Facility is temporarily closed until demand warrants reopening.
12
<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 Own
Property Name and Number Maximum Lifting Vessel or Expiration
Location Acreage Drydocks Capacity (Tons) Width (Feet) Lease Date
----------------- ------- -------- --------------- ------------ ----- ----------
<S> <C> <C> <C> <C> <C> <C>
Vessels Segment
Gretna Shipyard......... 30 1 1,800 55 Own --
Harvey, Louisiana
Halter Gulf Repair
Shipyard............... 59 4 22,400 120 Lease 2016
New Orleans, Louisiana
TDI-Halter Pier 1
Shipyard............... 4 1 10,000 126 Lease Monthly
Orange, Texas
Bludworth Bond-Houston
Shipyard............... 11 4 2,000 65 Own --
Houston, Texas
Bludworth Bond-Texas
City Shipyard.......... 4 3 4,500 80 Own --
Texas City, Texas
Halter-Calcasieu
Shipyard............... 35 3 2,200 60 Own --
Sulphur, Louisiana
Rigs Segment
TDI-Halter Childers
Road................... 9 -- -- -- Lease 2000
Orange, Texas(1)
TDI-Halter North Yard... 17 -- -- -- Own --
Port Arthur, Texas(1)
TDI-Halter Dock Yard
--Ship Mode 100 1 64,000 122
--Rig Mode 100 1 64,000 363 Lease 2009
Port Arthur, Texas
TDI-Halter Central
Yard................... 32 -- -- -- Own --
Sabine Pass, Texas(1)
TDI-Halter Sabine Yard.. 34 -- -- -- Own --
Sabine Pass, Texas
TDI-Halter South Yard... 21 -- -- -- Own --
Sabine Pass, Texas
</TABLE>
(1) Facility is temporarily closed until demand warrants reopening.
Engineered Products
The Company's Engineered Products segment headquarters is located in St.
Paul, Minnesota in two buildings that, together, occupy 47,000 square feet.
The Engineered Products segment also operates small satellite sales offices in
Houston, Texas; Metairie, Louisiana; Slidell, Louisiana; Covington Louisiana;
and Gulfport, Mississippi.
13
<PAGE>
The 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 and offshore 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 Segment
Gulf Coast Manufacturing Division
Slidell, Louisiana
Bayou Liberty Facility................... 54,250 Lease(1) 2000
Cabiran Road Facility.................... 100,750 Own --
Covington Manufacturing Division........... 46,000 Own --
Covington, Louisiana
Gulfport Manufacturing Division............ 30,000 Own --
Gulfport, Mississippi
</TABLE>
- --------
(1) Lease/purchase whereby the Company will own the facility at conclusion
of the lease.
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 1999.
14
<PAGE>
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
---- --- --------
<S> <C> <C>
John Dane III............ 48 Chairman, President and Chief Executive Officer
since September 1996. President of the Company
since 1987. Employed 1987.(1)
Daniel J. Mortimer....... 51 Former Executive Vice President and Chief
Operating Officer. Employed November 1997 until
May 1999, Director from April 1997 until June
1999. 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. Resigned as Executive Vice President and
Chief Operating Officer in May 1999. Resigned
from Board of Directors in June 1999.
Rick S. Rees............. 46 Executive Vice President since April 1997.
Director since September 1996. Chief Financial
Officer since November 1997. President, Maritime
Holdings, Inc., which was acquired by the
Company in 1997, from September 1996 to April
1997. President Maritime Capital Corporation,
1989 to 1996. Employed 1997.
Richard T. McCreary...... 43 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.
Maureen O'Connor 50 Senior Vice President, General Counsel and
Sullivan................ 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 complex commercial litigation.
Manager of the firm's Dallas office and member
of its Management Committee from 1989-1997.
Employed 1997.
Don O. Covington......... 64 Group President--TDI-Halter since April 1998.
From 1986 to 1998, President and Chief Executive
Officer of Texas Drydock, Inc., which was
acquired by the Company in 1997. Employed 1997.
Richard J. Juelich....... 48 Group President--Engineered Products Group since
April 1998. From 1992 to 1997, Chief Operating
Officer, and 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.
15
<PAGE>
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 the
record date is incorporated herein by reference from "Voting Securities and
Stockholders" in the definitive proxy statement for the Company's 1999 Annual
Meeting of Stockholders. The following table sets forth the high and low
closing sales price of the Company's common stock as reported on the American
Stock Exchange Composite Tape.
<TABLE>
<CAPTION>
Quarter High Low
------- ------ ------
<S> <C> <C>
Fiscal Year 1998
First..................................................... $17.38 $ 9.83
Second.................................................... 32.25 16.00
Third..................................................... 40.81 23.44
Fourth.................................................... 27.25 13.88
Fiscal Year 1999
First..................................................... $19.75 $13.88
Second.................................................... 18.44 8.50
Third..................................................... 10.81 4.13
Fourth.................................................... 7.50 3.69
</TABLE>
The Company has paid no dividends and does not expect to pay dividends in
the foreseeable future.
Sales of Unregistered Securities
In July 1998, the Company issued an aggregate of 33,820 shares of its common
stock to certain executives who elected to take the stock in lieu of the
deferred amount of a cash bonus for fiscal year 1998. The issuance of such
shares was the only issuance or sale of securities by the Company during its
most recently completed fiscal year which was not registered under the
Securities Act. Such issuance 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 Company's securities issued in connection with such
transaction contained a restrictive legend.
16
<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, 1999, 1998, 1997, 1996 and
1995 and consolidated income statement data for the fiscal years ended March
31, 1999, 1998, 1997, 1996 and 1995 have been derived from the audited
consolidated financial statements of the Company. The selected consolidated
financial data set forth below should be read in conjunction with Item 7,
"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.
<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------------------------------
1999 1998 1997 1996 1995
-------- --------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Income Statement Data:(4)
Contract revenue earned.... $998,149 $ 670,238 $406,797 $254,294 $250,586
Cost of revenue earned..... 912,131 589,579 355,209 214,559 207,398
-------- --------- -------- -------- --------
Gross profit............... 86,018 80,659 51,588 39,735 43,188
Selling, general and
administrative expenses... 60,442 38,613 21,361 15,911 13,471
Amortization of excess of
cost over net assets
acquired.................. 5,845 2,801 -- -- --
-------- --------- -------- -------- --------
Operating income........... 19,731 39,245 30,227 23,824 29,717
Interest expense........... 8,135 6,600 3,232 3,268 3,844
Other, net................. (719) 932 ( 8) (11) (5)
-------- --------- -------- -------- --------
Income before income
taxes..................... 12,315 31,713 27,003 20,567 25,878
Provision for income
taxes..................... (1,017) 9,197 10,887 8,102 10,170
-------- --------- -------- -------- --------
Net income................. $ 13,332 $ 22,516 $ 16,116 $ 12,465 $ 15,708
======== ========= ======== ======== ========
Net income per share, basic
(pro forma for 1996)(1)... $ 0.46 $ 0.80 $ 0.59 $ 0.46
======== ========= ======== ========
Net income per share,
diluted (pro forma for
1996)(1).................. $ 0.46 $ 0.78 $ 0.59 $ 0.46
======== ========= ======== ========
Net cash provided
(required) by:(4)
Operating activities....... $ (3,480) $ 38,324 $ 12,488 $ 23,742 $ 14,803
Investing activities....... $(62,863) $(107,697) $(14,491) $(15,687) $(10,443)
Financing activities....... $ 19,124 $ 113,440 $ 8,410 $ (7,907) $ (4,057)
Other Data:(4)
EBITDA(2).................. $ 44,149 $ 53,106 $ 38,134 $ 30,579 $ 35,136
Depreciation and
amortization.............. $ 24,607 $ 15,217 $ 7,899 $ 6,744 $ 5,414
Capital expenditures....... $ 47,863 $ 40,988 $ 14,491 $ 5,568 $ 6,337
<CAPTION>
March 31,
-------------------------------------------------
1999 1998 1997 1996 1995
-------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:(4)
Working capital............ $134,914 $ 151,057 $ 88,431 $ 36,601 $ 40,855
Total assets............... $591,780 $ 499,601 $209,411 $141,374 $124,271
Long-term debt(3).......... $239,727 $ 218,215 $ 52,000 $ 25,000 $ 25,000
Total equity............... $164,949 $ 151,103 $ 93,301 $ 66,743 $ 54,278
Backlog data............... $655,976 $ 817,102 $478,803 $431,292 $244,229
</TABLE>
- --------
(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) Prior to March 31, 1997, long-term debt represented intercompany notes due
to Trinity.
(4) Consolidated financial data for fiscal 1998 reflects the impact of
companies acquired during the year from the dates of acquisition.
17
<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, new construction, conversion
and repair services for ocean-going vessels, mobile offshore drilling rigs and
production platforms, 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, offshore 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 the new construction,
conversion and repair of mobile offshore drilling rigs and production
platforms. Operations within the Engineered Products segment include the
design, manufacture and marketing of cranes, derricks, hoists, windlasses,
jacks, linear winches, fairleads, capstans, tuggers, locking devices, turret
bearings, control systems, winches and other related products used in the
marine and offshore construction industries. At March 31, 1999, the Company
had 22 shipyards which are strategically located along the Gulf Coast from
Florida to Texas.
As of March 31, 1999, the Company had backlog with an aggregate remaining
value of approximately $656.0 million (excluding unexercised options held by
customers) covering construction of a total of 84 vessels, the new
construction of two multi-service drill barges, three semi-submersible rigs,
and one jackup drilling rig; and conversion or repair services on two mobile
offshore rigs. The Company anticipates that approximately $598 million of the
aggregate remaining value of this backlog will be completed during fiscal
2000.
Although the Company cannot predict future levels or the timing of activity
in offshore oil and gas exploration, development and production, the Company
is optimistic that 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. The demand for these products
could temporarily decrease as a result of short-term declines in oil prices as
it did during fiscal 1999. Orders generated by the Company's Engineered
Products segment are less directly related to the existing level of activity
in the offshore oil and gas exploration, development and production industry.
At March 31, 1999, the Company had 16 offshore support vessels, six rigs and
two drill barges under contract.
The Company also hopes 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 had two offshore double hull tank barges
under contract at March 31, 1999.
Pursuant to the provisions of a separation agreement with Trinity, the
Company is prohibited, for four years plus an additional period under certain
circumstances, after the separation from Trinity, from engaging in the
construction of inland hopper barges and inland tank barges. Under special
arrangements with Trinity, the Company has built a limited number of such
vessels. Revenue related to this business was $0.7 million, $23.1 million and
$19.9 million for fiscal years 1999, 1998 and 1997, respectively. The
Company's gross profit from such activities was $0.2 million, $2.0 million and
$2.2 million for fiscal years 1999, 1998 and 1997, 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.
18
<PAGE>
The Company believes its multiple yard strategy and aggressive recruiting of
personnel will protect it from labor shortfalls in any one market. The
production labor force grew from 5,604 employees at March 31, 1998 to 5,978
employees at March 31, 1999.
The Company has taken several steps during fiscal 2000 in response to
current market conditions including reallocation of production, allowing
temporary closure of certain yards until market demands warrant reopening, and
reduced levels of selling, general and administrative spending.
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 below. Revenues
generated by the Company's Rigs and Engineered Products segments are included
from dates of acquisition.
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------------------------------
1999 1998 1997
-------------- -------------- --------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Contract revenue earned by
business segment:
Vessels........................ $515.7 51.7% $476.3 71.1% $406.8 100.0%
Rigs........................... 355.7 35.6 159.9 23.9 -- --
Engineered Products............ 126.7 12.7 34.0 5.0 -- --
------ ----- ------ ----- ------ -----
$998.1 100.0% $670.2 100.0% $406.8 100.0%
====== ===== ====== ===== ====== =====
Contract revenue earned by
customer type:
Government:(1)
Vessels...................... $146.4 14.7% $171.9 25.6% $215.8 53.1%
Energy:(2)
Vessels...................... 234.7 23.5 180.1 26.9 86.1 21.1
Rigs......................... 355.7 35.6 159.9 23.9 -- --
------ ----- ------ ----- ------ -----
590.4 59.1 340.0 50.8 86.1 21.1
Commercial:(3)
Vessels...................... 44.7 4.5 62.8 9.4 81.4 20.0
Other(4)
Vessels...................... 89.9 9.0 61.5 9.2 23.5 5.8
Engineered Products.......... 126.7 12.7 34.0 5.0 -- --
------ ----- ------ ----- ------ -----
261.3 26.2 95.5 14.2 23.5 5.8
------ ----- ------ ----- ------ -----
$998.1 100.0% $670.2 100.0% $406.8 100.0%
====== ===== ====== ===== ====== =====
</TABLE>
- --------
(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 towboats 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.
19
<PAGE>
Fiscal 1999 Compared with Fiscal 1998
Contract revenue increased 48.9% to $998.1 million in the fiscal year ended
March 31, 1999 compared with $670.2 million in the fiscal year ended March 31,
1998. The majority of this increase in revenue was within the Rigs and
Engineered Products segments of the Company. The growth in revenue in the Rigs
segment was attributable to an increase in rig orders placed during fiscal
1998 in response to the favorable offshore drilling market conditions. Also
included in revenue in the Rigs segment was $9.0 million related to a contract
claim which is subject to meditation and possible arbitration. The growth in
revenue in the Engineered Products segment was partially attributable to the
fact that fiscal 1999 revenue reflected a full year of revenue compared to
only five months of revenue in the prior fiscal year. Revenue generated from
the energy customer group of the Vessels segment grew as a result of increased
construction of offshore support vessels. The "other" customer group within
the Vessels segment experienced revenue growth due to increased vessel repair
activity and increased orders for yachts. The decline in government revenue
within the Vessels segment occurred because fiscal 1998 included revenue from
a contract for a ferry that was being constructed for the State of Alaska that
closed in early fiscal 1999 and was not replaced.
The gross profit margin decreased to 8.6% in fiscal 1999 compared to 12.0%
in fiscal 1998. The overall decrease in gross margin was primarily a result of
a decline in the gross margin experienced in the Rigs segment. The Rigs
segment gross margin decreased principally as a result of cost overruns
associated with the new construction of five of six multi-service drill
barges. These cost overruns were principally related to delays in owner
furnished contract drawings, engineering delays, owner-imposed changes, an
accelerated delivery schedule, and a shortage of trained supervision. The
Company has made a claim to recover certain of these costs as described in the
paragraph above. Additionally, production delays in the Rigs segment were
experienced during the second quarter of the current year resulting from the
effects of two tropical storms that affected the Texas coast. The gross margin
in the Vessels segment remained relatively stable compared to the prior year.
Gross profit margins, by segment, for fiscal 1999 were: Vessels, 8.8%; Rigs,
4.9%; and Engineered Products, 18.0%. Gross profit margins, by segment, for
fiscal 1998 were: Vessels, 8.2%; Rigs, 22.9%; and Engineered Products, 14.9%.
Selling, general and administrative expenses increased $21.8 million to
$60.4 million in fiscal 1999, or 6.1% of revenue, compared to $38.6 million,
or 5.8% of revenue, in fiscal 1998. Major increases in expenses included:
salaries and employee related expenses, $6.8 million; management and
consulting fees, $8.1 million; legal fees, $1.0; and expenses associated with
bids and proposals on new contracts, $1.1 million. Of the $8.1 million
increase in management and consulting fees, $7.4 million is related to a
business improvement project undertaken in the Vessels segment during the
latter part of fiscal 1998. The Company expects to spend and additional $2.1
million on consulting fees related to this project during fiscal 2000.
The Company's construction backlog decreased 20% to $656.0 million at March
31, 1999 compared to $817.1 million at March 31, 1998 and consisted of the
following as of March 31:
<TABLE>
<CAPTION>
1999 1998
-------------------------------- --------------------------------
Engineered Engineered
Vessels Rigs Products Total Vessels Rigs Products Total
------- ------ ---------- ------ ------- ------ ---------- ------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Backlog by customer
type:
Government............ $124.2 $ -- $ -- $124.2 $179.3 $ -- $ -- $179.3
Commercial............ 47.4 -- -- 47.4 29.6 -- -- 29.6
Energy................ 121.3 268.2 -- 389.5 285.8 228.7 -- 514.5
Other................. 22.3 -- 72.6 94.9 34.0 -- 59.7 93.7
------ ------ ----- ------ ------ ------ ----- ------
$315.2 $268.2 $72.6 $656.0 $528.7 $228.7 $59.7 $817.1
====== ====== ===== ====== ====== ====== ===== ======
</TABLE>
Interest expense, net of interest income, increased $1.5 million to $8.1
million for fiscal 1999 compared to $6.6 million for fiscal 1998 primarily due
to the issuance, by the Company, of $30 million in Taxable Revenue
20
<PAGE>
Bonds in January 1998 and cash advances under the Company's revolving credit
facility. These increases were offset by $1.7 million of interest capitalized
on self-constructed assets.
Amortization of excess of cost over net assets acquired increased $3.0
million to $5.8 million for fiscal 1999 compared to $2.8 million for fiscal
1998 as fiscal 1999 included a full year effect of amortization on fiscal 1998
acquisitions and certain purchase accounting adjustments.
Income before income taxes decreased $19.4 million or 61.2% to $12.3 million
for the fiscal year ended March 31, 1999 compared to $31.7 million for the
fiscal year ended March 31, 1998. The decrease was the result of a decline in
gross profit margin as well as increases in selling, general and
administrative expenses, interest expense, and amortization of excess of cost
over net assets acquired as discussed above. The Company does not expect its
gross margin percentage to improve significantly during fiscal 2000,
principally because its Rigs segment contains several contracts on which it
expects to earn minimal gross profit. The Company does not anticipate
continued increases in its selling, general and administrative expenses during
fiscal 2000, as the Company has implemented a plan to reduce these expenses.
Interest expense is expected to increase during fiscal 2000 resulting from
projected increased borrowings under the Company's revolving credit facility,
and a reduced amount of capitalized interest.
The Company recorded an income tax benefit of $1.0 million or an 8.3%
effective tax rate for fiscal 1999 compared to income tax expense of $9.2
million or a 29% effective tax rate for fiscal 1998. The benefit for the
current year reflects tax credits for the Company's research and development
activities, and, the write-off for tax purposes, of the Company's investment
in an international joint venture. The write-off of the investment in joint
venture was recorded as a purchase accounting adjustment for financial
accounting purposes. Additionally, a refund of income taxes previously paid to
Trinity Industries, Inc., the Company's former parent, also favorably impacted
the Company's income tax position for fiscal 1999. The Company does not
anticipate that its income tax rate during fiscal 2000 will be similarly
impacted.
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. 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
21
<PAGE>
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'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:
<TABLE>
<CAPTION>
1998 1997
-------------------------------- -------
Engineered
Vessels Rigs Products Total Vessels
------- ------ ---------- ------ -------
(in thousands)
<S> <C> <C> <C> <C> <C>
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
====== ====== ===== ====== ======
</TABLE>
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.
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 1999 were cash provided by cash balances
and borrowings from the Company's existing credit facility. Cash flows during
fiscal 1999 from these sources were $51 million from cash and cash equivalent
balances at the beginning of the year and $22 million from the existing credit
facility. These sources were used primarily to fund the Company's working
capital requirements and capital expenditures.
Effective April 23, 1999, the Company entered into an amended and restated
secured credit agreement with a group of banks, decreasing the maximum loan
amount from $150 million to $125 million, to be used for general corporate
purposes and working capital. The credit agreement is secured by substantially
all of the assets of the Company. Any amounts outstanding under the new credit
agreement will become payable on September 30, 2001. The interest rate is
1.65% to 2.90% over the London Interbank Offering Rate ("LIBOR"), or the base
rate (as defined), at the Company's choice. The margin over LIBOR is set
quarterly, depending on the ratio of the Company's total 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 of .25% to .50%
of the unused portion of the commitment. The new loan agreement contains
certain financial covenants, including minimum net worth requirements (as
defined), an interest coverage ratio (as defined), a fixed charge ratio (as
defined), and a leverage ratio (as defined).
22
<PAGE>
The Company made capital expenditures, including construction in process, of
$48 million, $42 and $14 million in fiscal 1999, 1998 and 1997, respectively.
The Company currently has budgeted approximately $20 million (excluding
acquisitions) for planned capital projects at its current operating facilities
for fiscal 1999.
The Company believes that cash flow from operations, cash on hand, and funds
available under the existing credit facility, 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 has formed a Year 2000 Project team ("Project 2000") responsible
for identifying the functions affected by Year 2000 and has developed a plan
to reduce the potentially harmful impact of Year 2000 issues on its
operations. The focus of Project 2000 is segregated into three areas:
information technology, which primarily includes the Company's financial
applications and voice communication equipment; production processes and
systems, which primarily includes machinery and equipment with embedded
technology and software used in the design and production of its products; and
external agents, which includes key business relationships with vendors,
customers, and other third parties including, but not limited to, financial
institutions. An evaluation of each of these areas has been or is being
performed according to the following four phases: assessment, remediation,
testing and implementation.
Project 2000 has completed its assessment of significant software used in
the information technology area and is currently in the remediation, testing
and implementation phases of this area. Each of these phases is expected to be
completed by September 1999. The Company has determined that its financial
software is Year 2000 compliant and expects to be able to continue to take
customer orders, invoice customers, collect payments and process payments to
vendors. Project 2000 has substantially completed its assessment of the
production processes and systems area and has begun the remediation, testing,
and implementation phases which it expects to complete by September 1999.
Assessment, remediation, testing and implementation measures are currently
underway in the area of external agents. These phases are expected to be
completed by September 1999. Beginning in August 1998, the Company developed
purchasing guidelines designed to limit the Company's liability for Year 2000
non-compliant products provided by suppliers that are used either by the
Company or installed in its products. The Company has circulated Year 2000
questionnaires among its major vendors giving them the opportunity to inform
the Company of their efforts to become Year 2000 compliant. As of this report
date, the Company has experienced a response rate from its major vendors of
approximately 41%, none of which have indicated situations of Year 2000 non-
compliance which the Company believes would materially affect its operations.
In the event of non-responses, the Company has developed a list of Year 2000
compliant strategic vendors that it expects to be available to replace the
vendors that do not offer an adequate level of assurance that they will be
Year 2000 compliant. The Company has substantially completed an assessment of
its exposure to failure to
23
<PAGE>
deliver products or services to its customers by reviewing components and
systems of products scheduled for delivery through the year 2000. This
assessment includes evaluation of the terms and conditions of purchases of
equipment and supplies necessary to deliver its products and services to
determine if they are compliant with the previously mentioned purchasing
guidelines. Remediation, testing, and implementation in this area is expected
to be completed in September 1999. Based upon its procedures to date, the
Company does not anticipate significant exposure related to its vendors,
customers, or other third parties.
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.
Management believes it has an effective program in place to resolve Year
2000 issues in a timely manner. The Company expects to complete all phases of
its Year 2000 review by September 1999; although the Company will continuously
take steps to reaffirm Year 2000 compliance in the areas of information
technology, production processes and systems, and external agents. The Company
is still in the process of reviewing machinery and equipment used to
manufacture products. In the event that the Company is unable to remediate
potential problems, if any, with this equipment, the Company may be unable to
manufacture products on a timely basis. Disruptions in the economy generally
resulting from Year 2000 issues could materially adversely affect the Company.
The Company could be subject to litigation for failure of computer systems
installed in its products. The amount of potential liability and lost revenue
cannot be estimated at this time.
The Company is in the process of developing a contingency plan in the event
that material year 2000 situations arise. The Company expects to have
completed this plan by September 1999.
Item 7a. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to market risks, primarily changes in interest rates
in the United States. The Company has not used derivative financial
instruments to manage its interest rate risk or engage in speculative
transactions. The following table provides information about the Company's
future maturities of principal for outstanding debt instruments and related
weighted-average interest rates. The table also provides the fair value of
outstanding debt instruments at March 31, 1999.
<TABLE>
<CAPTION>
March 31,
------------------------------------
Fair
2000 2001 2002 2003 2004 Thereafter Value
------- ----- ---------- ----- ----- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Long-term debt,
including current
portion
Fixed rate............ $ 2,839 $117 $126 $137 $149 $217,727 $131,766
Avg. interest rate.... 4.76% 4.76% 4.76% 4.76% 4.76% 4.76%
Variable rate......... -- -- $22,000 -- -- -- $ 22,000
Avg. interest rate.... -- -- LIBOR -- -- --
plus 0.75%
to 1.75%
</TABLE>
24
<PAGE>
Item 8: Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors............................................. 26
Consolidated Balance Sheets................................................ 27
Consolidated Statements of Income.......................................... 28
Consolidated Statements of Stockholders' Equity............................ 29
Consolidated Statements of Cash Flows...................................... 30
Notes to Consolidated Financial Statements................................. 31
</TABLE>
25
<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, 1999 and 1998, and the
related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended March 31, 1999. 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, 1999 and 1998, and the consolidated
results of their operations and their cash flows for each of the three years
in the period ended March 31, 1999 in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
New Orleans, Louisiana
May 12, 1999, except for Note 17,
as to which the date is June 1, 1999
26
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 31,
-----------------
1999 1998
ASSETS -------- --------
<S> <C> <C>
Current Assets:
Cash and cash equivalents.................................. $ 3,927 $ 51,146
Contract receivables ...................................... 117,376 115,389
Costs and estimated earnings in excess of billings on
uncompleted contracts..................................... 146,313 81,229
Inventories................................................ 33,501 19,692
Other current assets....................................... 11,408 5,124
-------- --------
Total current assets..................................... 312,525 272,580
Property, plant and equipment, net........................... 170,972 125,962
Excess of cost over net assets acquired, net................. 99,977 92,101
Other assets ................................................ 8,306 8,958
-------- --------
$591,780 $499,601
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable and accrued liabilities................... $ 85,529 $ 51,433
Billings in excess of costs and estimated earnings on
uncompleted contracts..................................... 89,243 68,172
Notes payable and current portion of long-term debt........ 2,839 1,918
-------- --------
Total current liabilities................................ 177,611 121,523
Long-term debt, less current portion......................... 239,727 218,215
Deferred income taxes ....................................... 9,445 7,025
Other noncurrent liabilities................................. 48 1,735
-------- --------
Total liabilities........................................ 426,831 348,498
Stockholders' equity:
Common stock, $.01 par value; authorized 150,000 shares;
issued 28,857 and 28,822 shares at March 31, 1999 and
1998, respectively........................................ 288 288
Preferred stock, authorized 1,000 shares; issued, none..... -- --
Additional paid-in capital ................................ 119,910 119,396
Retained earnings.......................................... 44,751 31,419
-------- --------
Total stockholders' equity............................... 164,949 151,103
-------- --------
$591,780 $499,601
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
March 31,
----------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Contract revenue earned......................... $998,149 $670,238 $406,797
Cost of revenue earned ......................... 912,131 589,579 355,209
-------- -------- --------
Gross profit.................................. 86,018 80,659 51,588
Selling, general and administrative expenses.... 60,442 38,613 21,361
Amortization of excess of cost over net assets
acquired....................................... 5,845 2,801 --
-------- -------- --------
Operating income.............................. 19,731 39,245 30,227
Other (income) expenses:
Interest expense, net......................... 8,135 6,600 3,232
Other, net.................................... (719) 932 (8)
-------- -------- --------
7,416 7,532 3,224
-------- -------- --------
Income before income taxes...................... 12,315 31,713 27,003
Provision (benefit) for income taxes:
Current ...................................... (3,437) 10,253 5,125
Deferred...................................... 2,420 (1,056) 5,762
-------- -------- --------
(1,017) 9,197 10,887
-------- -------- --------
Net income ..................................... $ 13,332 $ 22,516 $ 16,116
======== ======== ========
Net income per share............................ $ 0.46 $ 0.80 $ 0.59
======== ======== ========
Net income per share, diluted................... $ 0.46 $ 0.78 $ 0.59
======== ======== ========
Weighted average shares outstanding:
Basic......................................... 28,846 28,052 27,281
Diluted....................................... 28,990 29,008 27,339
</TABLE>
See accompanying notes to consolidated financial statements.
28
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Additional Stockholder's
Common Paid-In Retained Net
Stock Capital Earnings Investment Total
------ ---------- -------- ------------- --------
<S> <C> <C> <C> <C> <C>
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
Issuances of common stock:
Employee stock options.. -- 21 -- -- 21
Employee bonuses........ -- 493 -- -- 493
Net income................ -- -- 13,332 -- 13,332
---- -------- ------- -------- --------
Balances at March 31, 1999.. $288 $119,910 $44,751 $ -- $164,949
==== ======== ======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year ended March 31,
----------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Operating activities:
Net income...................................... $ 13,332 $ 22,516 $ 16,116
Adjustments to reconcile net income to net cash
provided (required) by operating activities:
Depreciation and amortization.................. 24,607 15,217 7,899
Deferred provision (benefit) for income taxes.. 2,420 (1,056) 5,762
Changes in operating assets and liabilities:
Increase in contract receivables............... (1,987) (42,255) (27,713)
Decrease in due from former parent............. -- 11,513 --
(Increase) decrease in costs and estimated
earnings in excess of billings on uncompleted
contracts..................................... (65,084) 984 (9,799)
(Increase) decrease in inventories............. (13,809) (771) (4,764)
(Increase) decrease in other current assets.... 1,101 (105) (4,114)
(Increase) decrease in other assets............ (190) 707 --
Increase (decrease) in accounts payable and
accrued liabilities........................... 16,746 (8,463) 35,491
Decrease in income taxes payable to affiliate.. -- -- (15,785)
Increase in billings in excess of costs and
estimated earnings on uncompleted contracts... 21,071 40,269 7,428
Increase (decrease) in other noncurrent
liabilities................................... (1,687) (232) 1,967
-------- -------- --------
Net cash provided (required) by operating
activities..................................... (3,480) 38,324 12,488
-------- -------- --------
Investing activities:
Capital expenditures............................ (47,863) (40,988) (14,491)
Business acquisitions, net of cash acquired..... (15,000) (66,709) --
-------- -------- --------
Net cash required by investing activities..... (62,863) (107,697) (14,491)
-------- -------- --------
Financing activities:
Net proceeds from sale and issuance of stock.... 21 72 35,442
Net borrowings from former parent............... -- -- (79,032)
Issuance of long-term subordinated debentures... -- 185,000 --
Issuance of taxable revenue bonds............... -- 30,000 --
Debt issuance costs............................. (34) (6,013) --
Principal payments on debt...................... (2,863) (43,619) --
Net borrowings (repayments) under line of
credit......................................... 22,000 (52,000) 52,000
-------- -------- --------
Net cash provided by financing activities..... 19,124 113,440 8,410
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents..................................... (47,219) 44,067 6,407
Cash and cash equivalents at beginning of year... 51,146 7,079 672
-------- -------- --------
Cash and cash equivalents at end of year......... $ 3,927 $ 51,146 $ 7,079
======== ======== ========
Supplemental disclosures:
Cash paid for:
Interest........................................ $ 11,525 $ 8,519 $ 1,586
======== ======== ========
Income taxes.................................... $ 9,830 $ 5,455 $ --
======== ======== ========
Purchase of subsidiaries........................ $ 15,000 $ 66,928 $ --
======== ======== ========
Fair value of assets of subsidiaries purchased... $ 15,000 $ 90,748 $ --
======== ======== ========
Fair value of liabilities of subsidiaries
assumed......................................... $ -- $ 56,511 $ --
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
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 that formerly
conducted the business of construction, repair and conversion of primarily
ocean-going vessels for the governmental and commercial markets for Trinity
Industries, Inc. ("Trinity"). On September 26, 1996, Halter Marine Group, Inc.
and subsidiaries (collectively, the "Company") completed an initial public
offering of 16.7% of its stock (18.7% after the underwriters exercised their
overallotment option). 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 its new
construction contracts in process. Under the percentage of completion method
used in its Vessels and Rigs segments, revenues from 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 its vessels and rigs
contracts. Under the percentage of completion method used in its Engineered
Products segment, revenue from contracts is measured by the percentage of cost
incurred as compared to estimated total cost for each contract. Management
considers cost incurred to be the best available measure of progress on its
31
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
engineered products 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. An amount equal to contract cost attributable to claims is
included in revenues when realization is probable and the amount can be
reliably estimated.
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 revenues recognized in excess of amounts
billed. The liability, "Billings in excess of costs and estimated earnings on
uncompleted contracts," represents billings in excess of revenues 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 repair 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 goodwill
was $8.6 million and $2.8 million as of March 31, 1999 and 1998, respectively.
Other Assets
Other assets includes $6.0 million of debt issuance costs capitalized in
conjunction with the issuance of the $185.0 million of 4 1/2% Convertible
Subordinated Notes and the $30.0 million of Taxable Revenue Bonds. These costs
are being amortized over the life of the related debt. Accumulated
amortization of debt issuance costs was $1.2 million and $0.4 million at March
31, 1999 and 1998, respectively.
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
32
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
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 1998 and
1997 have been reclassified to conform with the 1999 presentation.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which is required to be adopted in fiscal years
beginning after June 15, 2000. Because of the Company's minimal use of
derivatives, management does not anticipate that the adoption of the new
statement will have a significant effect on financial position or earnings of
the Company.
33
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. Business Acquisitions
The Company completed certain business acquisitions during fiscal 1999 and
1998, 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 May 29, 1998, the Company acquired all of the outstanding common stock of
Trinity Marine Orange, Inc. ("Orange") of Orange, Texas. The total purchase
price of $15.0 million, paid in cash, was allocated to property, plant and
equipment.
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.
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 twelve months ended March 31, 1998 and
1997, assuming consummation of the purchase of TDI and the Engineered Products
Group as of April 1, 1997 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 expense. 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., 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 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
34
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
respective former owners. The additional payments, which are not expected to
be material, will be accounted for as additional excess of cost over net
assets acquired.
During fiscal 1999, cost in excess of net assets acquired increased
approximately $13.7 million as a result of contingent payment provisions
included in the Bludworth Bond Shipyard purchase agreement and changes in
preacquisition contingencies.
4. Costs and Estimated Earnings on Uncompleted Contracts
<TABLE>
<CAPTION>
March 31,
---------------------
1999 1998
---------- ----------
(in thousands)
<S> <C> <C>
Costs incurred on uncompleted contracts................... $1,228,071 $1,064,026
Estimated earnings........................................ 112,790 130,607
---------- ----------
1,340,861 1,194,633
Less billings to date..................................... 1,283,791 1,181,576
---------- ----------
$ 57,070 $ 13,057
========== ==========
Included in the following balance sheet captions:
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. $ 146,313 $ 81,229
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 89,243 68,172
---------- ----------
$ 57,070 $ 13,057
========== ==========
</TABLE>
Costs and estimated earnings in excess of billings includes $9 million
relating to a claim arising from a dispute with a customer over design and
specification changes in certain drill barges. In the opinion of counsel, the
Company has a valid claim against the customer.
5. Property, Plant and Equipment
<TABLE>
<CAPTION>
March 31,
-----------------
1999 1998
-------- --------
(in thousands)
<S> <C> <C>
Land......................................................... $ 15,847 $ 13,676
Buildings and improvements................................... 81,602 64,849
Machinery and equipment...................................... 135,913 104,448
Construction in progress .................................... 27,112 16,418
-------- --------
260,474 199,391
Less accumulated depreciation................................ 89,502 73,429
-------- --------
Property, plant and equipment, net........................... $170,972 $125,962
======== ========
</TABLE>
6. Long-Term Debt
<TABLE>
<CAPTION>
March 31,
-----------------
1999 1998
-------- --------
(in thousands)
<S> <C> <C>
4 1/2% Convertible Subordinated Notes........................ $185,000 $185,000
Taxable Revenue Bonds, Series 1998........................... 30,000 30,000
Revolving Credit Agreement................................... 22,000 --
Other........................................................ 5,566 5,133
-------- --------
242,566 220,133
Less current portion......................................... 2,839 1,918
-------- --------
$239,727 $218,215
======== ========
</TABLE>
35
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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
Agreement (the "Indenture") which provides that the Notes are convertible at
the option of the holder into shares of common stock of the Company at a
conversion rate of $31.50 per share, subject to adjustment for certain events
(as defined in the Indenture).
Interest on the Notes is payable semiannually, in arrears, on March 15 and
September 15 of each year, with principal due at maturity.
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 semiannually, in arrears, on June 30 and December 31 of each
year, 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.
Revolving Credit Agreement
At March 31, 1999, the Company had a revolving credit agreement with a group
of banks with a maximum loan amount of $150 million. Any amounts outstanding
under this revolving credit agreement would have become payable on September
30, 2002. Letters of credit were limited to an aggregate of $50 million. The
interest rate was 0.75% to 1.75% over the London Interbank Offered Rate
(LIBOR), or the base rate (as defined), at the Company's option. The margin
over LIBOR was set quarterly, depending on the ratio of the Company's total
debt to EBITDA (as defined). Effective December 31, 1998 through April 23,
1999, the Company was in violation of certain financial covenants included in
this credit agreement. The group of banks waived non-compliance with these
covenants during this period.
36
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Effective April 23, 1999, the Company entered into an amended and restated
secured credit agreement decreasing the maximum loan amount from $150 million
to $125 million. The credit agreement is secured by substantially all of the
assets of the Company. Any amounts outstanding under the new credit agreement
will become payable on September 30, 2001. The interest rate is 1.65% to 2.90%
over the London Interbank Offered Rate ("LIBOR"), or the base rate (as
defined), at the Company's option. The margin over LIBOR is set quarterly,
depending on the ratio of the Company's total 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 0.25% to
0.50% of the unused portion of the commitment. The new loan agreement contains
certain financial covenants, including minimum net worth requirements (as
defined), an interest coverage ratio (as defined), a fixed charge ratio (as
defined), and a leverage ratio (as defined).
At March 31, 1999, the Company had $22 million in cash advances under the
credit agreement with no additional amount available. As of April 23, 1999,
availability under the credit agreement was $23 million.
Other Debt
Other long-term debt of $5.6 million at March 31, 1999 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, buildings, docking facilities, and improvements and
machinery and equipment with a net book value approximating $8.7 million. The
notes have final maturities ranging from the year 2000 through 2013.
Scheduled maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Year ending March 31 Amount
-------------------- --------------
(in thousands)
<S> <C>
2000....................................................... $ 2,839
2001....................................................... 117
2002....................................................... 22,126
2003....................................................... 137
2004....................................................... 149
-------
$25,368
=======
</TABLE>
Interest capitalized during the year ended March 31, 1999 was $1.7 million.
No interest was capitalized during the years ended March 31, 1998 and 1997.
The fair value of the Company's 4 1/2% convertible subordinated notes as of
March 31, 1999 was $96.2 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 noncancelable
operating leases which expire at various dates through the year 2016. Total
lease expense recorded by the Company was $2.0 million, $0.9 million, and $0.3
million for fiscal 1999, 1998, and 1997, respectively.
37
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Future minimum lease commitments are as follows:
<TABLE>
<CAPTION>
Year ending March 31, Amount
--------------------- --------------
(in thousands)
<S> <C>
2000....................................................... $ 3,759
2001....................................................... 3,457
2002....................................................... 3,140
2003....................................................... 3,058
2004....................................................... 2,985
Thereafter................................................. 10,600
-------
$26,999
=======
</TABLE>
8. Segment Information
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,
offshore 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 the new construction, conversion
and repair of mobile offshore drilling rigs and production platforms.
Operations within the Engineered Products segment include the design,
manufacture and marketing of cranes, derricks, hoists, windlasses, jacks,
linear winches, fairleads, capstans, tuggers, locking devices, turret
bearings, control systems, winches and other related products used in the
marine and offshore construction industries. The Company evaluates the
performance of its 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."
38
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Selected information as to the operations of the Company by segment is set
forth below.
<TABLE>
<CAPTION>
Year Ended March 31, 1999
--------------------------------------
Engineered
Vessels Rigs Products Total
-------- -------- ---------- --------
(in thousands)
<S> <C> <C> <C> <C>
Operations:
Contract revenue earned.............. $515,693 $355,732 $126,724 $998,149
Cost of revenue earned............... 470,087 338,140 103,904 912,131
-------- -------- -------- --------
Gross profit....................... 45,606 17,592 22,820 86,018
Selling, general and administrative
expenses............................ 40,966 11,718 7,758 60,442
Amortization of excess of cost over
net assets acquired................. 564 1,859 3,422 5,845
Other, net........................... (681) -- (38) (719)
-------- -------- -------- --------
Income before interest and income
taxes............................. $ 4,757 $ 4,015 $ 11,678 $ 20,450
======== ======== ======== ========
<CAPTION>
Year Ended March 31, 1998
--------------------------------------
Engineered
Vessels Rigs Products Total
-------- -------- ---------- --------
(in thousands)
<S> <C> <C> <C> <C>
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
======== ======== ======== ========
</TABLE>
Certain other financial information of the Company by segment is set forth
below.
<TABLE>
<CAPTION>
Year Ended March 31, 1999
-------------------------------------------
Engineered
Vessels Rigs Products Corporate Total
------- ------ ---------- --------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Other financial information:
Depreciation and amortization
expense:
Included in cost of revenue
earned.......................... $12,930 $2,975 $ 509 $ -- $16,414
Included in selling, general and
administrative expenses......... 1,684 2,102 3,499 -- 7,285
Included in interest expense..... -- -- -- 908 908
------- ------ ------ ---- -------
$14,614 $5,077 $4,008 $908 $24,607
======= ====== ====== ==== =======
<CAPTION>
Year Ended March 31, 1998
-------------------------------------------
Engineered
Vessels Rigs Products Corporate Total
------- ------ ---------- --------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Other financial information:
Depreciation and amortization
expense:
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 -- 3,317
Included in interest expense..... -- -- -- 424 424
------- ------ ------ ---- -------
$ 9,942 $3,551 $1,300 $424 $15,217
======= ====== ====== ==== =======
</TABLE>
39
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For consolidation purposes, all interest and income taxes are allocated to
corporate operations. Operations for fiscal 1997 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 1999 and 1997 revenue from these customers was less than 10%
of total contract revenue earned.
Total assets and capital expenditures of the Company by segment are set
forth below.
<TABLE>
<CAPTION>
As of and for the Year Ended March 31, 1999
-------------------------------------------------
Engineered
Vessels Rigs Products Adjustments Total
-------- -------- ---------- ----------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Total assets.................. $347,328 $120,797 $109,724 $13,931 $591,780
======== ======== ======== ======= ========
Capital expenditures.......... $ 22,193 $ 24,757 $ 913 $ -- $ 47,863
======== ======== ======== ======= ========
<CAPTION>
As of and for the Year Ended March 31, 1998
-------------------------------------------------
Engineered
Vessels Rigs Products Adjustments Total
-------- -------- ---------- ----------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Total assets.................. $263,820 $102,029 $ 85,247 $48,505 $499,601
======== ======== ======== ======= ========
Capital expenditures.......... $ 26,453 $ 8,840 $ 383 $ 5,312 $ 40,988
======== ======== ======== ======= ========
</TABLE>
For consolidation purposes, certain cash and cash equivalent balances 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.
9. Reconciliation of Net Income Per Share
The following table sets forth the computation of basic and diluted net
income per share:
<TABLE>
<CAPTION>
Year Ended March 31,
-----------------------
1999 1998 1997
------- ------- -------
(in thousands, except
per share data)
<S> <C> <C> <C>
Numerator:
Net income........................................... $13,332 $22,516 $16,116
======= ======= =======
Numerator for net income per share, diluted ......... $13,332 $22,516 $16,116
======= ======= =======
Denominator:
Denominator for net income per share--weighted
average shares outstanding.......................... 28,846 28,052 27,281
Effect of dilutive securities:
Stock options...................................... 144 956 58
------- ------- -------
Denominator for net income per share, diluted........ 28,990 29,008 27,339
======= ======= =======
Net income per share................................... $ 0.46 $ 0.80 $ 0.59
======= ======= =======
Net income per share, diluted.......................... $ 0.46 $ 0.78 $ 0.59
======= ======= =======
</TABLE>
40
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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, Chairman, President, and Chief Executive Officer of the
Company, acquired 25% of the stock of United States Marine, Inc. ("USMI") in
June 1996 with a commitment to acquire an additional 50% over the next five
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 1999, 1998 and 1997, the Company paid USMI fees of approximately
$5.7 million, $4.8 million and $7.2 million, respectively, for subcontractor
services.
During fiscal 1999 and 1998, the Company leased certain equipment and
purchased certain materials from Gulf Coast Industries, Inc. ("GCI"), a
company 50% owned by Mr. Daniel J. Mortimer, former Executive Vice President,
Chief Operating Officer and Director. The Company made payments to GCI
totaling $0.2 million during fiscal 1999 and 1998, respectively. During fiscal
1998, GCI acquired Cajan Wire, Inc., which, from time to time, is a vendor to
the Company. The Company made payments to Cajan Wire, Inc. totaling $1.2
million and $0.2 million during fiscal 1999 and 1998, respectively. Mr.
Mortimer resigned his position as an executive officer in May 1999 and as a
director in June 1999.
For 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.
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. The majority of this amount was paid by
Trinity in fiscal 1998.
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 noncompete 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
nonrestricted 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.
41
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Following is a summary of the option activity for the years ended March 31,
1999, 1998 and 1997:
<TABLE>
<CAPTION>
Weighted
Average
Shares Price
--------- --------
<S> <C> <C>
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
Granted............................................. 376,500 15.99
Cancelled........................................... (108,000) 15.08
Exercised........................................... (2,100) 10.33
---------
Outstanding at March 31, 1999......................... 3,268,600 $14.58
========= ======
Exercisable at March 31, 1999......................... 649,360 $13.66
========= ======
Exercisable at March 31, 1998......................... 60,300 $ 7.33
========= ======
Exercisable at March 31, 1997......................... -- $ --
========= ======
</TABLE>
The following table summarizes information about stock options outstanding
at March 31, 1999:
<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>
$4.125 to $10.44........... 1,883,600 9.2 years $ 9.75 432,900 $ 9.43
$12.00 to $16.50........... 506,500 8.8 years $15.91 31,700 $14.73
$19.33 to $27.25........... 557,000 8.6 years $19.72 111,400 $19.72
$30.50 to $34.88........... 321,500 9.6 years $31.89 64,300 $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 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 1999, 1998 and 1997 are amortized to expense over the
options' vesting period.
42
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Year Ended March 31,
-----------------------------------------------------------------
1999 1998 1997
--------------------- --------------------- ---------------------
As Reported Pro Forma As Reported Pro Forma As Reported Pro Forma
----------- --------- ----------- --------- ----------- ---------
(in thousands, except net income per share)
<S> <C> <C> <C> <C> <C> <C>
Net income.............. $13,332 $8,361 $22,516 $19,343 $16,116 $15,912
Net income per share,
diluted................ $ 0.46 $ 0.29 $ 0.78 $ 0.67 $ 0.59 $ 0.58
</TABLE>
The weighted average grant date fair value of options granted during the
year ended March 31, 1999 was $10.30. 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
5.60%, expected life of 7 years, expected volatility of .589 and no dividend
yield.
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 frozen 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.
The Company has adopted Statement of Financial Accounting Standard No. 132,
"Employer's Disclosures about Pension and Other Postretirement Benefits,"
which revises the required disclosures about pension and other postretirement
benefit plans. The following table summarizes the changes in benefit
obligations and plan assets during the years ended March 31, 1999 and 1998 and
the funded status of the pension plan at March 31, 1999 and 1998:
<TABLE>
<CAPTION>
March 31,
---------------
1999 1998
------ -------
<S> <C> <C>
Changes in benefit obligations:
Benefit obligation at beginning of year................ $7,789 $ 6,644
Service cost........................................... -- 1,035
Interest cost.......................................... 605 572
Actuarial (gains) losses............................... 905 2,211
Curtailment............................................ -- (2,668)
Benefits paid.......................................... (25) (5)
------ -------
Benefit obligation at end of year.................... $9,274 $ 7,789
====== =======
</TABLE>
43
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
March 31,
----------------
1999 1998
------- -------
(in thousands)
<S> <C> <C> <C>
Change in plan assets:
Fair value of plan assets at beginning of year............ $ 7,683 $ 5,437
Actual return on plan assets.............................. 833 2,251
Company contributions..................................... 1,134 --
Benefits paid............................................. (25) (5)
------- -------
Fair value of plan assets at end of year.................. $ 9,625 $ 7,683
======= =======
Funded status of the plan (underfunded)................... $ 351 $ (106)
Unrecognized net actuarial loss........................... 829 --
------- -------
Prepaid (accrued) benefit cost............................ $ 1,180 $ (106)
======= =======
Assumptions used in actuarial calculations were as follows:
Weighted average assumptions:
Discount rate............................................. 7.00% 7.00%
Expected return on plan assets............................ 9.00 9.00
Rate of compensation increase............................. -- 4.75
Net periodic benefit cost includes the following components:
<CAPTION>
March 31,
-----------------------
1999 1998 1997
----- ------- -------
(in thousands)
<S> <C> <C> <C>
Components of net periodic benefit cost:
Service cost........................................ $ -- $ 1,035 $ 807
Interest cost....................................... 605 572 501
Expected return on plan assets...................... (758) (489) (502)
Amortization of prior service cost.................. -- (2) (2)
Amortization of transition asset.................... -- (23) (23)
Recognized actuarial loss........................... -- 124 67
Curtailment......................................... -- (458) --
----- ------- -------
Benefit cost........................................ $(153) $ 759 $ 848
===== ======= =======
</TABLE>
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 pretax contributions which are matched, up to certain limits, by the
Company. Expenses related to this plan approximated $4.0 million, $2.0 million
and $0.9 million in 1999, 1998 and 1997, respectively.
The Company had established a Supplemental Profit Sharing Plan which,
effective April 1, 1998, has been amended and renamed as the Company's
Nonqualified Deferred Compensation Plan (the "nonqualified deferred
compensation plan"). Under this nonqualified deferred compensation plan,
certain highly compensated employees are permitted to defer compensation, and
the Company credits to an account for each such employee an amount equal to
the deferred portion of his compensation plus matching contribution. For
deferrals made on or after April 1, 1998, the Company matches fifty (50%)
percent of the amount of the employee's base salary deferrals, not in excess
of six (6%) percent of base salary. The Company may also make additional
contributions on behalf of one or more participants in its discretion for each
plan year. The bookkeeping accounts that are maintained on behalf of
participants under this plan are credited with earnings and losses based on
deemed investments made at the direction of the participant in specified
investment funds. The Company has also assumed an obligation to provide
benefits under its nonqualified deferred compensation plan based on deferrals
44
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
and matching contributions made by certain Company employees to a deferred
compensation plan maintained by Trinity. Benefits are paid in a lump sum
payment at termination of employment or may be paid in installments if the
participant retires after age 55. Certain pretermination distributions are
also available. Contributions to the nonqualified deferred compensation plan
are not deductible by the Company for federal income tax purposes until
benefits are paid to participants. The Company has established a grantor trust
under the plan, and the assets of the trust are considered part of the general
assets of the Company. Expenses related to this plan approximated $0.3 million
in 1999.
13. Income Taxes
For the year ended March 31, 1997, 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 significant components of the provision (benefit) for income taxes
follow:
<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------
1999 1998 1997
------- ------- -------
(in thousands)
<S> <C> <C> <C>
Current:
Federal....................................... $(3,824) $ 9,167 $ 3,440
State......................................... 387 1,086 1,685
------- ------- -------
(3,437) 10,253 5,125
Deferred:
Federal....................................... 2,493 (970) 4,771
State......................................... (73) (86) 991
------- ------- -------
2,420 (1,056) 5,762
------- ------- -------
Total....................................... $(1,017) $ 9,197 $10,887
======= ======= =======
</TABLE>
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:
<TABLE>
<CAPTION>
March 31,
-------------
1999 1998
------ ------
(in
thousands)
<S> <C> <C>
Deferred tax liabilities:
Depreciation and amortization............................ $8,431 $8,517
Pensions and other benefits.............................. 727 757
Other ................................................... 1,227 26
------ ------
Total deferred tax liabilities......................... 10,385 9,300
------ ------
Deferred tax assets:
Long-term contracts...................................... 487 1,439
Reserve for unpaid insurance and other claims............ 453 836
------ ------
Total deferred tax assets.............................. 940 2,275
------ ------
Net deferred tax liability................................. $9,445 $7,025
====== ======
</TABLE>
45
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A reconciliation between the effective tax rate and the statutory tax rate
is as follows:
<TABLE>
<CAPTION>
Year Ended March
31,
-------------------
1999 1998 1997
----- ----- ----
<S> <C> <C> <C>
Statutory rate....................................... 35.0% 35.0% 35.0%
Loss from foreign joint venture...................... (22.5) -- --
Refund of taxes paid to former parent company........ (7.3) -- --
Research and experimentation tax credits............. (22.3) (11.0) --
Nondeductible goodwill amortization.................. 9.3 6.3 --
State taxes, net of federal benefit.................. 1.5 2.2 4.1
Other................................................ (2.0) (3.5) 1.2
----- ----- ----
Effective tax rate................................... (8.3)% 29.0% 40.3%
===== ===== ====
</TABLE>
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.
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, 1999 and 1998, the total of all outstanding
performance obligations was approximately $228 million and $38 million,
respectively.
46
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16. Supplementary Unaudited Quarterly Data
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
(in thousands, except per share
data)
<S> <C> <C> <C> <C>
Year ended March 31, 1999:
Contract revenue earned.................. $209,775 $270,782 $279,246 $238,346
Gross profit............................. $ 25,739 $ 29,853 $ 11,539 $ 18,887
Net income (loss)........................ $ 6,128 $ 6,685 $ (972) $ 1,491
Net income (loss) per share.............. $ 0.21 $ 0.23 $ (0.03) $ 0.05
Net income (loss) per share, diluted..... $ 0.21 $ 0.23 $ (0.03) $ 0.05
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
</TABLE>
17. Subsequent Event
On June 1, 1999, the Company and Friede Goldman International Inc., a
Mississippi corporation ("Friede Goldman"), entered into an Agreement and Plan
of Merger (the "Merger Agreement"). Pursuant to the Merger Agreement, the
Company will merge with and into Friede Goldman (the "Merger") and upon
consummation of the Merger, Friede Goldman will be the surviving corporation.
As of the effective date of the Merger, each outstanding share of common
stock, par value $0.01 per share, of the Company, other than shares held in
the Company's treasury or owned by Friede Goldman or any wholly owned
subsidiary of Friede Goldman, will be converted into the right to receive
0.4614 of a share of common stock, par value $0.01 per share, of Friede
Goldman ("Friede Goldman Common Stock").
Consummation of the Merger is subject to various conditions, including the
expiration or termination of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the approval of the Merger
by the stockholders of the Company and of Friede Goldman.
Concurrently with the execution and delivery of the Merger Agreement, the
Company entered into a Voting and Proxy Agreement (the "Voting and Proxy
Agreement") with J.L. Holloway, the Chairman and Chief Executive Officer of
Friede Goldman. Under the Voting and Proxy Agreement, Mr. Holloway agreed to
vote the shares of Friede Goldman Common Stock owned (beneficially or
otherwise) by him in favor of the Merger. Mr. Holloway owns approximately 42%
of the outstanding Friede Goldman Common Stock. In addition, Mr. Holloway
entered into a Stockholder's Agreement with Friede Goldman (the "Stockholder's
Agreement") pursuant to which Mr. Holloway agreed to certain limits following
the Merger on (i) his acquisition or disposition of shares of Friede Goldman
Common Stock and (ii) the voting of such shares. Mr. Holloway also agreed to
resign as Chairman and Chief Executive Officer of Friede Goldman on the second
anniversary of completion of the Merger and to support the election of John
Dane III, the current Chairman and Chief Executive Officer of the Company, as
his successor.
47
<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 August 10, 1999.
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 Statement Schedules, and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.1* Form of Amended and Restated Revolving Credit Agreement, effective
April 23, 1999, by and among Halter Marine Group, Inc., as Borrower,
Whitney National Bank, as Administrative and Collateral Agent,
BankBoston, N.A., as Syndication Agent, The First National Bank of
Chicago, as Documentation Agent, and other banks named therein.
10.2** Agreement and Plan of Merger, dated as of June 1, 1999, between Halter
Marine Group, Inc. and Friede Goldman International Inc.
10.3** Voting and Proxy Agreement, dated as of June 1, 1999, between Halter
Marine Group, Inc. and
J. L. Holloway
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 June 3, 1999 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 25 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.
48
<PAGE>
(c) Reports on Form 8-K
The following Form 8-K was filed with the Securities and Exchange Commission
during the fourth quarter of fiscal 1999 on the date indicated:
1. Announcement regarding the amendment of an earlier earnings outlook for
the third quarter of fiscal 1999 filed on January 20, 1999.
49
<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, 1999
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.
Signature Title Date
/s/ John Dane III Chairman, President, June 29, 1999
- ----------------------------------- and Chief Executive
John Dane III Officer
/s/ Rick S. Rees Executive Vice June 29, 1999
- ----------------------------------- President, Chief
Rick S. Rees Financial Officer and
Director
/s/ Angus R. Cooper II Director June 29, 1999
- -----------------------------------
Angus R. Cooper II
/s/ Barry J. Galt Director June 29, 1999
- -----------------------------------
Barry J. Galt
/s/ Kenneth W. Lewis Director June 29, 1999
- -----------------------------------
Kenneth W. Lewis
50
<PAGE>
================================================================================
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
Effective April 23, 1999
BY AND AMONG
HALTER MARINE GROUP, INC.
as Borrower,
WHITNEY NATIONAL BANK,
as Administrative and Collateral Agent
BANKBOSTON, N.A.,
as Syndication Agent
THE FIRST NATIONAL BANK OF CHICAGO
as Documentation Agent
and
THE BANKS NAMED HEREIN,
as Banks,
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. TERM........................................................... 1
SECTION 2. DEFINITIONS.................................................... 1
2.1 Definitions.................................................... 1
2.2 Accounting Terms and Determinations............................ 25
SECTION 3. THE REVOLVING CREDIT LOANS..................................... 25
3.1 Revolving Credit Commitments................................... 25
3.2 The Swing Line................................................. 25
3.3 Method of Borrowing............................................ 26
3.4 Revolving Credit Notes......................................... 27
3.5 Termination or Reduction of Commitments........................ 28
3.6 Maturity....................................................... 28
3.7 Special Swing Loan Provisions.................................. 29
SECTION 4. LETTERS OF CREDIT.............................................. 30
4.1 Letter of Credit Commitment.................................... 30
4.2 Participation by Other Banks................................... 32
4.3 Disbursements.................................................. 32
4.4 Reimbursement.................................................. 33
4.5 Replacement or Collateralization of Letters of Credit.......... 33
4.6 Nature of Reimbursement Obligations............................ 33
4.6 Indemnity...................................................... 34
SECTION 5. GENERAL PROVISIONS FOR ALL LOANS............................... 35
5.1 Duration of Interest Periods and Selection of Interest Rates... 35
5.2 Interest Rates; Interest Payments.............................. 36
5.3 Fees........................................................... 37
5.4 Early Payments................................................. 37
5.5 General Provisions as to Payments.............................. 38
5.6 Funding Losses................................................. 38
5.7 Basis for Determining Interest Rate Inadequate or Unfair....... 39
5.8 Illegality..................................................... 39
5.9 Increased Cost................................................. 40
5.10 Base Rate Loans Substituted for Affected LIBOR Loans........... 41
5.11 Capital Adequacy............................................... 42
5.12 Survival of Provisions......................................... 42
5.13 Discretion of Bank as to Manner of Funding..................... 42
ii
<PAGE>
5.14 Computation of Interest........................................ 42
5.15 Security....................................................... 42
5.16 Guaranty of Obligations of Subsidiaries........................ 45
5.17 Appraisals, Title Insurance, etc............................... 45
5.18 Form of Transaction Documents.................................. 46
SECTION 6. PRECONDITIONS TO LOANS AND LETTERS OF CREDIT................... 46
6.1 Initial Revolving Credit Loan, Initial Swing Loan or
Letter of Credit............................................... 46
6.2 All Loans...................................................... 47
6.3 Letters of Credit.............................................. 48
SECTION 7. REPRESENTATIONS AND WARRANTIES................................. 49
7.1 Existence and Power............................................ 49
7.2 Authorization.................................................. 49
7.3 Binding Effect................................................. 49
7.4 Financial Statements........................................... 50
7.5 Litigation..................................................... 50
7.6 ERISA.......................................................... 50
7.7 Tax Payment.................................................... 51
7.8 Subsidiaries; Joint Venture Entities........................... 51
7.9 Compliance With Other Instruments; None Burdensome............. 51
7.10 Other Debt, Guarantees, Capitalized Leases..................... 51
7.11 Labor Matters.................................................. 52
7.12 Title to Property.............................................. 52
7.13 Regulation U................................................... 52
7.14 Investment Company Act of 1940: Public Utility Holding
Company Act of 1935............................................ 52
7.15 Patents, Licenses, Trademarks, Etc............................. 52
7.16 Environmental and Safety and Health Matters.................... 53
7.17 Investments.................................................... 53
7.18 No Default..................................................... 53
7.19 No Burdensome Restrictions..................................... 54
7.20 Government Contracts........................................... 54
7.21 Disclosure..................................................... 54
7.22 Liens Created by Transaction Documents......................... 54
SECTION 8. COVENANTS...................................................... 55
8.1 Affirmative Covenants of Borrower.............................. 55
(a) Information.............................................. 55
(b) Payment of Indebtedness.................................. 57
(c) Maintenance of Books and Records; Consultations and
Inspections.............................................. 57
iii
<PAGE>
(d) Payment of Taxes......................................... 58
(e) Payment of Claims........................................ 58
(f) Existence................................................ 59
(g) Maintenance of Property.................................. 59
(h) Compliance with Laws, Regulations, Etc................... 59
(i) Environmental Matters.................................... 59
(j) ERISA Compliance......................................... 60
(k) Notices.................................................. 60
(l) Insurance................................................ 61
(m) Financial Covenants...................................... 62
(i) Minimum Consolidated Interest Coverage............ 62
(ii) Minimum Fixed Charge Coverage..................... 62
(iii) Maximum Consolidated Funded Senior Debt to
EBITDA............................................ 62
(iv) Minimum Consolidated Net Worth.................... 62
(v) Borrowing Base.................................... 62
(n) Further Assurances....................................... 62
(o) Accountant............................................... 63
(p) Subsidiaries............................................. 63
(q) Agreements............................................... 63
(r) Offshore Marine Indemnity Company........................ 63
(s) Bonding Capacity......................................... 63
(t) Year 2000 Compatibility.................................. 63
(u) Certain Post Closing Matters............................. 63
8.2 Negative Covenants of Borrower................................. 64
(a) Limitation on Indebtedness............................... 64
(b) Limitation on Liens, No Negative Pledge
in favor of any other Person............................. 64
(c) Consolidation, Merger, Sale of Assets, Dissolution, Etc.. 64
(d) Sale and Leaseback Transactions.......................... 66
(e) Sale or Discount of Accounts............................. 66
(f) Transactions with Affiliates............................. 66
(g) Changes in Nature of Business............................ 66
(h) Fiscal Year.............................................. 66
(i) Distributions............................................ 67
(j) Pension Plans............................................ 67
(k) Restricted Investments................................... 67
(l) Ownership of Subsidiaries................................ 67
(m) Capital Expenditures..................................... 67
(n) Change in Control........................................ 67
(o) Payment of Subordinated Notes............................ 67
(p) Modification of Subordinated Notes....................... 67
iv
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8.3 Use of Proceeds................................................ 68
SECTION 9. EVENTS OF DEFAULT.............................................. 68
SECTION 10. AGENT.......................................................... 71
10.1 Appointment.................................................... 71
10.2 Powers......................................................... 71
10.3 General Immunity............................................... 72
10.4 No Responsibility for Loans, Recitals, etc..................... 73
10.5 Right to Indemnity............................................. 73
10.6 Action Upon Instructions of Required Banks..................... 73
10.7 Reliance on Documents; Employment of Agents and Counsel........ 74
10.8 May Treat Payee as Owner....................................... 74
10.9 Agent's Reimbursement.......................................... 74
10.10 Rights as a Bank............................................... 74
10.11 Independent Credit Decision.................................... 75
10.12 Resignation of Agent........................................... 75
10.13 Removal of Agent............................................... 75
10.14 Duration of Agency............................................. 75
10.15 Documentation Agent............................................ 76
10.16 Syndication Agent.............................................. 76
SECTION 11. GENERAL........................................................ 76
11.1 No Waiver...................................................... 76
11.2 Right of Setoff................................................ 76
11.3 Cost and Expenses.............................................. 76
11.4 Environmental Indemnity........................................ 77
11.5 General Indemnity.............................................. 78
11.6 Authority to Act............................................... 78
11.7 Notices........................................................ 79
11.8 Consent to Jurisdiction........................................ 79
11.9 Sharing of Payments............................................ 79
11.10 Governing Law.................................................. 80
11.11 Amendments and Waivers......................................... 80
11.12 References; Headings for Convenience........................... 80
11.13 Successors and Assigns, Participations......................... 81
11.14 Assignment Agreements.......................................... 81
11.15 Binding Agreement.............................................. 82
11.16 No Oral Agreements, Entire Agreement........................... 82
11.17 Severability................................................... 83
11.18 Counterparts................................................... 83
11.19 Resurrection of the Obligations................................ 83
11.20 Independence of Covenants...................................... 83
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11.21 Confidentiality................................................ 83
11.22 Certain Indemnification Procedures............................. 84
11.23 Conflicting Provisions......................................... 84
SCHEDULES
2.1(a) Liens to Remain in Existence
2.1(b) List of Foreign Subsidiaries
2.1(c) List of Joint Venture Entities
2.1(d) List of Wholly Owned Subsidiaries
2.1(e) List of Subsidiaries
2.1(f) List of Liens to be Canceled
4.1(a) List of Existing Letters of Credit
5.15(b) List of Leaseholds Excluded from Consent Requirement
7.10 Debts and Guarantees of Borrower or any Subsidiary
7.11 Wage Claims Unpaid and Unaccrued
7.16 Environmental and OSHA Matters
7.17 Restricted Investments Currently Owned by Borrower or any Subsidiary
8.1(u) Certain Post Closing Items
EXHIBITS
A Form of Revolving Credit Note
B Form of Swing Line Note
C Form of Continuing Guarantee
D Form of Standby Letter of Credit Application
E Form of Letter of Credit Request
F Form of Letter of Warranty and Representation
G Form of Assignment and Assumption Agreement
H Form of Preferred Ship Mortgage
I(1) Form of Pledge Agreement - stock
I(2) Form of Pledge Agreement - partnership/membership interest
J(1) Form of Collateral Mortgage - Land
J(2) Form of Collateral Mortgage - Leasehold
K(1) Form of Texas Deed of Trust - Land
K(2) Form of Texas Deed of Trust - Leasehold
L(1) Form of Mississippi Deed of Trust - Land
M(1) Form of Florida Mortgage - Land
N Form of Consent to Leasehold Mortgage/Deed of Trust
O(1) Form of Borrower Security Agreement
O(2) Form of Subsidiary Security Agreement
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AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
THIS AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (this "Agreement") is
effective the 23rd day of April, 1999, and is made and entered into by and among
HALTER MARINE GROUP, INC., a Delaware corporation ("Borrower") and the
undersigned Banks, including Whitney National Bank in its capacity as a Bank
hereunder and as Agent for the Banks under this Agreement, BankBoston, N.A. in
its capacity as a Bank hereunder and as Syndication Agent for the Banks under
this Agreement and The First National Bank of Chicago in its capacity as a Bank
hereunder and as Documentation Agent for the Banks under this Agreement.
WITNESSETH:
WHEREAS, the parties hereto (or their predecessors in interest) entered
into a Revolving Credit Agreement, effective as of October 31, 1997, as amended
by that certain First Amendment to Revolving Credit Agreement effective as of
September 30, 1998, and by that certain Waiver of Banks and Second Amendment to
Revolving Credit Agreement effective as of February 12, 1999 (the "Original
Credit Agreement").
WHEREAS, the parties desire to amend and restate the Original Credit
Agreement upon the terms, provisions and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto (or their successors in interest) hereby
mutually promise and agree as follows:
SECTION l. TERM.
The "Term" of this Agreement shall commence on the effective date hereof
and shall end on September 30, 2001, unless extended from time to time with the
unanimous consent of the Banks as provided in Section 3.6 hereof and unless
earlier terminated pursuant to the terms hereof.
SECTION 2. DEFINITIONS.
2.1 Definitions. In addition to the terms defined elsewhere in this
Agreement or in any Exhibit or Schedule hereto, when used in this Agreement, the
following terms shall have the following meanings (such meanings shall be
equally applicable to the singular and plural forms of the terms used, as the
context requires):
Acquisition shall mean the purchase, merger with or other acquisition by
Borrower and/or any one or more Subsidiaries, after the date hereof, of (i) any
stock or other equity interest (in
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whole or in part) in any Person, (ii) all or substantially all of the assets of
any Person, or (iii) a shipyard, ship building facility or any other facility.
Affiliate shall mean any Person (a) which directly or indirectly through
one or more intermediaries controls, is controlled by or is under common control
of or with Borrower or any Subsidiary, (b) which beneficially owns or holds or
has the power to direct the voting power of twenty percent (20%) or more of any
class of capital stock of Borrower or any Subsidiary, (c) which has twenty
percent (20%) or more of any class of its capital stock (or, in the case of a
Person which is not a corporation, twenty percent (20%) or more of its equity
interest) beneficially owned or held, directly or indirectly, by Borrower or any
Subsidiary, or (d) who is a director, officer or employee of Borrower or any
Subsidiary. For purposes of this definition, "control" shall mean the power to
direct the management and policies of a Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise.
Agent shall mean Whitney National Bank in its capacity as administrative
agent and collateral agent for the Banks hereunder and its successors in such
capacity.
Applicable Margin shall mean, the rate of interest per annum shown in the
applicable column below:
- --------------------------------------------------------------------------------
Level I Level II Level III Level IV Level V
- --------------------------------------------------------------------------------
If Ratio of Consolidated Total * 6.00 ** 6.00 ** 4.25 ** 3.75 ** 3.25
Debt as of the end of the *** 4.25 *** 3.75 *** 3.25
immediately preceding fiscal
quarter to Consolidated EBITDA
for the immediately preceding
four (4) fiscal quarters is
- --------------------------------------------------------------------------------
Applicable Margin for LIBOR
Loans 2.90% 2.40% 2.15% 1.90% 1.65%
Unused Fee .500% .375% .375% .250% .250%
Applicable Margin for Base Rate
Loans 0.75% 0.50% 0.50% 0.25% 0.00%
- --------------------------------------------------------------------------------
The Applicable Margin shall commence at Level I and shall be adjusted on the
first day of each March, June, September and December (or, if such day is not a
Business Day, on the next succeeding Business Day), based on the ratio of
Consolidated Total Debt as of the end of the immediately preceding fiscal
quarter to Consolidated EBITDA for the immediately preceding four (4) fiscal
quarters. If Borrower should fail to deliver the certificate required by
Section 8.1(a)(vii) hereof within the time period set forth in Section
8.1(a)(vii), then, until Borrower shall have provided such certificate, it shall
be presumed that the ratio of Consolidated Total Debt as
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of the end of the immediately preceding fiscal quarter to Consolidated EBITDA
for the immediately preceding four (4) fiscal quarters was greater than 6.00
(and, from the date of the delivery of such certificate, the Applicable Margin
shall be determined by reference to such certificate).
Assignment Agreement shall mean any of those certain Assignment Agreements
described in Section 11.14 herein.
Bank(s) shall mean each bank listed on the signature pages hereof, and its
successors and assigns.
Bank Hedge Agreement shall mean a Hedge Agreement between Borrower or any
Subsidiary and a Bank.
Base Rate shall mean the interest rate per annum, determined on any day,
equal to the sum of (a) the greater of: (i) the Prime Rate then in effect or
(ii) the sum of the Fed Funds Rate then in effect plus One-Half of One Percent
(.50%) plus (b) the Applicable Margin for Base Rate Loans.
Base Rate Loan shall mean any Loan bearing interest at the Base Rate.
Board of Directors shall mean, with respect to any Person, the Board of
Directors of such Person or any committee of the Board of Directors of such
Person authorized, with respect to any particular matter, to exercise the power
of the Board of Directors of such Person.
Borrowing Base shall mean, as of any date of determination thereof, the sum
of the following: (a) the lesser of (i) $20,000,000.00 or (ii) twenty-five (25%)
percent of Net Investment or one hundred (100%) percent of Net Negative
Investment, as the case may be, plus (b) the lesser of (i) $25,000,000.00 or
(ii) twenty-five (25%) percent of all inventory of Borrower and its Subsidiaries
that are not Foreign Subsidiaries plus (c) eighty (80%) percent of Eligible
Contract Receivables.
Business Day shall mean (a) any day except a Saturday, Sunday or legal
holiday observed by the Agent or by commercial banks in New Orleans, Louisiana;
and (b) relative to the making, continuing, prepaying or repaying of any LIBOR
Loans, any day on which dealings in U.S. Dollars are carried on in the London
interbank market.
Capital Expenditure shall mean any expenditure which, as determined in
accordance with GAAP, is required to be capitalized on the balance sheet of the
Person making the same, but excluding expenditures for the restoration or
replacement of fixed assets to the extent funded out of the proceeds of an
insurance policy. Capital Expenditures shall include, without limitation, all
expenditures for Acquisitions.
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Capitalized Lease shall mean any lease of Property, whether real and/or
personal, by a Person as lessee which as determined in accordance with GAAP is
required to be capitalized on the balance sheet of such Person.
Capitalized Lease Obligations of any Person shall mean, as of the date of
any determination thereof, the amount at which the aggregate rental obligations
due and to become due under all Capitalized Leases under which such Person is a
lessee would be reflected as a liability on a balance sheet of such Person as
determined in accordance with GAAP.
CERCLA shall mean the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. (S)(S)9601 et seq., and as the same may
from time to time be further amended, and shall include any and all regulations
issued pursuant thereto.
Change in Control shall mean (i) an event or series of events as a result
of which any "person" or "group" (as such terms are used in Sections 13(d)(3)
and 14(d) of the Exchange Act) (excluding Borrower or any Wholly Owned
Subsidiary thereof) is or becomes, directly or indirectly, the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, whether or
not applicable) of more than 50% of the combined voting power of the then
outstanding securities entitled to vote generally in elections of directors,
managers or trustees, as applicable, of Borrower or any successor entity
("Voting Stock"), (ii) the completion of any consolidation with or merger of
Borrower into any other Person, or sale, conveyance, transfer or lease by
Borrower of all or substantially all of its assets to any Person, or any merger
of any other Person into Borrower in a single transaction or series of related
transactions, and, in the case of any such transaction or series of related
transactions, the outstanding common stock of Borrower is changed or exchanged
as a result, unless the stockholders of the Borrower immediately before such
transaction own, directly or indirectly, immediately following such transaction,
at least a majority of the combined voting power of the outstanding voting
securities of the Person resulting from such transaction in substantially the
same proportion as their ownership of the Voting Stock immediately before such
transaction, (iii) such time as the Continuing Directors (as defined) do not
constitute a majority of the Board of Directors of Borrower (or, if applicable,
a successor corporation to Borrower) or (iv) a Change of Control as such term is
defined in the Subordinated Note Indenture.
Code shall mean the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import, together with the regulations thereunder,
in each case as in effect from time to time. References to sections of the Code
shall be construed to also refer to any successor sections.
Collateral shall mean all of the property in respect of which a Lien has
been granted by Borrower or any Subsidiary in favor of the Agent for the benefit
of the Agent and the Banks under the terms of the Transaction Documents.
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Collateral Mortgage shall mean a Collateral Mortgage (and related
Collateral Note and Collateral Note Security Agreement) substantially in the
form of Exhibit J(1) or J(2) executed now or at any time hereafter by Borrower
or a Subsidiary and delivered to Agent, as the same may be amended, supplemented
or otherwise modified from time to time.
Commitment shall mean, with respect to each Bank, the sum of such Bank's
Revolving Credit Commitment, and its Swing Line Commitment, if any.
Company Business shall mean (i) the design, construction, repair,
conversion and sale of ocean-going and inland vessels, (ii) the design,
construction, repair, conversion and sale of drilling rigs, barges and vessels,
(iii) the design, production, repair and sale of any component of or accessory
to any such ocean-going or inland vessel, drilling rig or production unit, barge
or vessel, (iv) any other similar type of design, production, construction,
conversion, manufacturing or sale, (v) the design, production, repair and sale
of cranes, winches and other engineered products used in the offshore
construction industry or on any such ocean-going or inland vessel, drilling rig
or production unit, barge or vessel, (vi) any financing related to the sale of
any of the Borrower's or any Subsidiary's products, and (vii) any other
activities ancillary to the foregoing.
Consolidated EBITDA shall mean, for any period, the sum of the following:
(a) Consolidated Net Income during such period plus (b) to the extent deducted
in determining Consolidated Net Income, the sum of (i) Consolidated Interest
Expense during such period, plus (ii) all provisions for any federal, state,
local and/or foreign income taxes made by Borrower or any Subsidiary during such
period (whether paid or deferred) plus (iii) all depreciation and amortization
expenses and all other non-cash items of Borrower or any Subsidiary during such
period, all determined on a consolidated basis as determined in accordance with
GAAP plus (c) to the extent not already included in Consolidated Net Income, the
sum of (i) the earnings before depreciation, amortization, interest expense,
extraordinary items and taxes during such period of any Subsidiaries acquired
during such period as determined in accordance with GAAP plus (ii) any
additional amount requested by Borrower and approved by the Required Banks
appropriate to reflect any additional earnings any Subsidiaries acquired during
such period would have recognized if they had been a Subsidiary for such period
minus to the extent not already included in Consolidated Interest Expense, the
estimated interest expense, in an amount approved by the Required Banks, that
Borrower or any Subsidiary would have incurred during such period had any
Indebtedness that Borrower or any Subsidiary incurred in connection with the
acquisition of any Subsidiaries during such period been in existence for such
period.
Consolidated Financed Capital Expenditures shall mean Capital Expenditures
of Borrower and its Subsidiaries financed through the incurrence of Indebtedness
other than the Loans.
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<PAGE>
Consolidated Fixed Charge Coverage Ratio shall mean:
(a) as of any date for which it is being determined on or before December
31, 1999, the ratio of (i) the sum of the following, without duplication:
Consolidated EBITDA for the fiscal quarter(s) ending after December 31, 1998
(including any fiscal quarter ending on such date of determination) minus
Capital Expenditures of Borrower or any Subsidiary during the fiscal quarter(s)
ending after December 31, 1998 (including any fiscal quarter ending on such date
of determination) plus Consolidated Financed Capital Expenditures during the
fiscal quarter(s) ending after December 31, 1998 (including any fiscal quarter
ending on such date of determination) to (ii) the sum of the following, without
duplication: Consolidated Net Interest Expense for the fiscal quarter(s) ending
after December 31, 1998 (including any fiscal quarter ending on such date of
determination) plus Consolidated Scheduled Principal Payments for the fiscal
quarter(s) ending after December 31, 1998 (including any fiscal quarter ending
on such date of determination) plus the principal portion of Capitalized Lease
Obligations payable by Borrower or any Subsidiary in respect of the fiscal
quarter(s) ending after December 31, 1998 (including any fiscal quarter ending
on such date of determination).
(b) as of any date for which it is being determined after December 31,
1999, the ratio of (i) the sum of the following, without duplication:
Consolidated EBITDA for the immediately preceding four (4) fiscal quarters
(including any fiscal quarter ending on such date of determination) minus
Capital Expenditures of Borrower or any Subsidiary during the immediately
preceding four (4) fiscal quarters (including any fiscal quarter ending on such
date of determination) plus Consolidated Financed Capital Expenditures during
the immediately preceding four (4) fiscal quarters (including any fiscal quarter
ending on such date of determination) to (ii) the sum of the following, without
duplication: Consolidated Net Interest Expense for the immediately preceding
four (4) fiscal quarters (including any fiscal quarter ending on such date of
determination) plus Consolidated Scheduled Principal Payments for the
immediately preceding four (4) fiscal quarters (including any fiscal quarter
ending on such date of determination) plus the principal portion of Capitalized
Lease Obligations payable by Borrower or any Subsidiary in respect of the
immediately preceding four (4) fiscal quarters (including any fiscal quarter
ending on such date of determination).
Consolidated Funded Debt shall mean, as of any date of determination
thereof, (a) the sum of the following, without duplication: (i) all Indebtedness
of Borrower or any Subsidiary, other than the Obligations, which matures in not
less than twelve months from the date of incurrence, whether or not represented
by bonds, debentures, notes or other securities, for the repayment of money
borrowed or for the payment of the purchase price of property or assets
purchased, unless secured by a Letter of Credit issued by an Issuer pursuant to
this Agreement plus (ii) all Obligations plus (iii) all Indebtedness of Borrower
or any Subsidiary, which matures in not less than twelve months from the date of
incurrence, secured by any mortgage, pledge, security interest or lien existing
on property owned by Borrower or any Subsidiary, whether or not the Indebtedness
secured thereby shall have been assumed by the owner thereof plus (iv) all
Capitalized Lease Obligations of Borrower or any Subsidiary plus (v) all
obligations of Borrower
-7-
<PAGE>
or any Subsidiary, contingent or otherwise, relative to the face amount of all
letters of credit (as may be reduced pursuant to their terms), whether or not
drawn plus (vi) the Subordinated Notes minus (b) all Excess Cash and Cash
Equivalents of Borrower or any Subsidiary.
Consolidated Funded Senior Debt shall mean, as of any date of determination
thereof, all Consolidated Funded Debt other than the Subordinated Notes.
Consolidated Interest Coverage Ratio shall mean, as of any date for which
it is being determined, the ratio of Consolidated EBITDA for the immediately
preceding fiscal quarter (including any fiscal quarter ending on such date) to
Consolidated Net Interest Expense for the immediately preceding fiscal quarter
(including any fiscal quarter ending on such date).
Consolidated Interest Expense shall mean, for the period in question,
without duplication, all gross interest expense of Borrower and its Subsidiaries
(including, without limitation, all commissions, discounts and/or related
amortization and other fees and charges owed by Borrower and its Subsidiaries
with respect to letters of credit and bankers' acceptance financing, the net
costs associated with interest swap obligations of Borrower and its
Subsidiaries, capitalized interest expense, the interest portion of Capitalized
Lease Obligations and the interest portion of any deferred payment obligation)
during such period, all determined on a consolidated basis as determined in
accordance with GAAP.
Consolidated Net Income shall mean, for the period in question, the after-
tax net income or loss of Borrower and its Subsidiaries during such period,
determined on a consolidated basis as determined in accordance with GAAP, but
excluding in any event the following:
(i) any net gain or net loss (net of expenses and taxes applicable
thereto) for such period resulting from the sale, transfer or other disposition
of fixed or capital assets as determined by GAAP;
(ii) any gains or losses resulting from any reappraisal, revaluation or
write-up or write-down of assets;
(iii) any equity of Borrower or any Subsidiary in the undistributed
earnings of any corporation which is not a Subsidiary and is accounted for on
the equity method as determined in accordance with GAAP;
(iv) any undistributed earnings of any Subsidiary to the extent that
the declaration or payment of dividends or other distributions by such
Subsidiary is not at the time permitted by the terms of its charter documents or
any agreement, document, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Subsidiary (other than this
Agreement);
(v) any gains or losses from the acquisition or disposition of
Investments;
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(vi) any gains from the retirement or extinguishment of Debt;
(vii) any gains on collections from insurance policies or settlements to
the extent that such gains exceed premiums paid or other expenses incurred
during the fiscal period in which the gain occurs with respect to such insurance
policies;
(viii) any gains or losses during such period from any change in
accounting principles, from any discontinued operations or the disposition
thereof or from any prior period adjustments; and
(ix) any extraordinary gains and/or losses;
all determined in accordance with GAAP.
Consolidated Net Interest Expense shall mean, for the period in question,
without duplication, Consolidated Interest Expense during such period minus all
interest income of Borrower and its Subsidiaries during such period, all
determined on a consolidated basis as determined in accordance with GAAP.
Consolidated Net Worth shall mean, at a particular date, all amounts which
would be included under shareholders' equity on a consolidated balance sheet of
Borrower and its Subsidiaries determined in accordance with GAAP (including,
without limitation, capital stock, additional paid-in-capital and retained
earnings) at such date.
Consolidated Scheduled Principal Payments shall mean, for the period in
question, without duplication, all scheduled principal payments of Borrower and
its Subsidiaries on Indebtedness for the applicable period, all determined on a
consolidated basis as determined in accordance with GAAP.
Consolidated Total Debt shall mean, as of the date of any determination
thereof, all Debt of Borrower and its Subsidiaries as of such date, determined
on a consolidated basis as determined in accordance with GAAP.
Continuing Director shall mean at any date a member of Borrower's Board of
Directors (i) who was a member of such board on the effective date hereof or
(ii) who was nominated or elected by at least a majority of the directors who
were Continuing Directors at the time of such nomination or election or whose
election to Borrower's Board of Directors was recommended or endorsed by at
least a majority of the directors who were Continuing Directors at the time of
such nomination or election.
Continuing Guarantee shall mean a Continuing Guarantee substantially in the
form of Exhibit C executed now or at any time hereafter by a Subsidiary and
delivered to Agent, as the same may be amended, supplemented or otherwise
modified from time to time.
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Contract Receivables shall mean all amounts due to Borrower and each
Subsidiary (other than Offshore) which is not a Joint Venture Entity arising out
of the performance by Borrower or any Subsidiary which is not a Joint Venture
Entity of contracts.
Debt of any Person shall mean, as of the date of determination thereof, the
sum of (a) all Indebtedness of such Person for borrowed money or which has been
incurred to acquire Property plus (b) all Capitalized Lease Obligations of such
Person.
Deed of Trust shall mean a Deed of Trust substantially in the form of
Exhibit K(1), K(2), or L(1) executed now or at any time hereafter by Borrower or
a Subsidiary and delivered to Agent, as the same may be amended, supplemented or
otherwise modified from time to time.
Default shall mean any event or condition the occurrence of which would,
with the lapse of time or the giving of notice or both, become an Event of
Default as defined in Section 9 hereof.
Disbursement Date shall have the meaning ascribed thereto in Section 4.3.
Distribution in respect of any corporation shall mean:
(a) dividends or other distributions of cash, stock, assets or other
property on or in respect of any shares of any class of stock of such
corporation; and
(b) the redemption, repurchase or other acquisition of any shares of any
class of any stock of such corporation or of any warrants, rights or other
options to purchase any such stock (except when solely in exchange for such
stock).
Documentation Agent shall mean The First National Bank of Chicago.
Documented Vessel shall mean a vessel documented under the laws of the
United States of America.
Eligible Contract Receivables shall mean all Contract Receivables other
than Contract Receivables which have remained unpaid for more than ninety (90)
days from the date invoiced or billed for payment.
Environmental Claim shall mean any administrative, regulatory or judicial
action, judgment, order, consent decree, suit, demand, demand letter, claim,
Lien, notice of noncompliance or violation, investigation or other proceeding
arising (a) pursuant to any Environmental Law or governmental or regulatory
approval issued under any such Environmental Law, (b) from the presence, use,
generation, storage, treatment, Release, threatened Release, disposal,
remediation or other existence of any Hazardous Substance, (c) from any removal,
remedial, corrective or other response action pursuant to an Environmental
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<PAGE>
Law or the order of any Governmental Authority, (d) from any third party seeking
damages, contribution, indemnification, cost recovery, compensation, injunctive
or other relief in connection with a Hazardous Substance or arising from alleged
injury or threat of injury to health, safety, natural resources or the
environment or (e) from any Lien against any Property owned, leased or operated
by Borrower or any Subsidiary in favor of any governmental or regulatory
authority or agency in connection with a Release, threatened Release or disposal
of a Hazardous Substance.
Environmental Law shall mean any federal, state or local statute, law,
rule, regulation, order, consent decree, judgment, permit, license, code, deed
restriction, common law, treaty, convention, ordinance or other governmental
requirement relating to public health, safety or the environment, including,
without limitation, those relating to Releases, discharges or emissions to air,
water, land or groundwater, to the use of groundwater, to the use and handling
of polychlorinated biphenyls or asbestos, to the disposal, treatment, storage or
management of hazardous or solid waste, Hazardous Substances or crude oil, or
any fraction thereof, to exposure to toxic or hazardous materials, to the
handling, transportation, discharge or release of gaseous or liquid Hazardous
Substances, in each case applicable to any of the Property owned, leased or
operated by Borrower or any Subsidiary or the operation, construction or
modification of any such Property, including, without limitation, the following:
CERCLA, the Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984,
the Hazardous Materials Transportation Act, as amended, the Federal Water
Pollution Control Act, as amended by the Clean Water Act of 1976, the Safe
Drinking Water Control Act, the Clean Air Act of 1966, as amended, the Toxic
Substances Control Act of 1976, the Occupational Safety and Health Act of 1977,
as amended, the Emergency Planning and Community Right-to-Know Act of 1986, the
National Environmental Policy Act of 1975, the Oil Pollution Act of 1990 and any
similar or implementing state or local law, and any state or local statute and
any further amendments to these laws providing for financial responsibility for
cleanup or other actions with respect to the Release or threatened Release of
Hazardous Substances or crude oil, or any fraction thereof and all rules and
regulations promulgated thereunder.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
ERISA Affiliate shall mean any corporation, trade or business that is,
along with Borrower and any Subsidiary, a member of a controlled group of
corporations or a controlled group of trades or businesses, as described in
Sections 414(b) and 414(c), respectively, of the Code or Section 4001 of ERISA.
Event of Default shall have the meaning ascribed thereto in Section 9.
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Excess Cash and Cash Equivalents of any Person shall mean, as of the date
of determination thereof, (a) the sum of the following: (i) all cash of such
Person on hand or on deposit with any Bank or any other financial institution
rated B or better by Thompson Bank Watch Service or on deposit with any
financial institution approved by Agent plus (ii) all Investments of such Person
described in subparagraphs (c), (d), (e), (f) or (g) of the definition of
Restricted Investment minus (b) Five Million Dollars ($5,000,000.00).
Exchange Act shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the Securities Exchange Commission.
Fed Funds Rate shall mean, for any day, the rate per annum (rounded
upwards, if necessary to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day, provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (b) if no such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the average rate charged to the
Agent on such day on such transactions.
Florida Mortgage shall mean a Mortgage substantially in the form of Exhibit
M(1) executed now or at any time hereafter by Borrower or a Subsidiary and
delivered to Agent, as the same may be amended, supplemented or otherwise
modified from time to time.
Foreign Subsidiary shall mean any Subsidiary which is a controlled foreign
corporation as defined in Section 957 of the Code and any regulations thereto,
and specifically including, but not limited to, each of the entities described
on Schedule 2.1(b) hereto.
GAAP shall mean generally accepted accounting principles at the time in the
United States.
Governmental Authority shall mean any sovereign state or nation or
government, any state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
Governmental Contract shall have the meaning ascribed thereto in Section
7.20.
Guarantee by any Person shall mean any obligation (other than endorsements
of negotiable instruments for deposit or collection in the ordinary course of
business), contingent or otherwise, of such Person guaranteeing, or in effect
guaranteeing, any Indebtedness, liability, dividend or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, all obligations incurred through an
agreement, contingent or otherwise, by such Person: (a) to purchase such
Indebtedness or
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obligation or any Property or assets constituting security therefor, (b) to
advance or supply funds (i) for the purchase or payment of such Indebtedness or
obligation, (ii) to maintain working capital or other balance sheet condition or
otherwise to advance or make available funds for the purchase or payment of such
Indebtedness or obligation, (iii) to lease property or to purchase securities or
other property or services primarily for the purpose of assuring the owner of
such Indebtedness or obligation of the ability of the primary obligor to make
payment of the Indebtedness or obligation or (iv) otherwise to assure the owner
of the Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of all computations made under this Agreement, a
Guarantee in respect of any Indebtedness for borrowed money shall be deemed to
be Indebtedness equal to the then outstanding principal amount of such
Indebtedness for borrowed money which has been guaranteed or such lesser amount
to which the maximum exposure of the guarantor shall have been specifically
limited, and a Guarantee in respect of any other obligation or liability or any
dividend shall be deemed to be Indebtedness equal to the maximum aggregate
amount of such obligation, liability or dividend or such lesser amount to which
the maximum exposure of the guarantor shall have been specifically limited.
Guarantee when used as a verb shall have a correlative meaning.
Hazardous Substance shall mean any hazardous or toxic material, substance
or waste, pollutant or contaminant which is regulated under any Environmental
Law, including, without limitation, any material, substance or waste which is:
(a) defined as a hazardous substance under Section 311 of the Federal Water
Pollution Control Act (33 U.S.C. (S)(S)1317), as amended; (b) regulated as a
hazardous waste under Section 1004 or Section 3001 of the Federal Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act (42
U.S.C. (S)(S)6901 et seq.), as amended; (c) defined as a hazardous substance
under Section 101 of the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. (S)(S)9601 et seq.), as amended; or (d) defined or
regulated as a hazardous substance or hazardous waste under any rules or
regulations promulgated under any of the foregoing statutes.
Hedge Agreement means any interest rate, currency or commodity swap, cap,
floor or collar agreement or similar hedging arrangement providing for the
transfer or mitigation of interest rate, commodity price or currency value or
exchange rate risks, either generally or under specific contingencies.
Indebtedness shall mean, with respect to any Person, without duplication,
all indebtedness, liabilities and obligations of such Person, and in any event
shall include all (i) indebtedness, liabilities and obligations of such Person
for borrowed money or which have been incurred to acquire Property, (ii)
indebtedness, liabilities and obligations secured by any Lien on, or payable out
of the proceeds of production from, any Property or assets owned by such Person,
whether or not such Person has assumed or become liable for the payment of such
obligations, (iii) indebtedness, liabilities and obligations of third parties,
including joint ventures and partnerships of which such Person is a venturer or
general partner, recourse to which may be had against such Person, (iv)
indebtedness, liabilities and obligations created or arising under any
conditional sale or other title retention agreement with respect to Property
acquired by such
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Person, notwithstanding the fact that the rights and remedies of the seller,
lender or lessor under such agreement in the event of default are limited to
repossession or sale of such Property, (v) Capitalized Lease Obligations of such
Person, (vi) indebtedness, liabilities and obligations of such Person under
Guarantees and (vii) all obligations of such Person, contingent or otherwise,
relative to the face amount of all letters of credit (as may be reduced pursuant
to their terms), whether or not drawn.
Indemnitees shall have the meaning ascribed thereto in Section 11.4.
Interest Period shall mean with respect to each LIBOR Loan:
(i) initially, the period commencing on the date of such Loan and
ending 1, 2, 3 or 6 months thereafter (or such other period agreed upon in
writing by Borrower and all of the Banks), as the Borrower may elect in the
applicable Notice of Borrowing; and
(ii) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Loan and ending 1, 2, 3 or 6 months
thereafter (or such other period agreed upon in writing by Borrower and all of
the Banks), as Borrower may elect pursuant to Section 5.1;
provided that:
(iii) subject to clause (iv) below, if any Interest Period would
otherwise end on a day which is not a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless such Business Day falls
in another calendar month, in which case such Interest Period shall end on the
immediately next preceding Business Day; and
(iv) no Interest Period for a LIBOR Loan shall extend beyond the last
day of the Revolving Credit Period.
Investment shall mean any investment by Borrower or any Subsidiary in any
Person, whether payment therefor is made in cash or capital stock of Borrower or
any Subsidiary, and whether such investment is by acquisition of stock or
Indebtedness, or by loan, advance, transfer of property out of the ordinary
course of business, capital contribution, equity or profit sharing interest,
extension of credit on terms other than those normal in the ordinary course of
business, Guarantee or otherwise becoming liable (contingently or otherwise) in
respect of the Indebtedness of any Person, or otherwise.
Issuer shall have the meaning ascribed thereto in Section 4.
Joint Venture Entity shall mean any Person which is at the time not wholly
owned directly or indirectly by Borrower and/or any one or more Subsidiaries but
in which Borrower
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and/or any one or more Subsidiaries holds an Investment directly or indirectly,
and specifically including, but not limited to, each of the entities described
on Schedule 2.1(c) hereto.
Leasehold Interest shall mean, with respect to any Person, all right, title
and interest of such Person in, to and under any leasehold interest in any land,
building and/or improvement to the extent that (a) the granting of a Lien upon
such Person's right, title and interest in, to and under such leasehold interest
is not prohibited by the instrument creating such leasehold interest or (b) the
granting of a Lien upon such Person's right, title and interest in, to and under
such leasehold interest is prohibited by the instrument creating such leasehold
interest but such Person is able to obtain the consent of the lessor of such
leasehold interest to the creation of a Lien upon such leasehold interest in
favor of Agent for the benefit of the Agent and the Banks after using reasonable
efforts to do so (which shall not require the payment of compensation by such
Person to such lessor in exchange for such consent); provided that any right,
title and interest of such Person in, to and under any leasehold interest used
solely as office space shall be excluded from this definition of Leasehold
Interest.
Letter of Credit and Letters of Credit shall have the meanings ascribed
thereto in Section 4.1(a).
Letter of Credit Application shall mean an application and agreement for
standby letter of credit in substantially the form of Exhibit D attached hereto
and incorporated herein by reference (or such other agreement as may be
required by Issuer in form acceptable to Agent) executed by Borrower and any
Subsidiary (if the Letter of Credit is to be for the account of a Subsidiary)
and delivered to a Bank pursuant to Section 4.1(a), as the same may from time to
time be amended modified, extended or renewed.
Letter of Credit Commitment shall have the meaning ascribed thereto in
Section
4.1 (a).
Letter of Credit Commitment Fee shall have the meaning ascribed thereto in
Section 4.1(c).
Letter of Credit Loan and Letter of Credit Loans shall have the meaning
ascribed thereto in Section 4.3.
Letter of Credit Period shall mean the period commencing on the effective
date hereof and ending September 30, 2001.
Letter of Credit Request shall have the meaning ascribed thereto in Section
4.1 (a).
LIBOR Base Rate means, for an Interest Period, (a) the LIBOR Index Rate for
such Interest Period, if such rate is available, or (b) if the LIBOR Index Rate
cannot be determined, the arithmetic average of the rates of interest per annum
(rounded upwards, if necessary, to the
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nearest 1/100 of 1%) at which deposits in U.S. dollars in immediately available
funds are offered to the Agent at 11:00 a.m. (New Orleans time), or as soon
thereafter as practicable, two (2) Business Days before the beginning of such
Interest Period by two (2) or more major banks in the London interbank market
selected by the Agent for a period equal to such Interest Period and in an
amount equal or comparable to the principal amount of the LIBOR Loan scheduled
to be made available by the Banks. As used herein, "LIBOR Index Rate" means, for
any Interest Period, the London interbank offered rate per annum (rounded
upwards, if necessary, to the next higher one hundred-thousandth of a percentage
point) for deposits in U.S. Dollars for a period equal to such Interest Period,
which appears on the Telerate Page 3875 as of 9:00 a.m. (New Orleans time) on
the day two Business Days before the commencement of such Interest Period.
LIBOR Loan shall mean a loan bearing interest at the LIBOR Rate.
LIBOR Rate shall mean (a) the quotient of the (i) LIBOR Base Rate divided
by (ii) one minus the applicable LIBOR Reserve Percentage plus (b) the
Applicable Margin for LIBOR Loans. The LIBOR Rate shall be adjusted
automatically on and as of the effective date of any change in the LIBOR Reserve
Percentage and Agent shall notify Borrower and Banks of any such change;
provided, however, no adjustment to the LIBOR Rate for the LIBOR Reserve
Percentage shall be made with respect to any Bank that is not subject to
Regulation D (or any other then applicable regulation of the Board of Governors
of the Federal Reserve System).
LIBOR Reserve Percentage shall mean for any day the percentage (including
any supplemental percentage applied on a marginal basis or any other reserve
requirement having a similar effect), expressed as a decimal, which is in effect
on the first day of the applicable Interest Period, as prescribed by the Board
of Governors of the Federal Reserve System (or any successor) under Regulation D
(or any other then applicable regulation of the Board of Governors (or any
successor)) with respect to "Eurocurrency Liabilities".
Lien shall mean any interest in Property securing an obligation owed to, or
a claim by, a Person other than the owner of the Property, whether such interest
is based on common law, statute or contract, including, without limitation, any
security interest, mortgage, deed of trust, pledge, assignment, judgment lien or
other lien or encumbrance of any kind or nature whatsoever, any conditional sale
or trust receipt, and any consignment or bailment for security purposes. The
term "Lien" shall include reservations, exceptions, encroachments, easements,
servitudes, rights-of-way, covenants, conditions, restrictions, leases and other
title exceptions and encumbrances affecting Property.
Loans shall collectively mean the Revolving Credit Loans, the Swing Loans,
and the Letter of Credit Loans, with each being a Loan, and shall include all
principal, interest, attorneys' fees and costs owed thereon.
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Material Adverse Effect shall mean a material adverse effect on the
Properties, assets, liabilities, business, operations, prospects, income or
condition (financial or otherwise) of Borrower and its Subsidiaries taken as a
whole.
Moody's shall mean Moody's Investors Service, Inc.
Multi-Employer Plan shall mean a "multi-employer plan" as defined in
Section 4001(a)(3) of ERISA which is maintained for employees of Borrower, any
Subsidiary or any ERISA Affiliate or to which Borrower, any Subsidiary or any
ERISA Affiliate has contributed in the past or currently contributes.
Net Investment shall mean, as of any date of determination thereof, (a) all
costs and estimated earnings in excess of billings on uncompleted contracts of
Borrower and each Subsidiary which is not a Joint Venture Entity minus (b) all
billings in excess of costs and estimated earnings on uncompleted contracts of
Borrower and each Subsidiary which is not a Joint Venture Entity. If the
preceding calculation results in a number less than zero such amount shall be
considered a Net Negative Investment.
Notes shall mean all of the Revolving Credit Notes and the Swing Line Note.
Notice of Borrowing shall have the meaning ascribed thereto in Section 3.3.
Obligations shall mean, without duplication, any and all present and future
indebtedness (including, without limitation, principal, interest, fees,
collection costs and expenses, attorneys' fees and other amounts), liabilities
and obligations (including, without limitation, reimbursement obligations with
respect to Letters of Credit issued by any one or more Banks under this
Agreement) of Borrower and each Subsidiary, and of any one or more of them, to
the Agent and/or any one or more of the Banks evidenced by or arising under or
in connection with this Agreement, the Notes, the Letter of Credit
Application(s), and/or any of the other Transaction Documents, whether direct or
contingent, due or to become due or now existing or hereafter arising.
Obligor shall mean Borrower, each Subsidiary and each other Person who is
or shall at any time hereafter become primarily or secondarily liable on any of
the Obligations.
Occupational Safety and Health Laws shall mean the Occupational Safety and
Health Act of 1970, as amended, and any other federal, state or local statute,
law, ordinance, code, rule, regulation, order or decree regulating, relating to
or imposing liability or standards of conduct concerning employee health and/or
safety, as now or at any time hereafter in effect.
Offshore shall mean Offshore Marine Indemnity Company, with Taxpayer
Identification Number 75-2674011.
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PBGC shall mean the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
Pension Plan shall mean a "pension plan," as such term is defined in
Section 3(2) of ERISA, which is established or maintained by Borrower, any
Subsidiary or any ERISA Affiliate, and includes, without limitation, a Multi-
Employer Plan.
Permitted Acquisition shall mean an Acquisition:
(a) acquired with the prior written consent of the Required Banks;
(b) acquired (and only to the extent acquired) through the issuance of
stock (or the use of the proceeds from the issuance of stock) of Borrower after
the effective date hereof; or
(c) acquired without the prior written consent of the Required Banks but
complying with each of the following requirements:
(i) such Acquisition will not cause a Default or an Event of Default;
(ii) the Purchase Price(s) for all Acquisitions falling within the
provisions of subparagraph (c) of this definition of Permitted Acquisition
acquired during the Revolving Credit Period plus the aggregate principal amount
of Guarantees, loans and/or advances by Borrower or a Subsidiary to any Foreign
Subsidiaries do not in the aggregate exceed $5,000,000.00; and
(iii) on the date of such Acquisition (and after giving effect to such
Acquisition), the Total Revolver Outstandings will not exceed $115,000,000.00
and Borrower will still have the ability to obtain a Revolving Credit Loan in
the amount of $10,000,000.00.
Permitted Liens shall mean any of the following:
(a) Liens for property taxes and assessments or governmental charges or
levies, provided that payment thereof is not at the time required by Section
8.1(d);
(b) (i) Deposits to secure the performance of bids, tenders or trade
contracts, or to secure statutory obligations, surety or appeal bonds or other
Liens of like general nature incurred in the ordinary course of business and not
in connection with the borrowing of money or the acquisition of inventory or
other Property and (ii) Liens (other than any Liens imposed by ERISA) arising in
the ordinary course of business or incidental to the ownership of Properties and
assets and not incurred in connection with the borrowing of money (including
Liens in connection with worker's compensation, unemployment insurance and other
like laws, carrier's, mechanic's, materialmen's, repairmen's, vendor's,
warehousemen's and attorneys' liens and statutory landlords' liens); provided in
each case (x) the obligation secured is not overdue or, if overdue, is being
contested in good faith by appropriate actions or proceedings being diligently
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conducted and for which adequate provision as determined in accordance with GAAP
has been made, (y) payment thereof is not at the time required by Section 8.1(d)
or 8.1(e), and (z) if the obligations secured thereby are in excess of
$50,000.00, Agent is provided written notice of such Lien within twenty days
after the date on which the Lien becomes overdue;
(c) Survey exceptions, issues with regard to the merchantability of
title, easements or reservations, mineral rights, or rights of others for
rights-of-way, servitudes, utilities and other similar purposes, or zoning or
other restrictions as to the use of real properties, which could not reasonably
be expected to have a Material Adverse Effect;
(d) Liens permitted by the Required Banks in writing;
(e) Liens reflected on Schedule 2.1(a) attached hereto in existence as of
the effective date hereof, and any extensions, renewals and refinancings thereof
(provided that any such refinancing shall not increase the principal
indebtedness secured thereby without the prior written consent of the Required
Banks);
(f) Liens on Properties in respect of judgments or awards, the
Indebtedness with respect to which is permitted by Section 8.2(a)(vi);
(g) non-perfected Liens in favor of Fireman's Fund Insurance Company or
other bonding company(ies) rated A-VII or better by A.M. Best Company pursuant
to a bonding company indemnity agreement(s) in customary form;
(h) non-perfected Liens in favor of Trinity in existence on October 1,
1996, to secure its contingent liability under parent guarantees, letters of
credit, bank guarantees or other similar obligations related to construction
contracts or bid proposals of Borrower or any Subsidiary existing or outstanding
on October 1, 1996, to the extent such Liens would customarily be required by a
bonding company in like circumstances;
(i) any Liens on the right, title or interest of Borrower or any
Subsidiary in or to any right, benefit or proceeds (including, without
limitation, rights to payment) arising from, or related to, Navy Prime Contract
#N62471-82-C-1455 for Model NP6D Clyde Crane;
(j) Liens granted in the ordinary course of business on vessels, rigs or
equipment under construction or materials used in the construction of such
property in favor of the purchaser, owner or supplier of such vessels, rigs,
equipment or materials (or lenders to such purchasers, owners or suppliers);
(k) Liens encumbering the assets of any Subsidiary acquired after the
effective date hereof which were in existence at the time of the acquisition of
such Subsidiary securing Indebtedness of Borrower or any Subsidiaries which does
not exceed $5,000,000.00 in the aggregate at any one time outstanding;
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(l) Liens against Property created in connection with the lease or
purchase of such Property securing Indebtedness incurred in connection with
Consolidated Financed Capital Expenditures, including, without limitation,
Capitalized Lease Obligations, which Indebtedness does not exceed $10,000,000.00
in the aggregate at any one time outstanding;
(m) Required margin deposits on Hedge Agreements;
(n) Liens in favor of Agent and the Banks under the Transaction
Documents;
(o) Liens in favor of one or more Banks securing Indebtedness under a
Hedge Agreement; and
(p) Liens listed on Schedule 2.1(f), so long as such Liens do not secure
any Indebtedness and are canceled within 90 days after the date hereof.
Permitted Transfer shall mean any sale, lease, transfer or other disposal
by Borrower or any Subsidiary of its Property (including, without limitation,
any shares of capital stock of a Subsidiary owned by Borrower or another
Subsidiary) prohibited by Section 8.2(c) but entered into with the prior written
consent of the Required Banks.
Person shall mean any individual, sole proprietorship, partnership, limited
liability company, limited liability partnership, joint venture, trust,
unincorporated organization, association, corporation, institution, entity or
government (whether national, federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
body or department thereof).
Pledge Agreement shall mean a Pledge Agreement substantially in the form of
Exhibit I(1) or I(2) executed now or at any time hereafter by Borrower or a
Subsidiary and delivered to Agent, as the same may be amended, supplemented or
otherwise modified from time to time.
Pledge Documents shall mean, with respect to each Wholly Owned Subsidiary
and each Joint Venture Entity, the following documents: (a) a Pledge Agreement
substantially in the form of Exhibit I(1) or I(2), as applicable, granting Agent
for the benefit of Agent and the Banks a pledge of and a security interest in
all of the common stock, membership interest, partnership interest or other
equity interest in such Wholly Owned Subsidiary or Joint Venture Entity owned
directly or indirectly by Borrower and/or any one or more Subsidiaries (other
than any Wholly Owned Subsidiary or Joint Venture Entity to be liquidated as set
forth on Schedule 8.1(u)) subject to no other Lien, (b) executed stock powers
covering all of the common stock of such Wholly Owned Subsidiary or Joint
Venture Entity owned directly or indirectly by Borrower and/or any one or more
Subsidiaries, (c) such opinions of counsel for Borrower and/or any Subsidiaries
as Agent may reasonably require, and (d) such financing statements, resolutions,
certificates, approvals, documents and instruments as Agent may reasonably
require; provided
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that the Pledge Agreement and stock powers shall not encumber in excess of
sixty-five percent (65%) of the outstanding voting equity interest in any
Foreign Subsidiary.
Preferred Ship Mortgage shall mean a Preferred Ship Mortgage substantially
in the form of Exhibit H executed now or at any time hereafter by Borrower or a
Subsidiary and delivered to Agent, as the same may be amended, supplemented or
otherwise modified from time to time.
Prime Rate shall mean the interest rate per annum equal to the arithmetic
average of the following: (a) the interest rate announced from time to time by
Whitney National Bank as its "prime rate" on commercial loans, (b) the interest
rate announced from time to time by The First National Bank of Chicago as its
"corporate base rate" on commercial loans, and (c) the interest rate announced
from time to time by BankBoston, N.A. as its "base rate" on commercial loans,
(which rate shall fluctuate as and when said prime or base rate(s) shall
change).
Property shall mean any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible. Properties shall mean the
plural of Property. For purposes of this Agreement, Borrower and each
Subsidiary shall be deemed to be the owner of any Property which it has acquired
or holds subject to a conditional sale agreement, financing lease or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person for security purposes.
Pro Rata Share shall mean with respect to each Bank, the percentage amount
equal to such Bank's Revolving Credit Commitment, divided by the sum of all of
the Banks' Revolving Credit Commitments.
Purchase Price shall mean any cash provided by Borrower or any Subsidiary
plus any Indebtedness assumed by Borrower or any Subsidiary in consideration for
an Acquisition.
RCRA shall mean the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976 and Hazardous and Solid Waste Amendments
of 1984, 42 U.S.C. (S)(S)6901 et seq., and any future amendments, and shall
include any and all regulations issued pursuant thereto.
Regulation D shall mean Regulation D of the Board of Governors of the
Federal Reserve System, as amended.
Regulatory Change shall have the meaning ascribed thereto in Section 5.9.
Release shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing into
the environment, including, without limitation, the abandonment or discarding of
barrels, drums, containers, tanks and/or other receptacles containing or
previously containing any Hazardous Substance.
Reportable Event shall have the meaning given to such term in ERISA.
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Required Banks shall mean at any time Banks having Fifty-One Percent (51%)
of the aggregate amount of the Revolving Credit Loans, the Letter of Credit
Loans and the face amount (or participation interest in the face amount) of
Letters of Credit then outstanding or, if no such Loans or Letters of Credit are
then outstanding, Fifty-One Percent (51%) of the total Commitments of all of the
Banks.
Responsible Officer shall mean the chief executive officer, president,
chief operating officer, chief financial officer or treasurer of Borrower or any
other officer of Borrower involved in the financial administration or
controllership function of Borrower.
Restricted Investment shall mean any Investment, or any expenditure or any
incurrence of any liability to make any expenditure for an Investment, other
than:
(a) (i) Guarantees, loans and/or advances by Borrower or a Subsidiary to
any Wholly Owned Subsidiary that is not a Foreign Subsidiary and (ii)
Guarantees, loans and/or advances by Borrower or a Subsidiary to any Foreign
Subsidiaries so long as the aggregate principal amount of such Guarantees, loans
and/or advances plus the aggregate Purchase Price(s) for all Acquisitions
falling within the provisions of subparagraph (c) of the definition of Permitted
Acquisition does not exceed $5,000,000.00;
(b) Guarantees, loans and/or advances by (i) any Subsidiary other than
Offshore to Borrower which are subordinated in writing to the payment of the
Obligations in form and substance satisfactory to the Required Banks or (ii)
Offshore to Borrower;
(c) Direct obligations of the United States of America or any
instrumentality or agency thereof, the payment of which is unconditionally
guaranteed by the United States of America or any instrumentality or agency
thereof (all of which Investments must mature within twelve (12) months from the
time of acquisition thereof);
(d) Investments in readily marketable commercial paper which, at the time
of acquisition thereof by Borrower or any Subsidiary, is rated investment grade
or better by S&P or Moody's and which matures within 270 days from the date of
acquisition thereof, provided that the issuer of such commercial paper shall, at
the time of acquisition of such commercial paper, have a senior long-term debt
rating of at least A by S&P and Moody's;
(e) Negotiable certificates of deposit or negotiable bankers acceptances
issued by (i) any of the Banks or (ii) any other bank or trust company organized
under the laws of the United States of America or any state thereof, which bank
or trust company (other than the Banks to which such restrictions shall not
apply) is a member of both the Federal Deposit Insurance Corporation and the
Federal Reserve System and is rated B or better by Thompson Bank Watch Service
(all of which Investments must mature within twelve (12) months from the time of
acquisition thereof);
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(f) Repurchase agreements providing for the purchase of securities of a
type described in clause (c) of this definition of Restricted Investment having
a value of not less than 100% of the amount owed by the counter party to such
agreement, issued by (i) any of the Banks or (ii) any other bank or trust
company organized under the laws of the United States or any state thereof,
which bank or trust company (other than the Banks to which such restrictions
shall not apply) is a member of both the Federal Deposit Insurance Corporation
and the Federal Reserve System and is rated B or better by Thompson Bank Watch
Service (all of which Investments must mature within twelve (12) months from the
time of acquisition thereof);
(g) Investments in mutual funds the investments of which are limited to
securities of a type described in clause (c) of this definition of Restricted
Investment;
(h) Investments existing as of the effective date hereof as described in
Schedule 7.17, and any future retained earnings in respect thereof;
(i) Guarantees, loans or advances other than in the ordinary course of
business to officers or employees of Borrower or a Subsidiary in the aggregate
principal amount of up to $500,000.00 at any one time outstanding;
(j) Permitted Acquisitions;
(k) Investments in Subsidiaries of Borrower and Joint Venture Entities as
of the effective date hereof;
(l) Investments representing all or a portion of the sales price for
property sold to another Person in the ordinary course of business.
Revolving Credit Commitment shall mean for each Bank, subject to
termination or reduction as set forth in Section 3.5, the principal amount set
forth as the Revolving Credit Commitment for such Bank next to its name on the
signature pages hereof, which commitments in the aggregate equal the principal
amount of $125,000,000.00.
Revolving Credit Loan and Revolving Credit Loans shall have the meanings
ascribed thereto in Section 3.1.
Revolving Credit Notes shall have the meaning ascribed thereto in Section
3.4(a).
Revolving Credit Period shall mean the period commencing on the effective
date of this Agreement and ending September 30, 2001, unless extended from time
to time with the unanimous consent of the Banks as provided in Section 3.6
hereof.
S&P shall mean Standard and Poor's Ratings Group.
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Security Agreement shall mean a Security Agreement substantially in the
form of Exhibit O(1) executed now or at any time hereafter by Borrower or a
Security Agreement substantially in the form of Exhibit O(2) executed now or at
any time hereafter by a Wholly Owned Subsidiary and delivered to Agent, as the
same may be amended, supplemented or otherwise modified from time to time.
Separation and Related Agreements shall mean the Separation Agreement,
Barge Agreement, Insurance Agreement, Tax Allocation Agreement and the Trademark
License Agreement between Borrower and Trinity dated as of October 1, 1996.
Subordinated Notes shall mean the convertible subordinated notes in the
aggregate principal amount of $185,000,000.00 issued by Borrower on September
15, 1997, bearing interest at 4.5% per annum, due 2004, which are contractually
subordinated to the Obligations and to certain other Indebtedness of Borrower
and its Subsidiaries.
Subordinated Notes Indenture shall mean the Indenture, dated September 15,
1997, between Borrower and U.S. Trust Company of Texas, N.A., as trustee,
pertaining to the Subordinated Notes.
Subsidiary shall mean (a) any corporation of which more than fifty percent
(50%) of the issued and outstanding capital stock entitled to vote for the
election of directors (other than by reason of default in the payment of
dividends) is at the time owned directly or indirectly by Borrower and/or any
one or more Subsidiaries of Borrower, or (b) any partnership, limited liability
company, business trust, or any other similar entity of which more than fifty
percent (50%) of the voting interests is at the time owned directly or
indirectly by Borrower and/or any one or more Subsidiaries of Borrower, and
specifically including, but not limited to, each of the entities described on
Schedule 2(e) hereto.
Swing Loans and Swing Loan shall have the meanings ascribed thereto in
Section 3.2.
Swing Line Note shall have the meaning ascribed thereto in Section 3.2.
Swing Line Commitment shall mean the aggregate principal amount of
$10,000,000.00 at any one time outstanding.
Syndication Agent shall mean BankBoston, N.A.
Telerate Page 3875 means the display designated as "Page 3875" of the Dow
Jones Telerate Service (or such other page as may replace Page 3875 on that
service or such other service as may be nominated by the British Bankers'
Association as the information vendor for the purpose of displaying British
Bankers' Association Interest Settlement Rates for U.S. Dollar Deposits).
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Term shall have the meaning ascribed thereto in Section 1.
Total Revolver Outstandings shall mean the sum of (i) the aggregate
principal amount of all outstanding Revolving Credit Loans, plus (ii) the
aggregate principal amount of all outstanding Swing Loans plus (iii) the
aggregate principal amount of all outstanding Letter of Credit Loans plus (iv)
the aggregate undrawn face amount of all outstanding Letters of Credit.
Transaction Documents shall mean this Agreement, the Notes, the Letter of
Credit Application(s), the Continuing Guarantees, the Security Agreements, the
Collateral Mortgages, the Deeds of Trust, the Pledge Agreements, the Preferred
Ship Mortgages, the Florida Mortgages, the Bank Hedge Agreements and all other
agreements, documents and instruments heretofore, now or hereafter delivered to
the Agent or any of the Banks with respect to or in connection with or pursuant
to this Agreement, any Loans made hereunder or thereunder, or any Letters of
Credit issued hereunder or thereunder, and executed by or on behalf of Borrower
or any Subsidiary, all as the same may from time to time be amended, modified,
extended or renewed.
Trinity shall mean Trinity Industries, Inc., a Delaware corporation, with
Taxpayer Identification Number 75-0225040, and any subsidiaries thereof.
U. S. Governmental Authority shall mean the United States of America, any
political subdivision thereof or any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to the United
States of America.
Unused Fee shall have the meaning ascribed thereto in Section 5.3.
Whitney shall mean Whitney National Bank, a national banking association,
in its individual corporate capacity as a Bank hereunder, including, without
limitation, its capacity as a Bank hereunder with respect to its Pro-Rata Share
of the Revolving Credit Loans, with respect to its making of Swing Loans and
with respect to its issuance of Letters of Credit.
Wholly Owned Subsidiary shall mean (a) any corporation of which one hundred
percent (100%) of the issued and outstanding capital stock entitled to vote for
the election of directors (other than by reason of default in the payment of
dividends) is at the time owned directly or indirectly by Borrower and/or any
one or more Subsidiaries, or (b) any partnership, limited liability company,
business trust, or any other similar entity of which one hundred percent (100%)
of the voting interests is at the time owned directly or indirectly by Borrower
and/or any one or more Subsidiaries, and specifically including, but not limited
to, each of the entities described on Schedule 2.1(d) hereto.
2.2 Accounting Terms and Determinations. Except as otherwise specified
herein, all accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made and all financial statements required to
be delivered hereunder shall be prepared as determined in accordance with GAAP
as in effect from time to time, applied on a basis
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consistent (except for changes accompanied by a concurrence from Borrower's
independent certified public accountants) with the most recent audited financial
statements of Borrower delivered to the Banks.
SECTION 3. THE REVOLVING CREDIT LOANS.
3.1 Revolving Credit Commitments. Subject to the terms and conditions set
forth in this Agreement and so long as no Default or Event of Default under this
Agreement has occurred and is continuing, during the Revolving Credit Period,
each Bank severally (and not jointly) agrees to lend to Borrower from time to
time (individually, a "Revolving Credit Loan" and collectively, the "Revolving
Credit Loans") amounts not to exceed, in the aggregate at any one time
outstanding, the lesser of: (a) such Bank's Revolving Credit Commitment, or (b)
such Bank's Pro Rata Share of the sum of the total Revolving Credit Commitments
of all of the Banks minus the aggregate principal amount of all outstanding
Letter of Credit Loans minus the aggregate undrawn face amount of all
outstanding Letters of Credit minus the principal amount of any outstanding
Swing Loans. Each Revolving Credit Loan under this Section 3.1 shall be made
from the several Banks ratably in proportion to their respective Pro Rata
Shares, and may be made as either (x) a Base Rate Loan, (y) a LIBOR Loan, or (z)
any combination thereof, as determined by Borrower with notice thereof to Agent
pursuant to Section 3.3. Each Revolving Credit Loan under this Section 3.1 which
is a Base Rate Loan shall be for an aggregate principal amount of at least
$1,000,000.00 or any larger multiple of $100,000.00. Each Revolving Credit Loan
under this Section 3.1 which is a LIBOR Loan shall be for an aggregate principal
amount of at least $5,000,000.00 or any larger multiple of $500,000.00. Within
the foregoing limits, Borrower may borrow under this Section 3.1, prepay under
Section 5.4(a) or 5.4(b) and reborrow at any time during the Revolving Credit
Period under this Section 3.1. The failure of any Bank to make any Revolving
Credit Loan required under this Agreement shall not release any other Bank from
its obligation to make Revolving Credit Loans as provided herein.
3.2 The Swing Line. Subject to all of the terms and conditions hereof
and so long as no Default or Event of Default under this Agreement has occurred
and is continuing, Whitney agrees to make loans to Borrower (individually, a
"Swing Loan" and collectively, the "Swing Loans") which shall not in the
aggregate at any time outstanding exceed the lesser of (i) the Swing Line
Commitment, or (ii) the sum of the total Revolving Credit Commitments of all of
the Banks minus the aggregate principal amount of all outstanding Revolving
Credit Loans minus the aggregate principal amount of all outstanding Letter of
Credit Loans minus the aggregate undrawn face amount of all outstanding Letters
of Credit. The Swing Loans shall be available to Borrower and may be availed of
by Borrower from time to time, and borrowings thereunder may be repaid and used
again during the period ending on the last day of the Revolving Credit Period.
All Swing Loans shall be made hereunder only as Base Rate Loans. The Swing
Loans shall be evidenced by the Swing Line Note of Borrower dated as of the
effective date hereof (the "Swing Line Note") payable to the order of Whitney in
the amount of the Swing Line Commitment and being in the form attached hereto as
Exhibit B.
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3.3 Method of Borrowing.
(a) With respect to each Revolving Credit Loan, Borrower shall give
notice (a "Notice of Borrowing") to the Agent by 11:00 a.m. (New Orleans time)
on the day of each Base Rate Loan, and by 11:00 a.m. (New Orleans Time) at least
three (3) Business Days before each LIBOR Loan, specifying:
(i) the date of such Revolving Credit Loan, which shall be a
Business Day,
(ii) the aggregate principal amount of such Revolving Credit
Loan,
(iii) whether such Loan is to be a Base Rate Loan or a LIBOR
Loan, or a combination thereof,
(iv) in the case of a LIBOR Loan, the duration of the initial
Interest Period applicable thereto, subject to the provisions of the definition
of Interest Period,
(v) that on the date of, and after giving effect to, such
Revolving Credit Loan, no Default or Event of Default under this Agreement has
occurred and is continuing, and
(vi) that on the date of, and after giving effect to, such
Revolving Credit Loan, all of the representations and warranties of Borrower
contained in Section 7 of this Agreement and of Borrower and its Subsidiaries
contained in the other Transaction Documents are true and correct in all
material respects as if made on and as of the date of such Revolving Credit Loan
(except to the extent (i) of changes consented to in writing by the Required
Banks after the effective date hereof, (ii) of changes resulting from
transactions permitted by this Agreement or the other Transaction Documents and
(iii) that such representations and warranties expressly relate solely to an
earlier date (in which case such representations and warranties shall have been
true and correct on and as of such earlier date)).
A Notice of Borrowing shall not be required in connection with a Base Rate Loan
pursuant to Section 5.7 or 5.8.
(b) Upon receipt of a Notice of Borrowing given to it, the Agent
shall notify each Bank by 1:00 p.m. (New Orleans time) on the date of receipt of
such Notice of Borrowing by the Agent (which must be a Business Day) of the
contents thereof and of such Bank's ratable share of such Revolving Credit Loan.
A Notice of Borrowing shall not be revocable by Borrower.
(c) Not later than 3:00 p.m. (New Orleans time) on the date of each
Revolving Credit Loan, each Bank shall make available its Pro Rata Share of such
Revolving Credit Loan, in federal or other funds immediately available in New
Orleans, Louisiana, to the Agent at its address specified in or pursuant to
Section 11.7. Agent shall not be required to make any amount available to
Borrower hereunder except to the extent it shall have received such amounts from
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the Banks as set forth herein, provided, however, that unless the Agent shall
have been notified by a Bank prior to the date a Revolving Credit Loan is to be
made hereunder that such Bank does not intend to make its Pro Rata Share of such
Revolving Credit Loan available to the Agent, the Agent may assume that such
Bank has made such Pro Rata Share available to the Agent on such date, and the
Agent may in reliance upon such assumption make available to the Borrower a
corresponding amount. If such corresponding amount is not in fact made
available to the Agent by such Bank and the Agent has made such amount available
to the Borrower, the Agent shall be entitled to receive such amount from such
Bank forthwith upon its demand, together with interest thereon in respect of
each day during the period commencing on the date such amount was made available
to the Borrower and ending on but excluding the date the Agent recovers such
amount from the Bank at a rate per annum equal to the Fed Funds Rate. Unless
the Agent determines that any applicable condition specified in Section 6 has
not been satisfied, the Agent will make the funds so received from the Banks
available to Borrower thereafter as of 3:30 p.m. New Orleans time at the Agent's
aforesaid address by crediting such funds to a demand deposit account (or such
other account mutually agreed upon in writing between Agent and Borrower) of
Borrower with the Agent.
(d) With respect to each Swing Loan, Borrower shall give Whitney
prior notice (which may be written or oral but which must be given prior to 2:00
p.m. New Orleans time on the date of the Swing Loan) of the amount and date of
each Swing Loan and, subject to all of the terms and conditions hereof, the
proceeds of such Swing Loan shall be made available to Borrower on the date of
request at the offices of the Agent in New Orleans, Louisiana. Anything
contained in the foregoing to the contrary notwithstanding, (i) the obligation
of Whitney to make Swing Loans shall be subject to all of the terms and
conditions of this Agreement, and (ii) Whitney shall not be obligated to make
more than one Swing Loan to Borrower during any day.
3.4 Revolving Credit Notes.
(a) The Revolving Credit Loans of each Bank to Borrower during the
Revolving Credit Period shall be evidenced by Revolving Credit Note of Borrower
dated the effective date hereof and payable to the order of such Bank in a
principal amount equal to its Revolving Credit Commitment in substantially the
form of Exhibit A attached hereto (with appropriate insertions) (as the same may
from time to time be amended, modified extended or renewed, the "Revolving
Credit Notes").
(b) Upon receipt of each Bank's Revolving Credit Note pursuant to
Section 3.4(a), the Agent shall mail such Revolving Credit Note by overnight
express delivery to such Bank. Each Bank shall record, and prior to any transfer
of its Revolving Credit Note may endorse on the schedules forming a part
thereof, appropriate notations to evidence the date and amount of each Revolving
Credit Loan made by it during the Revolving Credit Period and the date and
amount of each payment of principal made by Borrower with respect thereto. Each
Bank is hereby irrevocably authorized by Borrower so to endorse its Revolving
Credit Note and to attach to and make a part of any such Revolving Credit Note a
continuation of any such schedule as and when
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required; provided, however that the obligation of Borrower to repay each
Revolving Credit Loan actually made hereunder shall be absolute and
unconditional, notwithstanding any failure of any Bank to endorse or any mistake
by any Bank in connection with endorsement on the schedules attached to its
respective Revolving Credit Note. The internal records of each Bank shall
constitute for all purposes prima facie evidence of (i) the amount of principal
and interest owing on the Revolving Credit Loans from time to time, (ii) the
amount of each Revolving Credit Loan made to the Borrower and (iii) the amount
of each principal and/or interest payment received by the Banks on the Revolving
Credit Loans.
3.5 Termination or Reduction of Commitments. Borrower may, upon three (3)
Business Days' prior written notice to the Agent, terminate entirely at any
time, or proportionately reduce from time to time on a pro rata basis among the
Banks based on their respective Revolving Credit Commitments by an aggregate
amount of $1,000,000.00 or any larger multiple of $500,000.00 the unused
portions of the Revolving Credit Commitments; provided, however, that (i) at no
time shall the Revolving Credit Commitments be reduced to a figure less than the
Total Revolver Outstandings, (ii) at no time shall any Revolving Credit
Commitment be reduced to a figure greater than zero but less than $5,000,000.00
and (iii) any such termination or reduction shall be permanent and Borrower
shall have no right to thereafter reinstate or increase, as the case may be, the
Revolving Credit Commitment of any Bank.
3.6 Maturity. All Revolving Credit Loans and all Swing Loans not paid
prior to the last day of the Revolving Credit Period, together with all accrued
and unpaid interest thereon and all fees and other amounts owing by Borrower to
the Banks with respect thereto, shall be due and payable on the last day of the
Revolving Credit Period. Each year of the Revolving Credit Period, during the
period commencing on October 1st and ending on December 1st, Borrower may
request that the Revolving Credit Period be extended for up to one year from the
end of the then applicable Revolving Credit Period. Upon the unanimous consent
of the Banks, which consent may be withheld in the sole discretion of any of the
Banks, the Revolving Credit Period (and the Term of this Agreement) shall be so
extended, provided that Borrower and the Subsidiaries shall execute such
documentation as Banks shall require to evidence such extension. The Banks will
use reasonable efforts to provide Borrower with a response to any such request
for an extension of the Revolving Credit Period within 60 days following receipt
thereof and of any financial information requested by any Bank; provided that,
the failure of the Banks, or any one or more of them, to provide a response
within such 60 day period shall not be construed to constitute consent to such
an extension on the part of any of the Banks.
3.7 Special Swing Loan Provisions.
(a) All Swing Loans shall be payable with accrued interest thereon
solely to Whitney for its own account. Upon the earlier to occur of (i) seven
days after the making of any Swing Loan or (ii) at any time at the discretion of
Whitney, Borrower shall repay all of such Swing
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Loans in cash by 1:00 p.m., New Orleans time the following Business Day, or
obtain a Revolving Credit Loan in an amount at least equal to the aggregate
outstanding principal amount of all Swing Loans, together with all accrued
interest thereon, and shall apply the proceeds of such Revolving Credit Loan to
repay in its entirety the aggregate outstanding principal amount of all Swing
Loans, together with accrued interest thereon to the date of such repayment.
(b) In the event that any portion of any Swing Loan is not repaid as
set forth above, Whitney shall promptly notify Agent and Agent shall promptly,
and in no event later than 5:00 p.m., New Orleans time, two Business Days
thereafter, notify each Bank in writing of the unreimbursed amount of such Swing
Loan and of such Bank's Pro-Rata Share of such unreimbursed amount. Each of the
Banks shall make a Revolving Credit Loan in an amount equal to such Bank's Pro-
Rata Share of the unreimbursed amount of such Swing Loan, together with accrued
unpaid interest thereon, and pay the proceeds thereof, in immediately available
funds, directly to Whitney, not later than 1:00 p.m., New Orleans time, on the
next Business Day after the date such Bank is notified by the Agent. Revolving
Credit Loans made by the Banks to repay unreimbursed Swing Loans pursuant to
this subsection shall constitute Revolving Credit Loans hereunder, initially
shall be Base Rate Loans and shall be subject to all of the provisions of this
Agreement concerning Revolving Credit Loans, except that such Revolving Credit
Loans shall be made upon demand by the Agent as set forth above rather than upon
notice by Borrower and shall be made, notwithstanding anything in this Agreement
to the contrary, without regard to satisfaction of conditions precedent to the
making of Revolving Credit Loans set forth in Section 3 hereof or any other
Section of this Agreement.
(c) Each Bank's obligation to make Revolving Credit Loans in the
amount of its Pro-Rata Share of any unreimbursed Swing Loan pursuant hereto is
several, and not joint or joint and several. The failure of any Bank to perform
its obligation to make a Revolving Credit Loan in the amount of such Bank's Pro-
Rata Share of any unreimbursed Swing Loan will not relieve any other Bank of its
obligation hereunder to make a Revolving Credit Loan in the amount of such other
Bank's Pro-Rata Share of such unreimbursed Swing Loan. Any Bank may but shall
have no obligation to any Person to assume all or any portion of any non-
performing Bank's obligation to make a Revolving Credit Loan in the amount of
such Bank's Pro-Rata Share of such unreimbursed Swing Loan. The Borrower agrees
to accept the Revolving Credit Loans hereinabove provided, whether or not such
Loans could have been made pursuant to the terms of Section 3 hereof or any
other Section of this Agreement.
(d) In the event, for whatever reason, the Agent determines that the
Banks are not able to, or that it could be disadvantageous for the Banks to,
advance their respective Pro-Rata Share of Revolving Credit Loans for the
purpose of refunding Swing Loans as required hereunder, then each of the Banks
(subject to the provisions of this Section 3.7) absolutely and unconditionally
agrees to purchase and take from Whitney on demand an undivided participation
interest in Swing Loans outstanding in an amount equal to their respective Pro-
Rata Share of such Swing Loans.
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SECTION 4. LETTERS OF CREDIT.
4.1 Letter of Credit Commitment.
(a) Subject to the terms and conditions of this Agreement, during the
Letter of Credit Period of this Agreement, and so long as no Default or Event of
Default under this Agreement has occurred and is continuing (provided, however,
that Issuer shall have no liability to any of the other Banks for issuing a
Letter of Credit after the occurrence of any Default or Event of Default under
this Agreement unless Issuer has previously received notice in writing to Issuer
by Borrower, the Agent or any of the other Banks of the occurrence of such
Default or Event of Default), each Bank, except The Bank of Nova Scotia, hereby
agrees, upon the request of and as determined by Agent, to issue irrevocable
standby letters of credit for the account of Borrower or for the account of
Borrower and any Subsidiary (individually, a "Letter of Credit" and
collectively, the "Letters of Credit") (the "Letter of Credit Commitment") in an
amount and for the term specifically requested by Borrower by notice in writing
to such Bank in the form of Exhibit E attached hereto and incorporated herein by
reference (a "Letter of Credit Request") at least three (3) Business Days prior
to the requested issuance thereof; provided, however, that:
(i) Borrower, and if the Letter of Credit is to be issued for
the account of Borrower and a Subsidiary, such Subsidiary, shall have executed
and delivered to Issuer a Letter of Credit Application with respect to such
Letter of Credit, with Borrower and any Subsidiary executing same to be jointly,
severally and solidarily liable thereunder and Borrower and any such Subsidiary
shall have delivered to Issuer such other documentation as Issuer may reasonably
request;
(ii) the term of any such Letter of Credit shall not extend
beyond the last day of the Letter of Credit Period;
(iii) any Letter of Credit may only be utilized to secure the
payment of obligations of Borrower or any Subsidiary to third parties incurred
in the ordinary course of business;
(iv) the Total Revolver Outstandings shall not at any one time
exceed the sum of the total Revolving Credit Commitments of all of the Banks;
(v) the text of any such Letter of Credit is provided to Issuer
no less than three (3) Business Days prior to the requested issuance date, the
terms and conditions of which must be acceptable to Issuer;
(vi) the sum of (A) the aggregate undrawn face amount of all
outstanding Letter(s) of Credit securing obligations of Offshore plus (B) the
aggregate principal amount of all outstanding Letter of Credit Loans arising out
of Letter(s) of Credit securing obligations of Offshore shall not at any one
time exceed Fifteen Million and 00/100 Dollars ($15,000,000.00); and
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(vii) No Letter of Credit shall be issued securing obligations of
any Joint Venture Entity.
("Issuer" shall mean the Bank that issues a Letter of Credit.)
Banks and Borrower acknowledge and agree that the letter(s) of credit
described on Schedule 4.1(a) shall be deemed outstanding Letters of Credit under
this Agreement and shall be governed by the terms and provisions of this
Agreement.
(b) The Issuer will make available the original of each Letter of
Credit to the beneficiary thereof (and will promptly provide each of the Banks
and the Agent with a copy of such Letter of Credit).
(c) For each Letter of Credit, Borrower (and any Subsidiary that
executed the Letter of Credit Application) hereby further agrees, jointly,
severally and solidarily, to pay to the Agent for the account of the Issuer and
the other Banks an annual nonrefundable commitment fee payable quarterly in an
amount equal to the rate per annum equal to the then current Applicable Margin
for LIBOR Loans (calculated on an actual day, 360 day year basis) times the face
amount (taking into account any increases or decreases therein during the period
in question) of each such Letter of Credit issued hereunder ("Letter of Credit
Commitment Fee"), which Letter of Credit Commitment Fee shall be due and payable
in arrears with respect to each Letter of Credit on the last Business Day of
each calendar quarter during the term of each respective Letter of Credit and on
the termination thereof (whether at its stated maturity or earlier). Borrower
further agrees to pay (or cause any Subsidiary for which the Letter of Credit
was issued to pay) to Issuer all reasonable administrative fees of Issuer in
connection with the issuance, maintenance, modification (if any) and
administration of each Letter of Credit and standard negotiation charges upon
demand from time to time. Each of the Banks shall be entitled to its Pro Rata
Share of any Letter of Credit Commitment Fees, but the Banks shall have no right
to share in any administrative fees paid by Borrower (or any Subsidiary) to
Issuer in connection with any of the Letters of Credit. In addition to the
Letter of Credit Commitment Fee, for each Letter of Credit, Borrower hereby
further agrees to pay (or cause any Subsidiary that executed the Letter of
Credit Application to pay) to the Agent, solely for the account of the Issuer, a
nonrefundable commitment fee in an amount equal to 1/8 of 1% of the undrawn face
amount of each such Letter of Credit issued hereunder, which such fee shall be
due and payable upon issuance of such Letter of Credit.
(d) If the proposed beneficiary of a Letter of Credit will not accept
any Bank as the Issuer of such Letter of Credit, Agent will request a financial
institution selected by such beneficiary and acceptable to the Agent and the
Issuer to confirm such Letter of Credit, with Borrower to be responsible for any
and all fees incurred as a result of such confirmation.
4.2 Participation by Other Banks.
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(a) Upon the issuance of a Letter of Credit, each Bank shall share
the obligation represented by each such Letter of Credit so issued, in an amount
equal to such Bank's Pro Rata Share. The participation of each Bank in each
Letter of Credit shall be automatic. Each Bank shall make available to the
Issuer, regardless of whether any Default or Event of Default shall have
occurred and is continuing, an amount equal to its respective Pro Rata Share of
each drawing on each Letter of Credit in same day or immediately available funds
not later than 11:00 a.m. New Orleans time on each Disbursement Date (as
hereinafter defined) for each such drawing. In the event that any Bank fails to
make available to the Issuer the amount of such Bank's Pro Rata Share of any
drawing on a Letter of Credit as provided herein, the Issuer shall be entitled
to recover such amount on demand from such Bank together with interest at the
daily average Federal Funds Rate for the first two Business Days after the
Disbursement Date and thereafter at the Base Rate.
(b) The Issuer shall distribute to each Bank that has paid all
amounts payable by it under this Section 4.2 with respect to any Letter of
Credit issued by the Issuer such Bank's Pro Rata Share of all payments received
by the Issuer from the Borrower in reimbursement of drawings honored by Issuer
under such Letter of Credit when such payments are received (to the extent that
such Bank has not already received such amounts).
4.3 Disbursements. The Issuer shall notify the Borrower and the Agent
promptly of the presentment for payment of any Letter of Credit (on the date of
presentment, if possible, and otherwise on the next Business Day, it being
agreed that such notice may be made by phone), together with notice of the date
(the "Disbursement Date") such payment shall be made, and the Agent will
promptly notify the Banks of such matters. Subject to the terms and provisions
of such Letter of Credit, the Issuer shall make such payment to the beneficiary
(or its designee) of such Letter of Credit. On the Disbursement Date, Borrower
shall, contemporaneous with a payment on such Letter of Credit, reimburse (or
cause any Subsidiary for which the Letter of Credit was issued to reimburse)
Issuer and the other Banks (to the extent each Bank has paid its Pro Rata Share
of such drawing) for all amounts which will be or have been disbursed under such
Letter of Credit. In the event a payment under a Letter of Credit is made
without contemporaneous receipt of payment from Borrower in accordance with this
Section 4.3, such payment shall constitute a loan (individually a "Letter of
Credit Loan" and collectively, the "Letter of Credit Loans") by Issuer and the
other Banks (to the extent each Bank has paid its Pro Rata Share of such
drawing) to Borrower. All Letter of Credit Loans shall accrue interest at the
Base Rate and shall be payable on demand. The Issuer shall promptly distribute
to each Bank that has paid all amounts payable by it under Section 4.2 with
respect to a Letter of Credit such Bank's Pro Rata share of all interest and
other amounts received by Issuer from Borrower (or any Subsidiary) under the
Letter of Credit Loan relating to such Letter of Credit (to the extent that such
Bank has not already received such amounts).
4.4 Reimbursement. Borrower's obligation under Section 4.3 to reimburse
the Issuer and the other Banks with respect to each drawing under each Letter of
Credit (including interest
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thereon) (to the extent each Bank has paid its Pro Rata Share of such drawing),
and each Bank's obligation to fund each drawing shall be absolute and
unconditional under any and all circumstances and irrespective of any setoff,
counterclaim, or defense to payment which Borrower or any Bank may have or have
had against any Bank, the Borrower or any beneficiary of a Letter of Credit,
including, without limitation, any defense based upon the occurrence of any
Default or Event of Default, any draft, demand or certificate or other document
presented under a Letter of Credit proving to be forged, fraudulent, invalid or
insufficient, or any failure to apply or misapplication by the beneficiary of
the proceeds of any disbursement, or the legality, validity, form, regularity,
or enforceability of such Letter of Credit.
4.5 Replacement or Collateralization of Letters of Credit.
Notwithstanding any provision contained in this Agreement or any of the Letter
of Credit Applications to the contrary, upon the occurrence of any Event of
Default under this Agreement, at Agent's option, Borrower shall, upon Agent's
demand, deliver to Agent cash or other collateral acceptable to Agent, in its
sole and absolute discretion, having a value, as determined by Agent, at least
equal to the aggregate undrawn face amount of all outstanding Letters of Credit.
Any such collateral and/or any amounts received by Agent pursuant to this
Section 4.5 shall be held by Agent in a separate account at Agent appropriately
designated as a cash collateral account in relation to this Agreement and the
Letters of Credit and retained by Agent as collateral security for the payment
of the Borrower's Obligations. Cash amounts delivered to Agent pursuant to the
foregoing requirements of this Section 4.5 shall be invested, at the request and
for the account of Borrower, in investments of a type and nature and with a term
acceptable to Agent. Such amounts, including in the case of cash amounts
invested in the manner set forth above, any investment realized thereon, shall
not be used by Agent to pay any amounts drawn or paid under or pursuant to any
Letter of Credit, but may be applied to reimburse Issuer and/or the other Banks
for drawings or payments under or pursuant to the Letters of Credit which the
Issuer and/or the other Banks have paid, or if no such reimbursement is required
shall be applied to such other of Borrower's Obligations as Agent shall
determine. Any amounts remaining in any cash collateral account established
pursuant to this Section 4.5 after the payment in full of all of the Borrower's
Obligations and the expiration or cancellation of all of the Letters of Credit
shall be returned to Borrower (after deduction of any expenses of the Banks).
4.6 Nature of Reimbursement Obligations. Borrower shall assume all risks
of the acts, omissions, or misuse of any Letter of Credit by the beneficiary
thereof. Except to the extent of its own gross negligence or wilful misconduct,
the Issuer shall not be responsible for:
(a) the form, validity, sufficiency, accuracy, genuineness, or legal
effect of any Letter of Credit or any document submitted by any party in
connection with the application for and issuance of a Letter of Credit, even if
it should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent, or forged;
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(b) the form, validity, sufficiency, accuracy, genuineness, or legal
effect of any instrument transferring or assigning or purporting to transfer or
assign a Letter of Credit or the rights or benefits thereunder or proceeds
thereof in whole or in part;
(c) failure of the beneficiary to comply fully with conditions
required (except the presentment of any required documents, as set forth in the
applicable Letter of Credit, to the Issuer) in order to demand payment under a
Letter of Credit;
(d) errors, omissions, interruptions, or delays in transmission or
delivery of any information or messages, by mail, cable, telegraph, telex, or
otherwise;
(e) any loss or delay in the transmission or otherwise of any
document or draft required in order to make a disbursement under a Letter of
Credit or of the proceeds thereof;
(f) errors in interpretation of technical terms;
(g) any misapplication by a beneficiary of the proceeds of any
disbursement under any Letter of Credit; or
(h) any consequences arising from causes beyond the control of the
Issuer including, without limitation, acts of any Governmental Authority.
None of the foregoing shall affect, impair, or prevent the vesting of any
of the rights or powers granted to the Issuer hereunder.
4.7 Indemnity. In addition to amounts payable as elsewhere provided in
this Section 4, Borrower hereby agrees to protect, defend, hold harmless and
indemnify Issuer, and any of Issuer's correspondents or affiliates and their
respective officers, directors, and agents, from and against any and all claims,
demands, liabilities, damages, losses, costs, charges and expenses (including
reasonable attorneys' fees) which Issuer may incur or be subject to as a
consequence, direct or indirect, of (i) the issuance of the Letters of Credit,
other than as a result of (y) the gross negligence or wilful misconduct of the
Issuer or (z) the Issuer's failure to pay under any Letter of Credit after the
presentation to it of a request complying with the terms and conditions of the
Letter of Credit, or (ii) the failure of the Issuer to honor a drawing under any
Letter of Credit as a result of any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto Governmental Authority.
SECTION 5. GENERAL PROVISIONS FOR ALL LOANS.
5.1 Duration of Interest Periods and Selection of Interest Rates.
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(a) The commencement date and duration of the initial Interest Period for
each LIBOR Loan shall be as specified in the applicable Notice of Borrowing.
Borrower shall elect the duration of each subsequent Interest Period applicable
to such LIBOR Loan, and the interest rate to be applicable during such
subsequent Interest Period (and, Borrower shall have the option (x) in the case
of any Base Rate Loan, to elect that such Loan become a LIBOR Loan and the
Interest Period to be applicable thereto or (y) in the case of any LIBOR Loan,
to elect that such Loan become a Base Rate Loan), by giving notice of such
election to the Agent by 11:00 a.m. (New Orleans time) on the day of, in the
case of the election of the Base Rate, by 11:00 a.m. (New Orleans time) at least
three (3) Business Days before, in the case of the election of the LIBOR Rate,
the end of the immediately preceding Interest Period applicable thereto, if any;
provided, however, that notwithstanding the foregoing, in addition to and
without limiting the rights and remedies of the Agent and the Banks under
Section 9 hereof, so long as any Default or Event of Default under this
Agreement has occurred and is continuing, Borrower shall not be permitted to
renew any LIBOR Loan as a LIBOR Loan or to convert any Base Rate Loan into a
LIBOR Loan. By 1:00 p.m. (New Orleans time) on the date of receipt of each such
notice of conversion or continuation of a Loan from Borrower, Agent shall notify
each Bank of the contents thereof and of such Bank's ratable share of such Loan.
A notice by Borrower under this Section 5.1(a) shall not be revocable by
Borrower. All LIBOR Loans, whether by conversion or by an advance, shall be in
a principal amount of at least $5,000,000.00 or multiples of $500,000.00 in
excess thereof. All Loans which bear interest at a particular LIBOR Rate for a
particular Interest Period shall constitute a single LIBOR Loan. Borrower shall
not have more than ten (10) LIBOR Loans outstanding at any one time.
(b) If the Agent does not receive a notice of election for the
continuation of a LIBOR Loan for a subsequent Interest Period pursuant to
subsection (a) above within the applicable time limits specified therein,
Borrower shall be deemed to have elected to convert such LIBOR Loan on the last
day of the current Interest Period with respect thereto to a Base Rate Loan in
the principal amount of such expiring LIBOR Loan on such date.
(c) Notwithstanding the foregoing, the duration of each Interest Period
shall be subject to the provisions of the definition of Interest Period.
(d) Borrower hereby authorizes the Agent to rely on telephonic,
telegraphic, telecopy, telex or written instructions believed by the Agent in
good faith to have been sent or delivered by any person identifying himself or
herself as John Dane III, Rick S. Rees or Emile J. Dumesnil (or any other person
from time to time authorized to act on behalf of Borrower pursuant to a
resolution adopted by the Board of Directors of Borrower and certified by the
Secretary of Borrower and delivered to the Agent) with respect to any request to
make a Loan or a repayment hereunder, or to convert any Base Rate Loan or LIBOR
Loan to any other type of Loan available hereunder, and on any signature which
the Agent in good faith believes to be genuine. Borrower shall be bound thereby
in the same manner as if such person was actually authorized or such signature
was genuine. Borrower also hereby agrees to indemnify the Agent and each of the
Banks and to hold the Agent and each of the Banks harmless from and against any
and all claims,
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demands, damages, liabilities, losses, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) relating to or arising out
of or in connection with the acceptance of instructions for making or converting
Loans or making repayments hereunder.
5.2 Interest Rates; Interest Payments.
(a) Each Base Rate Loan shall bear interest on the outstanding principal
amount thereof, for each day from the date such Loan is made until it becomes
due, at a rate per annum equal to the Base Rate. Such interest shall be payable
on all such Loans quarterly in arrears on the last day of each quarter (or the
immediate subsequent Business Day if any such last day is not a Business Day),
commencing on the first day after such Base Rate Loan is made, and at maturity.
Additionally, Borrower shall pay interest on any such Loan upon conversion to a
LIBOR Loan. Any overdue principal of and, to the extent permitted by law,
overdue interest on, any Base Rate Loan shall bear interest, payable on demand,
for each day until paid at a rate per annum equal to the sum of two percent (2%)
plus the rate otherwise in effect for such day.
(b) Each LIBOR Loan shall bear interest on the outstanding principal
amount thereof for each Interest Period applicable thereto at a rate per annum
equal to the applicable LIBOR Rate; provided that if any LIBOR Loan or any
portion thereof shall, as a result of clause (iv) of the definition of Interest
Period, have an Interest Period of less than 30 days, such portion shall bear
interest during such Interest Period at the rate applicable to Base Rate Loans
during such period. Interest shall be payable for each Interest Period on the
last day thereof, unless the duration of the applicable Interest Period exceeds
three (3) months, in which case such interest shall be payable at the end of the
first three (3) months of such Interest Period and on the last day of such
Interest Period. Any overdue principal of and, to the extent permitted by law,
overdue interest on, any LIBOR Loan shall bear interest, payable on demand, for
each day until paid, at a rate per annum equal to the sum of two percent (2%)
plus the higher of (i) the LIBOR Rate for the immediately preceding Interest
Period applicable to such LIBOR Loan or (ii) the rate applicable to Base Rate
Loans for such day; provided that, the rate of interest shall not exceed the
maximum rate of interest permitted under La. R.S. 9:3509.
(c) The Agent shall (in accordance with this Agreement) determine each
interest rate applicable to the Loans hereunder. The Agent shall give prompt
notice to Borrower and the Banks by telecopy, telex or cable of each rate of
interest so determined, and its determination thereof shall be conclusive in the
absence of manifest error. Any change in the Base Rate shall become effective
as of the opening of business on the day on which such change in the Base Rate
shall occur.
5.3 Fees.
(a) Borrower shall pay to Agent for the account of the Banks, in arrears,
on the last day of March, June, September and December in each year (or, if such
day is not a Business Day, on the next succeeding Business Day) and on the last
day of the Revolving Credit Period, an unused fee
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(the "Unused Fee") equal to: (i) one fourth (1/4) of the rate per annum set
forth in the column labeled "Unused Fee" in the definition of "Applicable
Margin" that corresponds to Borrower's Ratio of Consolidated Total Debt as of
the end of the immediately preceding fiscal quarter (but excluding the fiscal
quarter ending on such payment date) to Consolidated EBITDA for the immediately
preceding four (4) fiscal quarters (but excluding the fiscal quarter ending on
such payment date) multiplied by (ii) the unused Revolving Credit Commitments of
all of the Banks during the preceding fiscal quarter (but excluding the fiscal
quarter ending on such payment date), or portion thereof, which unused Revolving
Credit Commitments shall be arrived at by dividing the sum of the unused
Revolving Credit Commitments of the Banks for each day of that quarter as of the
close of each day, by 90. Upon, receipt, Agent shall promptly pay each Bank its
Pro Rata Share of any such Unused Fee paid by Borrower. The unused Revolving
Credit Commitments shall be defined as (x) the total of the Revolving Credit
Commitments of all of the Banks minus (y) the sum of (1) the principal amount of
all outstanding Revolving Credit Loans, (2) the principal amount of all
outstanding Letter of Credit Loans, and (3) the aggregate undrawn face amount of
all outstanding Letters of Credit.
(b) Borrower shall pay to Agent an agreed upon annual fee. Borrower
shall pay an origination fee to the Banks equal to 1/4 of 1% of the total
Revolving Credit Commitments, which fee shall be due and payable in quarterly
installments due on the effective date of this Agreement, June 30, 1999,
September 30, 1999 and December 31, 1999; provided that, if not earlier paid,
the entire unpaid origination fee shall become due and payable upon the earlier
of (a) the date of any sale, merger or consolidation not permitted by Section
8.2 hereof, (b) the occurrence of an Event of Default, (c) the termination of
the Revolving Credit Commitments.
5.4 Early Payments.
(a) Borrower may, upon notice to the Agent specifying that it is paying
its Revolving Credit Loans which are Base Rate Loans, pay without penalty or
premium such Base Rate Loans in whole at any time, or from time to time in part
in amounts aggregating $1,000,000.00, or any larger multiple of $100,000.00;
provided, however, that in no event may Borrower make a partial payment of Base
Rate Loans which results in the total outstanding Revolving Credit Loans which
are Base Rate Loans being greater than zero but less than $1,000,000.00. Each
such optional payment shall be applied to pay the Base Rate Loans of the several
Banks in proportion to their respective Revolving Credit Commitments.
(b) Borrower may, upon at least one (1) Business Day's notice to the
Agent specifying that it is paying its Revolving Credit Loans which are LIBOR
Loans, pay without penalty or premium on the last day of any Interest Period its
LIBOR Loans to which such Interest Period applies, in whole, or in part in
amounts aggregating $1,000,000.00 or any larger multiple of $100,000.00, by
paying the principal amount to be paid together with all accrued and unpaid
interest thereon to and including the date of payment; provided, however, that
(i) in no event may Borrower pay any Loan with respect to which Borrower has
given a notice of conversion to or continuation of a LIBOR Loan pursuant to
Section 5.1(a) and (ii) in no event may Borrower make a partial payment of LIBOR
Loans which results in the total outstanding Revolving Credit Loans which are
LIBOR Loans with respect to which a given Interest Period applies being greater
than zero but less than $1,000,000.00. Each such optional payment shall,
subject to
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Section 5.6, be applied to pay such LIBOR Loans of the several Banks in
proportion to their respective Revolving Credit Commitments.
(c) Borrower shall deliver the proceeds (net of reasonable attorney's
fees, accountant's fees, investment banking fees, and other customary fees and
expenses incurred in connection therewith, net of amounts required to be applied
to the repayment of Indebtedness secured by a Lien permitted hereunder, and net
of taxes paid or reasonably estimated to be payable currently as a result
thereof) from any Permitted Transfer to Agent for the benefit of the Banks to be
applied ratably against the principal outstanding on the Obligations.
(d) Upon receipt of a notice of payment pursuant to any of Sections
5.4(a) through (c) above, the Agent shall promptly notify each Bank of the
contents thereof and of such Bank's ratable share of such payment and such
notice shall not thereafter be revocable by Borrower.
(e) Borrower may, upon notice to the Whitney specifying that it is paying
its Swing Loan, pay without penalty or premium such Swing Loan in whole at any
time, or in part from time to time.
5.5 General Provisions as to Payments. Borrower shall make each payment
of principal of, and interest on, the Loans and of fees and all other amounts
payable hereunder, not later than 12:00 noon (New Orleans time) on the date when
due (2:00 p.m. New Orleans Time in the case of payments on the Swing Loans), in
federal or other funds immediately available in New Orleans, Louisiana, to the
Agent at its address referred to in Section 11.7. The Agent will promptly
distribute to each Bank in immediately available funds its ratable share of each
such payment received by the Agent for the account of the Banks, provided,
however, that payments of principal, interest and fees with respect to the Swing
Line Note and the Swing Loans shall be retained by Whitney for its own account.
Whenever any payment of principal of, or interest on, the Loans or of fees shall
be due on a day which is not a Business Day, the date for payment thereof shall
be extended to the next succeeding Business Day, except that in the case of
LIBOR Loans such payment dates shall be subject to the definition of Interest
Period. If the date for any payment of principal is extended by operation of
law or otherwise, interest thereon, at the then applicable rate, shall be
payable for such extended time.
5.6 Funding Losses. Notwithstanding any provision contained herein to the
contrary, if Borrower makes any payment of principal with respect to any LIBOR
Loan (pursuant to Sections 3.1, 5.4, 9 or otherwise) on any day other than the
last day of the Interest Period applicable thereto, or if Borrower fails to
borrow or pay any LIBOR Loan after notice has been given to the Agent in
accordance with Section 3.3, 5.1 or 5.4(b), Borrower shall reimburse each Bank
on demand for any resulting losses and expenses incurred by it, including,
without limitation, any losses incurred in obtaining, liquidating or employing
deposits from third parties, but excluding loss of margin for the period after
any such payment, provided that such Bank shall have delivered to Borrower a
certificate as to the amount of such losses and expenses; provided that,
Borrower shall not be obligated to reimburse the Banks for any losses and
expenses pursuant to
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this Section 5.6 resulting from (a) any payment made by Borrower immediately
prior to or within 5 days after a breach by Borrower of Section 8.1(m)(v) or (b)
any payments required by Section 8.2(c)(ii)(C) or Section 5.4(c).
5.7 Basis for Determining Interest Rate Inadequate or Unfair. If with
respect to any Interest Period, the Agent determines that either adequate and
reasonable means do not exist for ascertaining the LIBOR Rate for any Interest
Period, or it becomes impractical for Agent or any Bank to obtain funds to make
or maintain any borrowing bearing interest at the LIBOR Rate, or Agent or any
Bank shall have determined that the LIBOR Rate will not adequately and fairly
reflect the cost to Agent or any Bank of making, maintaining, or funding a
proposed borrowing that Borrower has requested to bear interest at the LIBOR
Rate, then the Agent shall forthwith give notice thereof to Borrower and the
Banks, whereupon until the Agent notifies Borrower that the circumstances giving
rise to such suspension no longer exist, (a) the obligations of the Banks to
make LIBOR Loans shall be suspended, and (b) Borrower shall repay in full the
then outstanding principal amount of each of its LIBOR Loans together with all
accrued and unpaid interest thereon, on the last day of the then current
Interest Period applicable to such Loan, or convert the then outstanding
principal amount of each of its LIBOR Loans to a Base Rate Loan on the last day
of the then current Interest Period applicable to each such LIBOR Loan.
5.8 Illegality. If, after the effective date of this Agreement, the
adoption of any applicable law, rule or regulation, or any change therein, or
any change in the interpretation or administration thereof by any governmental
or regulatory authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank with any
request or directive (whether or not having the force of law) of any such
governmental or regulatory authority, central bank or comparable agency shall
make it unlawful or impossible for any Bank to make, maintain or fund its LIBOR
Loans to Borrower and such Bank shall so notify the Agent, the Agent shall
forthwith give written notice thereof to the other Banks and Borrower. If Agent
provides Borrower with such written notice, Borrower shall repay in full the
then outstanding principal amount of each of its LIBOR Loans from such Bank,
together with all accrued and unpaid interest thereon, on either (a) the last
day of the then current Interest Period applicable to such LIBOR Loan if such
Bank may lawfully continue to maintain and fund such LIBOR Loan to such day or
(b) within fifteen (15) days of the receipt of such notice if such Bank may not
lawfully continue to fund and maintain such LIBOR Loan to such day, provided
that Borrower shall not be obligated to reimburse any such Bank for any losses
or expenses as provided in Section 5.6. Concurrently with repaying each LIBOR
Loan of such Bank, Borrower may borrow a Base Rate Loan in an equal principal
amount from such Bank, and, if Borrower so elects, such Bank shall make such a
Base Rate Loan to Borrower.
5.9 Increased Cost.
(a) If after the effective date hereof, the adoption of any applicable
law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any Governmental Authority, central
bank or comparable agency charged with the interpretation
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or administration thereof, or compliance by any Bank with any request or
directive (whether or not having the force of law) of any such Governmental
Authority, central bank or comparable agency (a "Regulatory Change"):
(A) shall subject any Bank to any tax, duty or other charge with respect
to its LIBOR Loans, its Revolving Credit Notes or its obligation to make
LIBOR Loans hereunder, or shall change the basis of taxation of payments to
any Bank of the principal of or interest on its LIBOR Loans or any other
amounts due under this Agreement in respect of its LIBOR Loans or its
obligation to make LIBOR Loans (except for taxes on or changes in the rate
of tax on the overall net income of such Bank); or
(B) shall impose, modify or deem applicable any reserve (including,
without limitation, any reserve imposed by the Board of Governors of the
Federal Reserve System), special deposit, capital or similar requirement
against assets of, deposits with or for the account of, or credit extended
or committed to be extended by, any Bank or shall, with respect to any Bank
or the Interbank Eurodollar market, impose, modify or deem applicable any
other condition affecting its LIBOR Loans, its Revolving Credit Notes or
its obligation to make LIBOR Loans;
and the result of any of the foregoing is to increase the cost to (or in the
case of Regulation D, to impose a cost on or increase the cost to) such Bank of
making or maintaining any LIBOR Loan, or to reduce the amount of any sum
received or receivable by such Bank under this Agreement or under its Notes with
respect thereto, by an amount deemed by such Bank, in its good faith judgment,
to be material, and if such Bank is not otherwise fully compensated for such
increase in cost or reduction in amount received or receivable by virtue of the
inclusion of the reference to LIBOR Reserve Percentage in the calculation of the
interest rate applicable to LIBOR Loans, then, within fifteen (15) days after
notice by such Bank to Borrower together with a copy of the official notice of
the applicable change in law (if applicable) and a work sheet showing how the
change in cost or reduction or increase in amount received or receivable was
calculated (with a copy to the Agent and all of the other Banks), Borrower shall
pay for the account of such Bank as additional interest, such additional amount
or amounts as will compensate such Bank for such increased cost or reduction.
Each Bank will promptly notify Borrower and the Agent of any event of which it
has knowledge, occurring after the effective date hereof, which will entitle
such Bank to compensation pursuant to this Section. In determining such amount
or amounts, such Bank may use any reasonable averaging and attribution methods.
(b) If any Bank demands compensation under this Section, Borrower may at
any time, upon at least three (3) Business Days' prior notice to such Bank and
the Agent, repay in full its then outstanding LIBOR Loans, as the case may be,
of such Bank, together with all accrued and unpaid interest thereon to the date
of prepayment and any funding losses and other amounts due under Section 5.6.
Concurrently with repaying such LIBOR Loans of such Bank, Borrower may borrow
from such Bank a Base Rate Loan in an amount equal to the aggregate principal
amount
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of such LIBOR Loans, and, if Borrower so elects, such Bank shall make such a
Base Rate Loan to Borrower.
(c) At the time it becomes a party to this Agreement, each Bank that is
organized under the laws of a jurisdiction outside the United States shall
deliver to the Agent and Borrower either a valid and currently effective
Internal Revenue Service Form 1001 or Form 4224 or, in the case of a Bank
claiming exemption from U.S. Federal withholding tax under Section 871(h) or
881(c) of the Code with respect to payments of "portfolio interest", a Form W-8,
or any subsequent version thereof or successors thereto, (and if such Bank
delivers a Form W-8, a certificate representing that such Bank is not a bank for
purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within
the meaning of Section 871(h)(3)(B) of the Code) of Borrower and is not a
controlled foreign corporation related to Borrower (within the meaning of
Section 864(d)(4) of the Code)), properly completed and duly executed by such
Bank establishing that payments relating to this Agreement are (i) not subject
to United States Federal withholding tax under the Code because such payment is
effectively connected with the conduct by such Bank of a trade or business in
the United States or (ii) totally exempt from United States Federal withholding
tax.
(d) Notwithstanding anything to the contrary contained in this Section
5.9, Borrower shall not be required to pay any additional amounts to any Bank in
respect of United States Federal withholding tax if the obligation to pay such
additional amounts would not have arisen but for a failure by such Bank to
comply with the provisions of paragraph (c) above.
(e) Any Bank claiming any additional amounts payable pursuant to this
Section 5.9 or under Section 5.11 below shall use reasonable efforts (consistent
with legal and regulatory restrictions) to file any certificate or documents
requested by Borrower or to change the jurisdiction of its applicable lending
office if the making of such a filing or change would avoid the need for or
reduce the amount of any such additional amounts which may thereafter accrue and
would not, in the sole determination of such Bank, be otherwise disadvantageous
to such Bank.
5.10 Base Rate Loans Substituted for Affected LIBOR Loans. If notice has
been given by a Bank pursuant to Section 5.7 or 5.8 or by Borrower pursuant to
Section 5.9(b) requiring LIBOR Loans of any Bank to be repaid, then, unless and
until such Bank notifies Borrower that the circumstances giving rise to such
repayment no longer apply, all Loans which would otherwise be made by such Bank
to Borrower as LIBOR Loans shall be made instead as Base Rate Loans. Such Bank
shall notify Borrower if and when the circumstances giving rise to such
repayment no longer apply.
5.11 Capital Adequacy. If, after the effective date of this Agreement,
any Bank shall have determined that the adoption of any applicable law, rule,
regulation or treaty regarding capital adequacy, or any change therein, or any
change in the interpretation or administration thereof by any Governmental
Authority, central bank or comparable agency charged with the
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interpretation or administration thereof, or compliance by such Bank with any
request or directive regarding capital adequacy (whether or not having the force
of law) of any such authority, central bank or comparable agency, has or will
have the effect of reducing the rate of return on such Bank's capital in respect
of any Letter of Credit or its obligations hereunder to a level below that which
such Bank could have achieved but for such adoption, change or compliance
(taking into consideration such Bank's policies with respect to capital
adequacy), then from time to time Borrower shall pay to such Bank within fifteen
(15) days of a written demand such additional amount or amounts as will
compensate such Bank for such reduction. In determining such amount or amounts,
such Bank may use any reasonable averaging and attribution methods. Each Bank
will promptly notify the Borrower of any event occurring after the effective
date hereof of which it has knowledge which will entitle such Bank to
compensation pursuant to this section 5.11.
5.12 Survival of Provisions. All provisions relating to reimbursement to
any Bank of amounts sufficient to protect the yield to such Bank with respect to
the Loans, including, without limitation, Sections 5.7, 5.8 and 5.9 hereof,
shall survive the payment of the Notes and the termination of this Agreement.
5.13 Discretion of Bank as to Manner of Funding. Notwithstanding any
provision contained in this Agreement to the contrary, each of the Banks shall
be entitled to fund and maintain its funding of all or any part of its LIBOR
Loans in any manner it elects, it being understood, however, that for purposes
of this Agreement all determinations hereunder (including, without limitation,
the determination of each Bank's funding losses and expenses under Section 5.6)
shall be made as if such Bank had actually funded and maintained each LIBOR Loan
through the purchase of deposits having a maturity corresponding to the maturity
of the applicable Interest Period relating to the applicable LIBOR Loan and
bearing an interest rate equal to the applicable LIBOR Rate.
5.14 Computation of Interest. Interest on Base Rate Loans hereunder shall
be computed on the basis of a year of 360 days and paid for the actual number of
days elapsed (including the first day but excluding the last day). Interest on
LIBOR Loans shall be computed on the basis of a year of 360 days and paid for
the actual number of days elapsed, calculated as to each Interest Period from
and including the first day thereof but excluding the last day thereof.
5.15 Security. In order to secure payment when due of the Obligations:
(a) Security Agreements. Borrower shall execute a Security Agreement
substantially in the form of Exhibit O(1) and Borrower shall cause each Wholly
Owned Subsidiary, other than Offshore, that is not a Foreign Subsidiary, to
execute a Security Agreement substantially in the form of Exhibit O(2) in favor
of Agent for the benefit of the Agent and the Banks. Borrower shall execute and
cause each Wholly Owned Subsidiary, other than Offshore, that is not a Foreign
Subsidiary, to execute any and all financing statements, continuation statements
and such
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other documents as may from time to time be requested by Agent or the Banks in
order to create, perfect and maintain the security interest created by the
Security Agreements.
(b) Mortgages and Deeds of Trust. Borrower shall cause each Wholly Owned
Subsidiary, other than Offshore, owning any land, building or improvement or
holding any Leasehold Interest, that is not a Foreign Subsidiary, to execute and
deliver or cause to be executed and delivered to Agent (i) such Collateral
Mortgages, Deeds of Trust and Florida Mortgages, substantially in the form of
Exhibits J(1), K(1), L(1), and M(1), respectively, and such other security
documents, as Agent requires to create and perfect a Lien upon such land,
building or improvement (and any related Property) in favor of Agent for the
benefit of Agent and the Banks; and (ii) within thirty (30) days after the date
hereof, (A) such Collateral Mortgages and Deeds of Trust, substantially in the
form of Exhibits J(2) and K(2), respectively, and such other mortgages, deeds of
trust and security documents, as Agent requires to create and perfect a Lien
upon such Leasehold Interest (and any related Property) in favor of Agent for
the benefit of Agent and the Banks and (B) a Consent to Leasehold Mortgage/Deed
of Trust relating to each mortgage or deed of trust on a Leasehold Interest not
listed on Schedule 5.15(b), executed by the lessor of such Leasehold Interest,
or such other agreement satisfactory to Agent, to the extent that such
Subsidiary can through reasonable efforts (which shall not require the payment
of compensation to such lessor in exchange for such agreement) arrange for the
execution of such agreement.
(c) Preferred Ship Mortgages. Borrower shall cause each Wholly Owned
Subsidiary owning Documented Vessel(s), other than Offshore, that is not a
Foreign Subsidiary, to execute and deliver to Agent a Preferred Ship Mortgage
substantially in the form of Exhibit H encumbering such Documented Vessel(s)
(and any related Property) in favor of Agent for the benefit of the Agent and
the Banks.
(d) Continuing Guarantees. Borrower shall cause each Wholly Owned
Subsidiary that is not a Foreign Subsidiary to execute and deliver to Agent a
Continuing Guaranty substantially in the form of Exhibit C.
(e) Pledge Documents. Borrower shall execute and deliver, and cause each
Subsidiary to execute and deliver, to Agent Pledge Documents with respect to
each Wholly Owned Subsidiary and each Joint Venture Entity. Within thirty (30)
days of the creation or acquisition of any Wholly Owned Subsidiary or the
acquisition of any interest, directly or indirectly, in any Joint Venture
Entity, in each case in accordance with the terms of this Agreement, Borrower
(i) shall execute and deliver, and cause each Subsidiary to execute and deliver,
to Agent Pledge Documents with respect to such Wholly Owned Subsidiary or Joint
Venture Entity, as the case may be; provided that, the Pledge Documents shall
not encumber in excess of sixty-five percent (65%) of the outstanding voting
equity interest in any Foreign Subsidiary and (ii) shall deliver to Agent,
opinions of counsel for Borrower and any such Subsidiary relating to such
Transaction Documents and such other matters as Banks may reasonably require and
satisfactory in form and substance to the Agent together with all
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resolutions, certificates, information, approvals, documents or other
instruments as the Agent may reasonably request.
(f) New Subsidiaries. Within thirty (30) days of the creation or
acquisition of any Wholly Owned Subsidiary that is not a Foreign Subsidiary, in
each case, in accordance with the terms of this Agreement, Borrower shall cause
such Wholly Owned Subsidiary to execute and deliver or cause to be delivered to
Agent (i) a Continuing Guarantee substantially in the form of Exhibit C, (ii) a
Security Agreement substantially in the form of Exhibit O(2), (iii) such
Collateral Mortgages, Deeds of Trust, Florida Mortgages and Preferred Ship
Mortgages, substantially in the form of Exhibits J(1), J(2), K(1), K(2), L(1),
M(1), and H, respectively, and such other security documents, as Agent requires
to create and perfect a Lien upon the land, improvements, buildings, Leasehold
Interests, Documented Vessels and drydocks (and any related Property) of such
Subsidiary, (iv) a Consent to Leasehold Mortgage/Deed of Trust relating to any
such mortgage or deed of trust on a Leasehold Interest executed by the lessor of
such Leasehold Interest or such other agreement satisfactory to Agent, to the
extent that Borrower or such Subsidiary can through reasonable efforts (which
shall not require the payment of compensation to such lessor in exchange for
such agreement) arrange for the execution of such agreement and (v) opinions of
counsel for Borrower and such Subsidiary relating to such Transaction Documents
and such other matters as Banks may reasonably require and satisfactory in form
and substance to the Agent together with all resolutions, certificates,
information, approvals, documents or other instruments as the Agent may
reasonably request. Borrower shall also cause such Subsidiary, within such time
period, to execute any and all financing statements, continuation statements and
such other documents as may from time to time be requested by Agent or the Banks
in order to create, perfect and maintain the Liens created by such Transaction
Documents.
(g) Additional Property. Within thirty (30) days after the acquisition
by Borrower or any Wholly Owned Subsidiary, other than Offshore, that is not a
Foreign Subsidiary, of any land, improvement, building, Leasehold Interest,
Documented Vessel, or drydock, Borrower and such Subsidiary acquiring such
Property shall execute and deliver or cause to be executed and delivered to
Agent (i) such Security Agreements, Collateral Mortgages, Deeds of Trust,
Florida Mortgages, and Preferred Ship Mortgages, substantially in the form of
Exhibits O(1), O(2), J(1), J(2), K(1), K(2), L(1), M(1) and H, respectively, and
such other security documents, as Agent requires to create and perfect a Lien
upon such Property (and any related Property) in favor of Agent for the benefit
of Agent and the Banks, (ii) a Consent to Leasehold Mortgage/Deed of Trust
relating to any such mortgage or deed of trust on a Leasehold Interest executed
by the lessor of such Leasehold Interest or such other agreement satisfactory to
Agent, to the extent that Borrower or such Subsidiary can through reasonable
efforts (which shall not require the payment of compensation to such lessor in
exchange for such agreement) arrange for the execution of such agreement and
(iii) opinions of counsel for Borrower and such Subsidiary relating to such
Transaction Documents and such other matters as Banks may reasonably require and
satisfactory in form and substance to the Agent together with all resolutions,
certificates, information, approvals, documents or other instruments as the
Agent may reasonably request. Within thirty
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(30) days after any vessel owned by Borrower or any Wholly Owned Subsidiary,
other than Offshore, that is not a Foreign Subsidiary, becomes a Documented
Vessel, Borrower or such Subsidiary owning such vessel shall execute and deliver
to Agent a Preferred Ship Mortgage substantially in the form of Exhibit H
encumbering such Documented Vessel(s) (and any related Property) in favor of
Agent for the benefit of the Agent and the Banks. Borrower shall execute or
cause such Subsidiary to execute, within such time period, any and all financing
statements, continuation statements and such other documents as may from time to
time be requested by Agent or the Banks in order to create, perfect and maintain
the Liens created by such Transaction Documents.
(h) Further Documents. Borrower shall execute, and shall cause each
Subsidiary to execute, any and all documents as may from time to time be
requested by Agent or the Banks in order to create, perfect and maintain the
Liens created by the Transaction Documents subject only to Permitted Liens.
Upon demand, Borrower shall pay to Agent or to any other party designated by
Agent all filing fees incurred by Agent in the perfection of the Liens
contemplated by the Transaction Documents (provided that Borrower shall not be
obligated to pay the cost of recording the Florida Mortgages unless an Event of
Default occurs). Borrower shall use, and shall cause each Wholly Owned
Subsidiary to use, reasonable efforts to obtain the consent of the lessor of any
leasehold interest in any land, building and/or improvement held by Borrower or
any Wholly Owned Subsidiary to the creation of a Lien upon such leasehold
interest in favor of Agent for the benefit of the Agent and the Banks (which
shall not require the payment of compensation to such lessor in exchange for
such consent).
5.16 Guaranty of Obligations of Subsidiaries. Borrower hereby
unconditionally, irrevocably, jointly, severally and solidarily guarantees the
due and punctual payment to the Agent for the benefit of the Banks when stated
to be due of all present and future obligations and liabilities of each
Subsidiary evidenced by or arising under or in connection with the Security
Agreements, Collateral Mortgages, Deeds of Trust, Preferred Ship Mortgages,
Florida Mortgages, Pledge Agreements and/or any other security documents
executed by such Subsidiary in favor of Agent for the benefit of Agent and the
Banks, whether direct or contingent, due or to become due or now existing or
hereafter arising.
5.17 Appraisals, Title Insurance, etc. Upon the occurrence of an Event of
Default, Borrower shall be obligated to reimburse the Agent and the Banks for
all reasonable out-of-pocket costs and expenses incurred by the Agent and each
of the Banks for appraisals, title insurance, environmental site assessments and
surveys of or for the Property of Borrower and each Wholly Owned Subsidiary that
is not a Foreign Subsidiary and for all costs of recordation of any Florida
Mortgages, whether incurred prior to or after such Event of Default.
5.18 Form of Transaction Documents. Borrower will agree to such
modifications to the form of the Continuing Guarantees, Security Agreements,
Collateral Mortgages, Deeds of Trust, Preferred Ship Mortgages, Florida
Mortgages and Pledge Agreements that are reasonably necessary to comply with
applicable law or that Agent may otherwise reasonably require.
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SECTION 6. PRECONDITIONS TO LOANS AND LETTERS OF CREDIT.
6.1 Initial Revolving Credit Loan, Initial Swing Loan or Letter of
Credit. Notwithstanding any provision contained herein to the contrary, none of
the Banks shall have any obligation to make the initial Revolving Credit Loan
hereunder, Whitney shall have no obligation to make the initial Swing Loan
hereunder, and the Banks shall have no obligation to issue a Letter of Credit
hereunder unless the Agent shall have received on the effective date hereof:
(a) This Agreement, the Notes, the Security Agreement, the Pledge
Documents, and the other Transaction Documents required by Section 5.15, each
executed by a duly authorized officer of Borrower;
(b) The Continuing Guarantee by each Wholly Owned Subsidiary that is
not a Foreign Subsidiary, the Security Agreement by each Wholly Owned
Subsidiary, other than Offshore, that is not a Foreign Subsidiary, and the other
Transaction Documents required by Section 5.15, each executed by a duly
authorized officer of such Subsidiary;
(c) A copy of resolutions of the Board of Directors of Borrower, duly
adopted, which authorize the execution, delivery and performance of this
Agreement, the Notes, the Letter of Credit Application(s) and the other
Transaction Documents delivered at or prior to the closing, certified by the
Secretary or an Assistant Secretary of Borrower;
(d) A copy of resolutions of the Board of Directors of each Subsidiary
that is a corporation, duly adopted, which authorize the execution, delivery and
performance of the Transaction Documents executed by such Subsidiary, certified
by the Secretary or an Assistant Secretary of such Subsidiary;
(e) A copy of authorizations of the members or partners of each
Subsidiary that is a partnership, limited partnership, or limited liability
company, which authorize the execution, delivery and performance of the
Transaction Documents executed by such Subsidiary delivered at or prior to
closing, executed by the members or partners of such Subsidiary;
(f) An incumbency certificate, executed by the Secretary or an
Assistant Secretary of Borrower, which shall identify by name and title and bear
the signatures of all of the officers of Borrower executing any of the
Transaction Documents delivered at or prior to the closing;
(g) An incumbency certificate, executed by the Secretary or an
Assistant Secretary of each Subsidiary, which shall identify by name and title
and bear the signatures of the officer of such Subsidiary executing the
Transaction Documents executed by such Subsidiary delivered at or prior to the
closing;
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(h) Opinions of counsel for Borrower and the Subsidiaries satisfactory
to Agent relating to the Transaction Documents and such other matters as the
Banks may reasonably require and satisfactory in form and substance to the
Agent;
(i) Payment of Agent's costs and expenses as provided for in Section
11.3 and payment to Agent for the ratable benefit of the Banks of the fee
required under Section 5.3(b) herein; and
(j) All documents executed or submitted pursuant hereto by or on
behalf of Borrower of any of its Subsidiaries shall be satisfactory in form and
substance to the Agent and its counsel; and the Agent and its counsel shall have
received all information, approvals, opinions, documents or other instruments as
the Agent or its counsel may reasonably request.
Any one or more of the conditions set forth above which have not been
satisfied by Borrower on or prior to the effective date hereof shall not be
deemed permanently waived unless Agent and the Banks shall waive the same in a
writing which expressly states that the waiver is permanent, and, in all cases
in which the waiver is not stated to be permanent, Agent and the Banks may at
any time subsequent thereto insist upon compliance and satisfaction of any such
condition as a condition to any new Loan advance and/or to the requested
conversion of any interest rate on any outstanding Loan hereunder, and Banks
shall have no obligation to make any such advance or to convert any such
interest rate until all such conditions have been satisfied.
6.2 All Loans. Notwithstanding any provision contained herein to the
contrary, none of the Banks shall have any obligation to make any further
Revolving Credit Loan hereunder or to convert any Loan to a LIBOR Loan or to
extend any LIBOR Loan for a new Interest Period, and Whitney shall have no
obligation to make any further Swing Loan hereunder, unless:
(a) With respect to any new Revolving Credit Loan advance, the Agent
shall have received a Borrowing Notice for such Revolving Credit Loan as
required by Section 3.3;
(b) With respect to any conversion of a Loan to or continuation of
any Loan as a LIBOR Loan, the Agent shall have received the notice for such
conversion or continuation as required by Section 5.1;
(c) On the date of and immediately after giving effect to such
Revolving Credit Loan, such Swing Loan or such interest rate conversion or
extension, no Default or Event of Default under this Agreement shall have
occurred and be continuing;
(d) No change in the Properties, assets, liabilities, business,
operations, prospects, income or condition (financial or otherwise) of Borrower
and its Subsidiaries taken as a whole and having a Material Adverse Effect shall
have occurred since December 31, 1998, and be continuing; and
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(e) Except for subsequent changes consented to in writing by the
Required Banks after the effective date hereof, or as permitted pursuant to this
Agreement or the other Transaction Documents, all of the representations and
warranties of Borrower contained in Section 7 of this Agreement and of Borrower
and its Subsidiaries contained in the other Transaction Documents shall be true
and correct in all material respects on and as of the date of such Revolving
Credit Loan, such Swing Loan or such interest rate conversion or continuation as
if made on and as of the date of such Revolving Credit Loan, such Swing Loan or
such interest rate conversion or continuation (except to the extent that such
representations and warranties expressly relate solely to an earlier date (in
which case such representation and warranties shall have been true and correct
on and as of such earlier date)).
Each request for a Revolving Credit Loan by Borrower hereunder, each
request for a Swing Loan by Borrower hereunder and each request by Borrower to
convert any Loan to or continue any Loan as a LIBOR Loan shall be deemed to be a
representation and warranty by Borrower on the date of such Revolving Credit
Loan, such Swing Loan or such conversion or continuation, as the case may be, as
to the facts specified in clauses (c), (d) and (e) of this Section 6.2.
6.3 Letters of Credit. Notwithstanding any provision contained herein
to the contrary, Issuer shall have no obligation to issue any Letter of Credit
after the effective date hereof unless:
(a) Issuer shall have received a Letter of Credit Request for such
Letter of Credit as required by Section 4.1(a);
(b) Issuer shall have received a Letter of Credit Application for such
Letter of Credit as required by Section 4.1(a), duly executed by an authorized
officer of Borrower and of a Subsidiary (if such Letter of Credit is for the
account of such Subsidiary) as account party;
(c) Borrower shall have complied with all of the procedures and
requirements set forth in Section 4.1;
(d) On the date of and immediately after the issuance of such Letter
of Credit, no Default or Event of Default under this Agreement shall have
occurred and be continuing;
(e) No change in the Properties, assets, liabilities, business,
operations, prospects, income or condition (financial or otherwise) of Borrower
and its Subsidiaries taken as a whole and having a Material Adverse Effect shall
have occurred since December 31, 1998, and be continuing;
(f) Except for subsequent changes consented to in writing by the
Required Banks after the effective date hereof, or as permitted pursuant to this
Agreement or the other Transaction Documents, all of the representations and
warranties of Borrower contained in Section 7 of this Agreement and of Borrower
and its Subsidiaries contained in the other Transaction Documents shall be true
and correct in all material respects on and as of the date of
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the issuance of such Letter of Credit as if made on and as of the date of the
issuance of such Letter of Credit (except to the extent that such
representations and warranties expressly relate solely to an earlier date (in
which case such representation and warranties shall have been true and correct
on and as of such earlier date)); and
(g) Issuer shall have received such other documents, certificates and
agreements as it may reasonably request.
Each request for the issuance of a Letter of Credit by Borrower hereunder shall
be deemed to be a representation and warranty by Borrower on the date of the
issuance of such Letter of Credit as to the facts specified in clauses (d), (e)
and (f) of this Section 6.3.
SECTION 7. REPRESENTATIONS AND WARRANTIES.
Borrower hereby represents and warrants to each of the Banks that:
7.1 Existence and Power. Borrower and each Subsidiary: (a) is duly
organized, validly existing and, if it is a corporation, in good standing under
the laws of the jurisdiction of its organization; (b) has all requisite powers
and all governmental and regulatory licenses, authorizations, consents and
approvals required to carry on its business as now conducted; and (c) is
qualified to transact business as a foreign entity in, and, if it is a
corporation, is in good standing under the laws of, all states in which it is
required by applicable law to maintain such qualification and good standing
except for those states in which the failure to qualify or maintain good
standing could not reasonably be expected to have a Material Adverse Effect.
7.2 Authorization. The execution, delivery and performance by Borrower of
this Agreement, the Notes, the Letter of Credit Application(s) and the other
Transaction Documents are within the powers of Borrower and have been duly
authorized by all necessary action. The execution, delivery and performance by
each Subsidiary of any Continuing Guarantee, Letter of Credit Application(s) and
other Transaction Documents executed by such Subsidiary are within the powers of
such Subsidiary and have been duly authorized by all necessary action.
7.3 Binding Effect. This Agreement, the Notes and the other Transaction
Documents executed contemporaneously with the execution of this Agreement have
been duly executed and delivered by Borrower and each Subsidiary, as applicable,
and constitute the legal, valid and binding obligations of Borrower and each
Subsidiary, as applicable, enforceable in accordance with their respective
terms, except as such enforceability may be limited by bankruptcy, insolvency or
other similar laws affecting creditors' rights generally and by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and the Letter of Credit Application(s) and
any future Transaction Documents not executed contemporaneously with the
execution of this Agreement, when executed and delivered in accordance with this
Agreement, will constitute the legal, valid and binding obligations of Borrower
and each Subsidiary, as applicable, enforceable in accordance with their
respective
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terms, except as such enforceability may be limited by bankruptcy, insolvency or
other similar laws affecting creditors' rights generally and by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
7.4 Financial Statements. Borrower has furnished each of the Banks with
the following financial statements: (1) the consolidated balance sheets and
statements of income, retained earnings and cash flows of Borrower and its
Subsidiaries as of March 31, 1998, all certified by Borrower's independent
certified public accountants, which financial statements have been prepared as
determined in accordance with GAAP consistently applied; and (2) unaudited
consolidated balance sheets and statements of income, retained earnings and cash
flows of Borrower and its Subsidiaries as of December 31, 1998, certified by the
Vice President of Borrower as being true and correct to the best of his
knowledge and as being prepared in accordance with standard accounting practices
of the Borrower and its Subsidiaries consistently applied. Borrower further
represents and warrants to each of the Banks that: (1) said balance sheets and
their accompanying notes fairly present the condition, respectively, of Borrower
and its Subsidiaries as of the dates thereof; (2) there has been no material
adverse change in the condition or operation, financial or otherwise, of
Borrower or any of its Subsidiaries since September 30, 1998; and (3) neither
Borrower nor any Subsidiaries had, as of the respective dates of such financial
statements, any material direct or contingent liabilities which are not
disclosed on said financial statements or the notes thereto (to the extent such
disclosure is required by GAAP).
7.5 Litigation. There is no action, proceeding or claim pending or, to
the knowledge of Borrower, threatened against Borrower or any Subsidiary before
any court, arbitrator or any governmental, regulatory or administrative body,
agency or official (including, but not limited to, any ERISA plan administrator)
which, if adversely determined against Borrower or any Subsidiary, could
reasonably be expected to have a Material Adverse Effect or which would need to
be disclosed, as determined in accordance with GAAP, in Borrower's or any
Subsidiary's financial statements. Neither Borrower nor any Subsidiary is in
default with respect to any order, writ, injunction, decision or decree of any
court, arbitrator or any governmental, regulatory or administrative body, agency
or official, a default under which could reasonably be expected to have a
Material Adverse Effect. As of the effective date hereof, there are no
outstanding judgments against Borrower or any Subsidiary.
7.6 ERISA. Borrower and each Subsidiary are in compliance in all material
respects with the applicable provisions of ERISA and the Code (pertaining to any
Pension Plan), and have not engaged in, or permitted to exist or occur, any
condition, event or transaction which could result in the incurrence by Borrower
or any Subsidiary or ERISA Affiliate of any liability, fine or penalty which
could reasonably be expected to have a Material Adverse Effect.
7.7 Tax Payment. There is no proposed, asserted or assessed tax
deficiency against Borrower or any of its Subsidiaries which, if adversely
determined, could reasonably be expected to have a Material Adverse Effect.
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7.8 Subsidiaries; Joint Venture Entities. The Subsidiaries, Foreign
Subsidiaries, Joint Venture Entities and Wholly Owned Subsidiaries are
accurately and correctly set forth on Schedules 2.1(b), 2.1(c), 2.1(d) and
2.1(e) respectively, as the same may from time to time be amended, modified or
supplemented as provided herein. The capital stock or membership or partnership
interest, as the case may be, of each Subsidiary is duly authorized, validly
issued and fully paid and nonassessable. Borrower may at any time amend, modify
or supplement Schedules 2.1(b), 2.1(c), 2.1(d) and 2.1(e) by notifying the Agent
in writing of any changes thereto, including any formation, acquisition, merger
or liquidation of Subsidiaries or any change in the capitalization of any
Subsidiary, in each case, in accordance with the terms of this Agreement and
provided that any such new Subsidiary shall, within thirty (30) days of the
creation or acquisition of such Subsidiary, execute and deliver to Agent for the
benefit of Agent and the Banks the Transaction Documents required by Section
5.15.
7.9 Compliance With Other Instruments; None Burdensome. Neither Borrower
nor any Subsidiary is a party to any contract or agreement or subject to any
charter or other corporate or other restriction which could reasonably be
expected to have a Material Adverse Effect and which is not disclosed on
Borrower's or any Subsidiary's financial statements heretofore submitted to the
Banks; neither the execution and delivery by Borrower and the Subsidiaries of
the Transaction Documents nor the consummation of the transactions therein
contemplated has violated or will violate any law, rule, regulation, order,
writ, judgment, injunction, decree or award binding on Borrower or any
Subsidiary, or any of the provisions of Borrower's or any Subsidiary's Articles
of Incorporation, Bylaws, Articles of Organization, Operating Agreement or
Partnership Agreement or any of the provisions of any indenture, agreement,
document, instrument or undertaking to which Borrower or any Subsidiary is a
party or subject, or by which it or its Property is bound, or conflict with or
constitute a default thereunder or result in the creation or imposition of any
Lien pursuant to the terms of any such indenture, agreement, document,
instrument or undertaking (other than in favor of the Agent and/or the Banks
pursuant to the Transaction Documents). No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by, any Governmental Authority, or any other Person is required to
authorize, or is required in connection with, the execution, delivery or
performance of, or the legality, validity, binding effect or enforceability of,
any of the Transaction Documents that has not already been obtained.
7.10 Other Debt, Guarantees, Capitalized Leases. Except as disclosed on
Schedule 7.10 attached hereto as of the effective date of this Agreement, and
except for Debt incurred or made on or after the effective date hereof as
permitted under Section 8.2(a) and the other provisions of this Agreement,
neither Borrower nor any Subsidiary of Borrower is a borrower, guarantor or
obligor with respect to any Debt or Guarantees.
7.11 Labor Matters. Neither Borrower nor any Subsidiary is a party to any
labor dispute which could reasonably be expected to have a Material Adverse
Effect. There are no strikes or walkouts relating to any labor contract to
which Borrower or any Subsidiary is subject
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which could reasonably be expected to have a Material Adverse Effect. Hours
worked and payments made to the employees of Borrower and its Subsidiaries have
not been in violation of the Fair Labor Standards Act or any other applicable
law dealing with such matters which could reasonably be expected to have a
Material Adverse Effect. Except as described on Schedule 7.11 attached hereto,
all payments due from Borrower or any Subsidiary, or for which any claim may be
made against any of them, in respect of wages, employee health and welfare
insurance and/or other benefits have been paid or accrued as a liability on
their respective books as determined in accordance with GAAP.
7.12 Title to Property. Borrower and each Subsidiary is the sole and
absolute owner of, or has the legal right to use and occupy, all Property it
claims to own or which is necessary for Borrower or such Subsidiary to conduct
its business, free and clear of all Liens other than the Permitted Liens.
Borrower and its Subsidiaries enjoy peaceful and undisturbed possession in all
material respects under all leases under which they are operating as lessees.
7.13 Regulation U. Borrower is not engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U of The
Board of Governors of the Federal Reserve System, as amended) and no part of the
proceeds of any Loan will be used, whether directly or indirectly, and whether
immediately, incidentally or ultimately (i) to purchase or carry margin stock or
to extend credit to others for the purpose of purchasing or carrying margin
stock, or to refund or repay indebtedness originally incurred for such purpose
or (ii) for any purpose which entails a violation of, or which is inconsistent
with, the provisions of any of the Regulations of The Board of Governors of the
Federal Reserve System, including, without limitation, Regulations G, U, T or X
thereof, as amended. If requested by any of the Banks, Borrower shall furnish
to the Agent a statement in conformity with the requirements of Federal Reserve
Form U-1 referred to in Regulation U.
7.14 Investment Company Act of 1940: Public Utility Holding Company Act of
1935. Borrower is not an "investment company" as that term is defined in, and is
not otherwise subject to regulation under, the Investment Company Act of 1940,
as amended. Borrower is not a "holding company" as that term is defined in, and
is not otherwise subject to regulation under, the Public Utility Holding Company
Act of 1935, as amended.
7.15 Patents, Licenses, Trademarks, Etc. Borrower and each of its
Subsidiaries have all permits, certificates, licenses (including patent and
copyright licenses), approvals and other authorizations required in connection
with the operation of their businesses, except those which the failure to have
could not reasonably be expected to have a Material Adverse Effect. There is no
pending or, to Borrower's actual knowledge, threatened litigation, or
arbitration in which it is alleged that Borrower or any Subsidiary has violated
or breached any patents, licenses, trademarks, trademark rights, trade names,
trade name rights and copyrights which could reasonably be expected to have a
Material Adverse Effect.
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7.16 Environmental and Safety and Health Matters. Except as disclosed on
Schedule 7.16 attached hereto: (i) the operations of Borrower and each
Subsidiary comply in all respects with (A) all applicable lawfully promulgated,
enacted, entered or finalized Environmental Laws and (B) all applicable lawfully
promulgated, enacted, entered or finalized Occupational Safety and Health Laws,
which the failure to comply with could reasonably be expected to have a Material
Adverse Effect; (ii) none of the operations of Borrower or any Subsidiary are
subject to any Environmental Claim or any judicial, governmental, regulatory or
administrative proceeding alleging the violation of any Occupational Safety and
Health Law, which could reasonably be expected to have a Material Adverse
Effect; (iii) to Borrower's actual knowledge, none of the operations of Borrower
or any Subsidiary is the subject of any material federal or state investigation
evaluating whether any remedial action is needed to respond to any unsafe or
unhealthful condition at any premises of Borrower or such Subsidiary; (iv)
neither Borrower nor any Subsidiary has filed any notice under any Environmental
Law or Occupational Safety and Health Law (pertaining to a matter which has not
been resolved) reporting (A) any past or present spillage, disposal or Release
into the environment of, or treatment, storage or disposal of, any Hazardous
Substance or any other hazardous, toxic or dangerous waste, substance or
constituent or other substance which could reasonably be expected to have a
Material Adverse Effect, or (B) any unsafe or unhealthful condition at any
premises of Borrower or such Subsidiary which could reasonably be expected to
have a Material Adverse Effect; and (v) neither Borrower nor any Subsidiary has
to its actual knowledge any contingent liability which could reasonably be
expected to have a Material Adverse Effect in connection with (A) any spillage,
disposal or Release into the environment of, or otherwise with respect to, any
Hazardous Substances or any other hazardous, toxic or dangerous waste, substance
or constituent or other substance or (B) any unsafe or unhealthful environmental
condition at any premises of Borrower or such Subsidiary.
7.17 Investments. Except as disclosed on Schedule 7.17 attached hereto
neither Borrower nor any Subsidiary has any Restricted Investments.
7.18 No Default. No Default or Event of Default under this Agreement has
occurred and is continuing. There is no existing default or event of default
(and no event has occurred which with the giving of notice or the passage of
time would constitute a default or an event of default) under or with respect to
any indenture, contract, agreement, lease or other instrument to which Borrower
or any Subsidiary is a party or by which Borrower, any Subsidiary or any
Property of Borrower or any Subsidiary is bound or affected, a default under
which could reasonably be expected to have a Material Adverse Effect. Neither
Borrower nor any Subsidiary of Borrower is in violation of any applicable
statute, law, rule, regulation or ordinance of the United States of America, of
any state, city, town, municipality, county or of any other jurisdiction, or of
any agency thereof, a violation of which could reasonably be expected to have a
Material Adverse Effect.
7.19 No Burdensome Restrictions. No agreement or obligation of Borrower
or any of its Subsidiaries in effect on the effective date hereof and no
statute, law, rule, regulation or ordinance of the United States of America, of
any state, city, town, municipality, county or of any
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other jurisdiction, or of any agency thereof, on the effective date hereof
materially adversely affects Borrower or any Subsidiary, or insofar as Borrower
may reasonably foresee may have a Material Adverse Effect.
7.20 Government Contracts. Neither Borrower nor any Subsidiary has ever
been barred from contracting (as a first tier or any level of subcontractor) for
or bidding on any contract with or for any U. S. Governmental Authority (each a
"Government Contract" and collectively, the "Government Contracts") or had a
Government Contract canceled or terminated for default by Borrower or any
Subsidiary, as the case may be. Neither Borrower nor any Subsidiary is
currently barred from (or has received notice that it is under investigation
with respect to a possible bar or may be barred from) bidding on or entering
into any Government Contract. None of Borrower's or any Subsidiary's current or
backlogged Government Contracts have been forfeited or canceled for the
convenience of any Governmental Authority or for the default of the Borrower or
any Subsidiary, as the case may be. Neither the Borrower nor any Subsidiary has
been given notice (i) that any such contract may be or will be canceled for the
convenience of any Governmental Authority or a default by Borrower or any
Subsidiary, as the case may be, (ii) that a major Borrower or any Subsidiary
program or contract will be eliminated or substantially reduced or suspended,
(iii) requiring or resulting in, loss of use or substantial impairment or
interference of use by Borrower or any Subsidiary, as the case may be, of any
facilities owned by any Governmental Authority, or (iv) that any relevant budget
authority or contract authority has been exceeded with respect to any material
Government Contract which in any such case is likely to have a Material Adverse
Effect.
7.21 Disclosure. Neither this Agreement, any other Transaction Document,
any of the Exhibits or Schedules hereto or thereto, nor any certificate or other
data furnished to the Agent or any of the Banks in writing by or on behalf of
Borrower or any Subsidiary in connection with the transactions contemplated by
this Agreement or any other Transaction Document contains any untrue or
incorrect statement of a material fact or omits to state a material fact
necessary to make the statements contained herein or therein not misleading.
7.22 Liens Created by Transaction Documents. Pursuant to the Transaction
Documents and subject to the matters set forth on Schedule 8.1(u), the Banks
have perfected Liens on all of the real (immovable) Property owned by Borrower
or any Wholly Owned Subsidiary, other than Offshore, that is not a Foreign
Subsidiary, (except the property encumbered by the Florida Mortgages), all of
the Documented Vessels owned by Borrower or any Wholly Owned Subsidiary, other
than Offshore, that is not a Foreign Subsidiary, all of the personal Property of
each Wholly Owned Subsidiary, other than Offshore, that is not a Foreign
Subsidiary, as described in each Security Agreement in which a security interest
can be perfected by the filing of a UCC-1 Financing Statement in the relevant
jurisdiction under applicable law, and all of the common stock, membership
interest, partnership interest or other equity interest held by Borrower and/or
any one or more Subsidiaries in any Person (in at least 65% of the outstanding
voting equity interest in each Foreign Subsidiary). Within thirty (30) days
after the
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effective date hereof the Banks shall have perfected Liens on all Leasehold
Interests of Borrower and each Subsidiary.
SECTION 8. COVENANTS.
8.1 Affirmative Covenants of Borrower. Borrower covenants and agrees
that, so long as (i) any of the Banks has any obligation to make any Loan
hereunder or to issue any Letter of Credit hereunder, (ii) any Letter of Credit
remains outstanding or (iii) any of the Obligations (excluding any continuing
indemnity obligations beyond the Term of this Agreement or any earlier
termination hereof) remain unpaid:
(a) Information. Borrower will deliver to each of the Banks:
(i) as soon as available and in any event within ninety (90) days
after the end of each fiscal year of Borrower, consolidated and
consolidating balance sheets of Borrower and its Subsidiaries as of the end
of such fiscal year and the related consolidated and consolidating
statements of income, stockholders equity and cash flows for such fiscal
year, setting forth in each case, in comparative form, the figures for the
previous fiscal year, all such financial statements to be prepared as
determined in accordance with GAAP and such consolidated financial
statements to be reported on by and accompanied by the unqualified opinion
of independent certified public accountants of nationally recognized
standing selected by Borrower, together with (1) a certificate from such
accountants to the effect that, in making the examination necessary for the
signing of such annual audit report, such accountants have not become aware
of any Default or Event of Default that has occurred and is continuing, or,
if such accountants have become aware of any such event, describing it and
the steps, if any, being taken to cure it (such accountants, however, shall
not be liable to anyone by reason of their failure to obtain knowledge of
any Default or Event of Default which would not be disclosed in the course
of an audit conducted in accordance with generally accepted auditing
standards) and (2) computations evidencing Borrower's compliance with the
financial covenants contained in Sections 8.1(m)(i) through (v) of this
Agreement as calculated on a consolidated basis for Borrower and its
Subsidiaries;
(ii) as soon as available and in any event within forty-five (45)
days after the end of each of the first three (3) fiscal quarters of each
fiscal year of Borrower, consolidated balance sheets of Borrower and its
Subsidiaries as of the end of such fiscal quarter and the related
consolidated statements of income, retained earnings and cash flows for
such fiscal quarter and for the portion of Borrower's fiscal year ended at
the end of such fiscal quarter, setting forth in each case in comparative
form, the figures for the corresponding fiscal quarter and the
corresponding portion of Borrower's previous fiscal year, all in reasonable
detail;
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(iii) as soon as available and in any event within thirty (30) days
after the end of each month (A) a percentage of completion report as of the
end of such month, in form and substance satisfactory to Banks and (B) a
backlog report as of the end of such month, in form and substance
satisfactory to Banks;
(iv) promptly upon transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as Borrower or
any Subsidiary shall send to its stockholders and copies of all
registration statements (without exhibits) and all reports which Borrower
or any Subsidiary files with the Securities and Exchange Commission (or any
governmental body or agency succeeding to the functions of the Securities
and Exchange Commission);
(v) simultaneously with the delivery of each set of financial
statements referred to in clauses (i) and (ii) above, a certificate of the
principal financial officer of Borrower in the form attached hereto as
Exhibit F and incorporated herein by reference, accompanied by supporting
financial work sheets where appropriate, (A) evidencing Borrower's
compliance with the financial covenants contained in Sections 8.l(m)(i)
through (v) as calculated on a consolidated basis for Borrower and its
Subsidiaries, (B) evidencing Borrower's compliance with the covenant
contained in 8.2(m), (C) stating whether there exists on the date of such
certificate any Default or Event of Default and, if any Default or Event of
Default then exists, setting forth the details thereof and the action which
Borrower is taking or proposes to take with respect thereto, and (D)
certifying that all of the representations and warranties of Borrower
contained in this Agreement and of Borrower and its Subsidiaries contained
in the other Transaction Documents, as the same shall have been from time
to time updated by Borrower in writing to Agent (provided such updating
shall not relieve Borrower or any Subsidiary from its obligation to comply
with all covenants contained herein or therein), are true and correct in
all material respects on and as of the date of such certificate as if made
on the date of such certificate (except to the extent (i) of changes
consented to in writing by the Required Banks after the effective date
hereof, (ii) of changes resulting from transactions permitted by this
Agreement or the other Transaction Documents and (iii) that such
representations and warranties expressly relate solely to an earlier date
(in which case such representation and warranties shall have been true and
accurate on and as of such earlier date));
(vi) promptly upon receipt thereof, any reports submitted to
Borrower or any Subsidiary (other than reports previously delivered
pursuant to Sections 8.l(a)(i) and (ii) above) by independent accountants
in connection with any annual, interim or special audit made by them of the
books of Borrower or any Subsidiary;
(vii) as soon as possible and in any event within 45 days after the
end of each fiscal quarter (including fiscal year end) and simultaneously
with delivering the audited financial statements described in Section
8.1(a)(i), a certificate of the principal financial officer of Borrower,
accompanied by supporting computations, setting forth the ratio of
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Consolidated Total Debt as of the end of the immediately preceding fiscal
quarter to Consolidated EBITDA for the immediately preceding four (4)
fiscal quarters;
(viii) notice of the creation or acquisition of any Subsidiary within
thirty (30) days of such creation or acquisition;
(ix) within 30 days after the end of each month, an aging report of
the Contract Receivables of Borrower and its Subsidiaries that are not
Joint Venture Entities, in form and substance acceptable to the Agent,
reconciled to the general ledger;
(x) within 30 days after the end of each month, a certificate of
the principal financial officer of Borrower, accompanied by supporting
computations, setting forth the Borrowing Base as of the end of such month;
(xi) with reasonable promptness, such further information regarding
the business, affairs and financial condition of Borrower or any Subsidiary
as Agent may from time to time reasonably request.
Each of the Banks is hereby authorized to deliver a copy of any financial
statement or other information made available by Borrower or any Subsidiary to
any regulatory authority having jurisdiction over such Bank, pursuant to any
request therefor.
(b) Payment of Indebtedness. Borrower will, and it will cause each of
its Subsidiaries to, pay and discharge any and all Indebtedness payable or
Guaranteed by Borrower or such Subsidiary, as the case may be, and any interest
or premium thereon, when due in accordance with the agreement, document or
instrument relating to such Indebtedness or Guarantee, provided, however, that
neither Borrower nor any Subsidiary shall be required to pay any such
Indebtedness or Guarantee (excluding Borrower' s Obligations) which is being
contested in good faith and by appropriate proceedings being diligently
conducted and for which adequate provision in accordance with GAAP has been
made, except that Borrower or such Subsidiary, as the case may be, shall pay or
cause to be paid any such Indebtedness or Guarantee forthwith upon the
commencement of proceedings to foreclose any Lien which is attached as security
therefor, unless such foreclosure is stayed by the filing of an appropriate
bond.
(c) Maintenance of Books and Records, Consultations and Inspections.
Borrower will, and it will cause each of its Subsidiaries to, maintain books and
records as determined in accordance with GAAP and in which full, true and
correct entries shall be made of all dealings and transactions in relation to
its business and activities. Borrower will, and it will cause each of its
Subsidiaries to, permit the Agent and each of the Banks (and any Person
appointed by the Agent or any of the Banks to whom the Borrower does not
reasonably object) to discuss the affairs, finances and accounts of Borrower and
each Subsidiary with the officers of Borrower and each Subsidiary and their
independent public accountants, all at such reasonable times and as often as the
Agent or any of the Banks may from time to time reasonably request. Subject to
any
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confidentiality and/or security clearance restrictions applicable to Borrower's
or any Subsidiary's records, Borrower will also permit, and will cause each
Subsidiary to permit, inspection of its Properties, books and records by the
Agent during normal business hours and at other reasonable times. Agent may be
accompanied by representatives of any of the Banks during any such inspections.
Borrower will reimburse the Agent upon demand for all costs and expenses
incurred by the Agent in connection with any such inspection conducted by the
Agent while any Default or Event of Default under this Agreement has occurred
and is continuing. A representative of Borrower may be present during any such
inspection, provided that a particular representative's availability or
unavailability shall not inhibit or delay such inspection. Borrower shall permit
the Agent to communicate directly with Borrower's independent public accountants
and to discuss the affairs, finances and accounts of the Borrower and the
Subsidiaries at such reasonable times and intervals and to such reasonable
extent as the Agent may request. A representative of Borrower may be present
and/or participate in any such communication with Borrower's accountants,
provided that a particular representative's availability or unavailability shall
not inhibit or delay such communication.
(d) Payment of Taxes. Borrower will, and it will cause each of its
Subsidiaries to, duly file all federal, state and local income tax returns and
all other tax returns and reports of Borrower or such Subsidiary, as the case
may be, which are required to be filed and duly pay and discharge promptly all
taxes, assessments and other governmental charges imposed upon it or any of its
Property; provided, however, that neither Borrower nor any Subsidiary shall be
required to pay any such tax, assessment or other governmental charge the
payment of which is being contested in good faith and by appropriate proceedings
being diligently conducted and for which adequate provision as determined in
accordance with GAAP has been made, except that Borrower or such Subsidiary, as
the case may be, shall pay or cause to be paid all such taxes, assessments and
governmental charges forthwith upon the commencement of proceedings to foreclose
any Lien which is attached as security therefor, unless such foreclosure is
stayed by the filing of an appropriate bond.
(e) Payment of Claims. Borrower will, and it will cause each of its
Subsidiaries to, promptly pay and discharge (i) all trade accounts payable in
accordance with usual and customary business practices and (ii) all claims for
work, labor or materials which if unpaid might become a Lien upon any of its
Property or assets; provided, however, that neither Borrower nor any Subsidiary
shall be required to pay any such account payable or claim the payment of which
is being contested in good faith and by appropriate proceedings being diligently
conducted and for which adequate provision as determined in accordance with GAAP
has been made, except that Borrower or such Subsidiary, as the case may be,
shall pay or cause to be paid all such accounts payable and claims forthwith
upon the commencement of proceedings to foreclose any Lien which is attached as
security therefor, unless such foreclosure is stayed by the filing of an
appropriate bond.
(f) Existence. Borrower will, and it will cause each of its Subsidiaries
to, do all things necessary to (i) preserve and keep in full force and effect at
all times its corporate or
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other existence and all permits, licenses, franchises and other rights material
to its business, and (ii) be duly qualified to do business in all jurisdictions
where the nature of its business or its ownership of Property requires such
qualification except for those states in which the failure to qualify could not
reasonably be expected to have a Material Adverse Effect.
(g) Maintenance of Property. Borrower will, and it will cause each of
its Subsidiaries to, at all times, preserve and maintain all of the Property
useful and necessary in the conduct of its business in adequate working order
(taking into consideration the condition of any such Property in existence on
the effective date hereof), ordinary wear and tear excepted.
(h) Compliance with Laws, Regulations, Etc. Borrower will, and it
will cause each of its Subsidiaries to, comply with any and all laws, ordinances
and governmental and regulatory rules and regulations to which Borrower or such
Subsidiary, as the case may be, is subject (including, without limitation, the
Federal Acquisition Regulations, 48 C.F.R. Chapters 1 through 68) except where
noncompliance could not reasonably be expected to have a Material Adverse
Effect, and maintain any and all licenses, permits, franchises and other
governmental and regulatory authorizations necessary to the ownership of its
Properties or to the conduct of its business, which violation or failure to
obtain could reasonably be expected to have a Material Adverse Effect.
(i) Environmental Matters. Borrower will, and it will cause each of
its Subsidiaries to, at all times comply with all requirements and agreements
contained in Section 11.4 hereof. Borrower will, and will cause each of its
Subsidiaries to, at all times comply with all Environmental Laws which the
failure to comply with could reasonably be expected to have a Material Adverse
Effect. Borrower shall give the Agent and each of the Banks prompt written
notice of (i) any Environmental Claim or any other action or investigation with
respect to the existence or potential existence of any Hazardous Substances to
its actual knowledge instituted or threatened with respect to Borrower or any
Subsidiary or any of the Properties or facilities owned, leased or operated by
Borrower or any Subsidiary that could result in liability in excess of
$250,000.00 and (ii) any condition or occurrence on any of the Properties or
facilities owned, leased or operated by Borrower or any Subsidiary which
constitutes a material violation by Borrower or any Subsidiary of any lawfully
promulgated, enacted, entered or finalized Environmental Laws or which gives
rise to a reporting obligation or requires pursuant to an order of a
Governmental Authority (the "Order") removal or remediation by Borrower or any
Subsidiary under any lawfully promulgated, enacted, entered or finalized
Environmental Laws. Such notice shall in either case be accompanied by
Borrower's plan with respect to removal or remediation and Borrower agrees to
take all action which is required by the Order or any lawfully promulgated,
enacted, entered or finalized Environmental Law in connection with such action,
investigation, condition or occurrence in accordance with such plan with due
diligence and to fulfill the requirements of any Order or lawfully promulgated,
enacted, entered or finalized Environmental Law as promptly as possible and in
all events within the time required by any Order. Borrower shall promptly
provide the Agent and each of the Banks with copies of all material
documentation relating thereto, and such other material information with respect
to
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environmental matters as the Agent or any of the Banks may reasonably request
from time to time.
(j) ERISA Compliance. If Borrower, any Subsidiary or any ERISA Affiliate
shall have any Pension Plan, Borrower, such Subsidiary or such ERISA Affiliate,
as the case may be, shall comply in all respects with all requirements of ERISA
and the Code relating to such Pension Plan, with which the failure to comply
could reasonably be expected to have a Material Adverse Effect. Without limiting
the generality of the foregoing, unless Borrower shall have received the prior
written consent of the Required Banks to the contrary (which consent shall not
be unreasonably withheld), Borrower will not, and it will not cause or permit
any Subsidiary or any ERISA Affiliate to:
(i) permit any Pension Plan maintained by Borrower, any Subsidiary
or any ERISA Affiliate to engage in any nonexempt "prohibited transaction,"
as such term is defined in Section 4975 of the Code which could reasonably
be expected to have a Material Adverse Effect;
(ii) permit any Pension Plan maintained by Borrower, any Subsidiary
or any ERISA Affiliate to incur any "accumulated funding deficiency", as
such term is defined in Section 302 of ERISA, 29 U.S.C. (S) 1082, whether
or not waived, which could reasonably be expected to have a Material
Adverse Effect;
(iii) allow the termination of any Pension Plan in a manner which
could result in the imposition of a Lien on any Property of Borrower, any
Subsidiary or any ERISA Affiliate pursuant to Section 4068 of ERISA, 29
U.S.C. (S) 1368; or
(iv) take any action which would constitute a complete or partial
withdrawal from a Multi-Employer Plan within the meaning of Sections 4203
or 4205 of Title IV of ERISA, which could have a Material Adverse Effect.
(k) Notices. Borrower will notify the Agent in writing of any of the
following within three (3) Business Days after learning of the occurrence
thereof, describing the same and, if applicable, the steps being taken by the
Person(s) affected with respect thereto:
(i) the occurrence of any Default or Event of Default under this
Agreement;
(ii) the occurrence of any default or event of default by Borrower,
any Subsidiary or any other Obligor under any note, indenture, loan
agreement, mortgage, deed of trust, security agreement, lease or other
similar agreement, document or instrument to which Borrower, any Subsidiary
or any other Obligor, as the case may be, is a party or by which it is
bound or to which it is subject which evidences or secures Indebtedness in
an outstanding principal amount of $1,000,000.00 or more in the aggregate
for all such defaulted agreements;
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(iii) the institution of any litigation, arbitration proceeding or
governmental or regulatory proceeding affecting Borrower, any other Obligor
or any Subsidiary, whether or not considered to be covered by insurance, in
which the prayer or claim for relief seeks recovery of an amount in excess
of $1,000,000.00 (or, if no dollar amount is specified in the prayer or
claim for relief, in which there is a reasonable likelihood of recovery of
an amount in excess of $1,000,000.00) or any form of equitable relief;
(iv) the entry of any judgment or decree against Borrower, any
other Obligor or any Subsidiary which, when aggregated with any other such
judgments or decrees then entered and unsatisfied, exceed $1,000,000.00 in
the aggregate;
(v) the occurrence of a Reportable Event with respect to any
Pension Plan; the filing of a notice of intent to terminate a Pension Plan
by Borrower, any ERISA Affiliate or any Subsidiary; the institution of
proceedings to terminate a Pension Plan by the PBGC or any other Person;
the withdrawal in a "complete withdrawal" or a "partial withdrawal" as
defined in Sections 4203 and 4205, respectively, of ERISA by Borrower, any
ERISA Affiliate or any Subsidiary from any Multi-Employer Plan; or the
incurrence of any material increase in the contingent liability of Borrower
or any Subsidiary with respect to any "employee welfare benefit plan" as
defined in Section 3(1) of ERISA which covers retired employees and their
beneficiaries;
(vi) the occurrence of any event that could reasonably be expected
to have a Material Adverse Effect: and
(vii) any notices required to be provided pursuant to other
provisions of this Agreement that do not otherwise provide a time frame in
which such notice is to be provided and notice of the occurrence of such
other events as the Agent may from time to time reasonably specify.
(l) Insurance. Borrower will, and it will cause each of its Subsidiaries
to, insure all of its Property of the character usually insured by corporations
engaged in the same or similar businesses with properties in similar geographic
areas, against loss or damage of the kind customarily insured against by such
corporations, and carry adequate liability insurance and other insurance of a
kind and in amount(s) generally carried by such corporations. All insurance
required by this Section 8.1(1) shall be with insurers rated A-VII or better by
A.M. Best Company (or accorded a similar rating by another nationally or
internationally recognized insurance rating agency of similar standing if A.M.
Best Company is not then in the business of rating insurers or rating foreign
insurers) or such other insurers as may from time to time be reasonably
acceptable to the Required Banks, except to the extent that Borrower may obtain
insurance from its Subsidiary, Offshore Marine Indemnity Company, for (i)
workers compensation insurance and (ii) property and casualty insurance so long
as Reliance National Insurance Company or any other insurance company rated A-
VII or better by A.M. Best
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Company assumes any coverage written above $250,000.00 on each policy written by
Offshore Marine Indemnity Company. All such insurance may be subject to
reasonable deductible amounts. Borrower shall deliver to the Agent a certificate
of insurance within thirty (30) days of the date hereof and upon the annual
renewal of such policies specifying the details of all insurance then in effect;
together with a certificate of an officer of Borrower that all premiums then due
have been paid.
(m) Financial Covenants.
(i) Minimum Consolidated Interest Coverage. Borrower will have a
Consolidated Interest Coverage Ratio as of the end of each fiscal quarter
of at least 3.00 to 1.
(ii) Minimum Fixed Charge Coverage. Borrower will have a
Consolidated Fixed Charge Coverage Ratio as of the end of each fiscal
quarter of at least 1.50 to 1.
(iii) Maximum Consolidated Funded Senior Debt to EBITDA. As of the
end of each fiscal quarter, Borrower shall have a ratio of Consolidated
Funded Senior Debt as of such date to Consolidated EBITDA for the
immediately preceding four (4) fiscal quarters (including any fiscal
quarter ending on such date) of less than or equal to 2.75 to 1.
(iv) Minimum Consolidated Net Worth. Borrower will not permit
Consolidated Net Worth at the end of any fiscal quarter to be less than
$160,000,000.00 plus 50% of Consolidated Net Income (without giving any
effect to any losses), excluding any Consolidated Net Income due to non-
cash accounting adjustments, for each fiscal quarter ending on or after
December 31, 1998 plus 75% of the net cash proceeds received by Borrower
from any future sale of stock of Borrower or any Subsidiary through any
public offering within the meaning of the Securities Act of 1933.
(v) Borrowing Base. Borrower will not permit, as of the end of any
month, Total Revolver Outstandings to exceed the Borrowing Base.
(n) Further Assurances. Borrower and each Subsidiary will execute and
deliver to the Agent, at any time and from time to time, any and all further
agreements, documents and instruments, and take any and all further actions
which may be required under applicable law, or which the Agent may from time to
time reasonably request, in order to effectuate the transactions contemplated by
this Agreement and the other Transaction Documents.
(o) Accountant. Borrower shall give each of the Banks prompt notice
of any change of Borrower's independent certified public accountants and a copy
of the Form 8-K relating thereto filed with the Securities and Exchange
Commission. Borrower shall at all times utilize independent certified public
accountants of nationally recognized standing reasonably acceptable to the
Required Banks.
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(p) Subsidiaries. Borrower shall not create any Subsidiaries without the
prior written consent of Agent; provided that, the provisions of this Section
8.1(p) shall not require the Agent's consent for the formation of wholly-owned
direct Subsidiaries of Borrower or any Subsidiary. Borrower covenants and agrees
that in the event Borrower or any Subsidiary shall create or acquire any new
Subsidiary or Subsidiaries at any time after the effective date hereof, that
Borrower shall deliver to Agent the Transaction Documents required by Section
5.15 hereof.
(q) Agreements. Borrower and its Subsidiaries shall comply with all
indentures, contracts, agreements, leases and other instruments to which
Borrower or any Subsidiary is a party or by which Borrower, any Subsidiary or
any Property of Borrower or any Subsidiary is bound or affected, which the
failure to comply with could reasonably be expected to have a Material Adverse
Effect.
(r) Offshore Marine Indemnity Company. Offshore shall maintain a
relationship with Reliance National Insurance Company or any other insurance
company(ies) rated A-VII or better by A.M. Best Company whereby such insurance
company(ies) will provide excess insurance for Offshore for all liability
underwritten by Offshore in excess of $250,000.00 per occurrence and
$8,000,000.00 in the annual aggregate.
(s) Bonding Capacity. Borrower and its Subsidiaries shall have the
ability to obtain any performance bonds necessary for new vessel construction
contracts which the failure to obtain could reasonably be expected to have a
Material Adverse Effect.
(t) Year 2000 Compatibility. All material systems used in the conduct
of the business of Borrower or any Subsidiary will have appropriate capabilities
and compatibility to handle calendar dates falling on or after January 1, 2000,
and all information pertaining to such calendar dates. Upon reasonable request,
Borrower agrees to provide, and to cause each Subsidiary to provide, to the
Banks documentation satisfactory to the Banks to establish that its systems and
software are year 2000 compliant, or that Borrower and its Subsidiaries are in
the process of implementing a plan to ensure that its systems and software will
be year 2000 compliant before December 31, 1999.
(u) Certain Post Closing Matters. Borrower shall, and shall cause its
Subsidiaries to, accomplish the matters described on Schedule 8.1(u) within the
time frame set forth therein; provided that the Agent shall be entitled, in its
sole discretion, to agree with Borrower on any modifications to Schedule 8.1(u)
on behalf of the Banks.
8.2 Negative Covenants of Borrower. Borrower covenants and agrees that,
so long as (i) any of the Banks has any obligation to make any Loan hereunder or
to issue any Letter of Credit hereunder, (ii) any Letter of Credit remains
outstanding or (iii) any of the Obligations remain unpaid, unless the prior
written consent of the Required Banks is obtained:
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(a) Limitation on Indebtedness. Borrower will not, and it will not
cause or permit any of its Subsidiaries to, incur or be obligated on any
Indebtedness, either directly or indirectly, by way of Guarantee, suretyship or
otherwise, other than:
(i) the Obligations to the Agent and the Banks;
(ii) Indebtedness relating to the employee benefit plans;
(iii) Indebtedness described in clause (a) or (b) of the defined
term Restricted Investment of this Agreement;
(iv) Indebtedness in respect of taxes, assessments, governmental
charges or levies and claims for labor, materials and supplies to the extent
that payment therefor shall not at the time be required to be made in accordance
with the provisions of Section 8.1(d) or Section 8.1(e);
(v) Indebtedness in respect of judgments or awards that have been
in force for less than the applicable period for taking an appeal and for which
adequate provision as determined in accordance with GAAP has been made so long
as execution is not levied thereunder and in respect of which Borrower or any
Subsidiary shall at the time in good faith be prosecuting an appeal or
proceedings for review and a suspensive appeal bond in the full amount of such
judgment or award shall have been obtained by Borrower or such Subsidiary with
respect thereto;
(vi) current liabilities of Borrower or any Subsidiary of Borrower
incurred in the ordinary course of business not incurred through (A) the
borrowing of money, or (B) the obtaining of credit except for credit on an open
account basis customarily extended and in fact extended in connection with
normal purchases of goods and services;
(vii) endorsements for collection, deposits or negotiation and
warranties of products or services, in each case incurred in the ordinary course
of business;
(viii) Indebtedness in respect of performance, surety or appeal bonds
obtained in the ordinary course of Borrower's or any Subsidiary's business and
in connection with transactions in the ordinary course of Borrower's or any
Subsidiary's business;
(ix) Indebtedness for any permitted declared and unpaid
Distributions on Borrower's stock;
(x) Indebtedness under Hedge Agreements;
(xi) Indebtedness in respect of the Separation and Related
Agreements;
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(xii) Indebtedness not otherwise permitted by this Section 8.2(a) in
an amount not to exceed $30,000,000.00 in the aggregate at any one time
outstanding for Borrower and all Subsidiaries so long as not more than
$10,000,000.00 of such Indebtedness is incurred in any one fiscal year;
(xiii) Indebtedness, in an amount not to exceed $20,000,000.00 in the
aggregate at any one time outstanding for Borrower and all its Subsidiaries, in
respect of guarantees issued in support of customer financing of down payments
and other similar amounts relating to Exim Bank or other similar construction
financing, which guarantees do not exceed 20% of the purchase price of the
subject vessel;
(xiv) Indebtedness due in connection with the issuance of industrial
revenue bonds by the Mississippi Economic Development Corporation not to exceed
the aggregate principal amount of $30,000,000.00; and
(xv) the Subordinated Notes.
(b) Limitation on Liens, No Negative Pledge in favor of any other Person.
Borrower will not, and will not cause or permit any of its Subsidiaries to,
create, incur or assume, or suffer to be incurred or to exist, any Lien on any
Property or assets of Borrower or any Subsidiary, whether now owned or hereafter
acquired, or upon any income or profits therefrom, except for Permitted Liens.
Borrower will not, and will not cause or permit any of its Subsidiaries to,
covenant or agree to, or suffer to be incurred or to exist, in favor of any
Person (other than the Banks), any agreement prohibiting the granting of any
Liens in favor of the Banks other than agreements prohibiting the granting of
any Liens in favor of the Banks contained in those agreements pursuant to which
a Permitted Lien is created.
(c) Consolidation, Merger, Sale of Assets, Dissolution, Etc. Borrower
will not, and will not cause or permit any of its Subsidiaries to, (i) directly
or indirectly, merge into or with or consolidate with any other Person or permit
any other Person to merge into or with or consolidate with it provided that
Borrower may cause two or more Wholly Owned Subsidiaries to merge or consolidate
into Borrower, one another, or any other Wholly Owned Subsidiary (provided,
however, that no Wholly Owned Subsidiary which is a Foreign Subsidiary may merge
or consolidate with a Wholly Owned Subsidiary which is not a Foreign Subsidiary
unless the Wholly Owned Subsidiary which is not a Foreign Subsidiary is the
survivor entity of such merger or consolidation), or (ii) sell, assign, lease,
transfer, abandon or otherwise dispose of any of its Property (including,
without limitation, any capital stock of or other equity interest in a Wholly
Owned Subsidiary or Joint Venture Entity owned by Borrower or another
Subsidiary), except for (A) sales of vessels constructed by Borrower and any
Subsidiary, inventory and materials in the ordinary course of business, (B)
sales in the ordinary course of business of those items described in clause (c)
through (h) of the defined term Restricted Investment of this Agreement, or (C)
sales by Borrower and its Subsidiaries taken as a whole during any fiscal year
of fixed assets having a book value in an aggregate amount not to exceed
$10,000,000.00, so long as such assets
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shall be sold to third party buyers in arms-length transactions on reasonable
terms and so long as the net proceeds thereof are used solely to purchase other
fixed assets which are either replacements for those assets sold or are
otherwise consistent with the Company Business within a reasonable time (not to
exceed 120 days after the date of the applicable sale) or to pay any principal
due on the Loans.
(d) Sale and Leaseback Transactions. Borrower will not, and it will not
cause or permit any of its Subsidiaries to, enter into any arrangement, directly
or indirectly, whereby Borrower or any Subsidiary of Borrower shall in one or
more related transactions sell, transfer or otherwise dispose of any Property
owned by Borrower or any Subsidiary of Borrower and then rent or lease, as
lessee, such Property or any part thereof for a period or periods which in the
aggregate would exceed twelve (12) months from the date of commencement of the
lease term.
(e) Sale or Discount of Accounts. Borrower will not, and it will not
cause or permit any of its Subsidiaries to, sell or discount any of its
receivables (whether represented by a note, account, general intangible or
chattel paper) other than in the ordinary course of its business.
(f) Transactions with Affiliates. Borrower will not, and it will not
cause or permit any of its Subsidiaries to, enter into or be a party to any
transaction or arrangement with any Affiliate (including, without limitation,
the purchase from, sale to or exchange of Property with, or the rendering of any
service by or for, any Affiliate), except in the ordinary course of business and
pursuant to the reasonable requirements of Borrower's or such Subsidiary's
business and upon fair and reasonable terms no less favorable to Borrower or
such Subsidiary than would be obtained in a comparable arm's length transaction
with a Person not an Affiliate.
(g) Changes in Nature of Business. Borrower will not, and it will not
cause or permit any of its Subsidiaries to, engage in any business if, as a
result, the general nature of the business which would then be engaged in by
Borrower and its Subsidiaries, considered as a whole, would be substantially
changed from the Company Business.
(h) Fiscal Year. Borrower will not, and it will not cause or permit any
of its Subsidiaries to, change its fiscal year; provided that, the fiscal year
of any Subsidiary may be changed to coincide with the fiscal year of Borrower.
(i) Distributions. Borrower will not, and it will not cause or permit
any of its Subsidiaries to, declare or incur any liability to make any
Distribution, except Distributions by any Subsidiary to Borrower.
(j) Pension Plans. Borrower will not, and it will not cause or permit
any of its Subsidiaries to, (a) permit any condition to exist in connection with
any Pension Plan which might constitute grounds for the PBGC to institute
proceedings to have such Pension Plan terminated or a trustee appointed to
administer such Pension Plan or (b) engage in, or permit to exist or occur, any
other condition, event or transaction with respect to any Pension Plan which
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could result in the incurrence by Borrower, any Subsidiary or any ERISA
Affiliate of any liability, fine or penalty which could reasonably be expected
to have a Material Adverse Effect.
(k) Restricted Investments. Borrower will not, and it will not cause or
permit any of its Subsidiaries to, directly or indirectly, make any Restricted
Investments.
(l) Ownership of Subsidiaries. Borrower will not cause or permit any of
its Subsidiaries to (i) authorize or issue any new types, varieties or classes
of capital stock or any bonds or debentures, subordinated or otherwise, or any
stock warrants or options, (ii) authorize or issue any additional shares of any
existing class of capital stock, (iii) declare any stock dividends or stock
splits or (iv) take any other action which could, directly or indirectly,
decrease Borrower's ownership interest in any of its Subsidiaries.
(m) Capital Expenditures. Borrower and its Subsidiaries will not incur
Capital Expenditures in excess of (i) $62,000,000.00 in the aggregate for
Borrower and its Subsidiaries taken as a whole for the fiscal year ending March
31, 1999, (ii) $22,000,000.00 in the aggregate for Borrower and its Subsidiaries
taken as a whole for the fiscal year ending March 31, 2000 or (iii)
$25,000,000.00 in the aggregate for Borrower and its Subsidiaries taken as a
whole for each fiscal year ending on or after March 31, 2001.
(n) Change in Control. Borrower shall not allow any Change in Control to
occur.
(o) Payment of Subordinated Notes. Neither Borrower nor any Subsidiary
shall (i) pre-pay, redeem or purchase any Subordinated Notes or (ii) make any
offer to pre-pay, redeem or purchase any Subordinated Notes; provided that this
Section 8.2(p) shall not prohibit the conversion of the Subordinated Notes into
common stock of Borrower or payment of the Subordinated Notes through the use of
proceeds from the issuance, after the effective date hereof, of common stock of
Borrower.
(p) Modification of Subordinated Notes. Neither Borrower nor any
Subsidiary of Borrower shall amend or modify any material terms, conditions or
provisions of the Subordinated Notes, including, without limitation, any terms,
conditions or provisions applicable to the payment, redemption or purchase of
any Subordinated Notes.
8.3 Use of Proceeds. Borrower covenants and agrees that (i) the proceeds
of the Revolving Credit Loans and Swing Loans will be used solely for payment of
the existing Indebtedness to the Banks, working capital purposes, Permitted
Acquisitions, any specific purposes permitted under this Agreement, and other
general corporate purposes of Borrower; (ii) no part of the proceeds of any Loan
will be used in violation of any applicable law or regulation; and (iii) no part
of the proceeds of any Loan will be used, whether directly or indirectly, and
whether immediately, incidentally or ultimately (A) to purchase or carry margin
stock or to extend credit to others for the purpose of purchasing or carrying
margin stock, or to refund or repay indebtedness originally incurred for such
purpose or (B) for any purpose which entails a
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violation of, or which is inconsistent with, the provisions of any of the
Regulations of The Board of Governors of the Federal Reserve System, including,
without limitation, Regulations G, U, T or X thereof, as amended.
SECTION 9. EVENTS OF DEFAULT.
If any of the following (each of the following herein sometimes called an
"Event of Default") shall occur and be continuing:
9.1 Borrower shall fail to pay any of the Obligations other than
principal or interest within five (5) Business Days after the date the same
shall first become due and payable, whether by reason of demand, maturity,
acceleration or otherwise;
9.2 (a) Borrower shall fail to pay any of the Obligations for the
repayment of interest three (3) Business Days after the date the same shall
become due and payable, whether by reason of demand, maturity, acceleration or
otherwise;
(b) Borrower shall fail to pay any of the Obligations for the repayment
of principal as and when the same shall become due and payable, whether by
reason of demand, maturity, acceleration or otherwise;
9.3 Any representation or warranty of Borrower or any Subsidiary made in
this Agreement, in any other Transaction Document to which Borrower or any
Subsidiary is a party or in any certificate, agreement, instrument or statement
furnished or made or delivered pursuant hereto or thereto or in connection
herewith or therewith, shall prove to have been untrue or incorrect in any
material respect when made or effected;
9.4 Borrower shall fail to perform or observe any term, covenant or
provision contained in Section 8.1(l), Section 8.1(m)(i) - (iv), Section 8.2
or Section 8.3;
9.5 Borrower shall fail to perform or observe any term, covenant or
provision contained in Section 8.1(a) or 8.1(m)(v) and any such failure shall
remain unremedied for five (5) Business Days after the earlier of (i) notice of
such default is given to Borrower by the Agent or (ii) a Responsible Officer of
Borrower obtaining knowledge of such default;
9.6 Borrower shall fail to perform or observe any other term, covenant or
provision contained in this Agreement (other than those specified in Sections
9.1, 9.2, 9.3, 9.4 or 9.5 above or elsewhere in this Section 9) or Borrower or
any Subsidiary shall fail to perform or observe any term, covenant or provision
contained in any other Transaction Document and any such failure shall remain
unremedied for thirty (30) days after the earlier of (i) written notice of
default is given to Borrower by the Agent or any of the Banks or (ii) a
Responsible Officer of Borrower obtaining knowledge of such default;
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9.7 This Agreement or any of the other Transaction Documents shall at any
time for any reason cease to be in full force and effect or shall be declared to
be null and void by a court of competent jurisdiction, or if the validity or
enforceability thereof shall be contested or denied by Borrower or any
Subsidiary, or if the transactions completed hereunder or thereunder shall be
contested by Borrower or any Subsidiary or if Borrower or any Subsidiary shall
deny that it has any or further liability or obligation hereunder or thereunder.
9.8 Borrower, any Subsidiary or any other Obligor shall (i) voluntarily
commence any proceeding or file any petition seeking relief under Title 11 of
the United States Code or any other federal, state or foreign bankruptcy,
insolvency, receivership, liquidation or similar law, (ii) consent to the
institution of, or fail to contravene in a timely and appropriate manner, any
such proceeding or the filing of any such petition, (iii) apply for or consent
to the appointment of a receiver, trustee, custodian, sequestrator or similar
official of itself, himself or herself or of a substantial part of its Property
or assets, (iv) file an answer admitting the material allegations of a petition
filed against itself in any such proceeding, (v) make a general assignment for
the benefit of creditors, (vi) become unable, admit in writing its inability or
fail generally to pay its debts as they become due or (vii) take any corporate
or other action for the purpose of effecting any of the foregoing;
9.9 An involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i) relief
in respect of Borrower, any Subsidiary or any other Obligor, or of a substantial
part of the Property or assets of Borrower, any Subsidiary or any other Obligor,
under Title 11 of the United States Code or any other federal, state or foreign
bankruptcy, insolvency, receivership, liquidation or similar law, (ii) the
appointment of a receiver, trustee, custodian, sequestrator or similar official
of Borrower, any Subsidiary or any other Obligor or of a substantial part of the
Property or assets of Borrower, any Subsidiary or any other Obligor or (iii) the
winding-up or liquidation of Borrower, any Subsidiary or any other Obligor; and
such proceeding or petition shall continue undismissed for sixty (60)
consecutive days or an order or decree approving or ordering any of the
foregoing shall be entered;
9.10 Any of the Letter of Credit Applications shall be declared to be null
and void by a court of competent jurisdiction, or if the validity or
enforceability of any of the Letter of Credit Applications shall be contested or
denied by Borrower or any Subsidiary, or if Borrower or any Subsidiary shall
deny that it has any further liability or obligation under any of the Letter of
Credit Applications or if Borrower or any Subsidiary shall fail to comply with
or observe any of the terms, provisions or conditions contained in any of the
Letter of Credit Applications;
9.11 Borrower, any Subsidiary or any other Obligor shall be declared by
any of the Banks to be in default on, or pursuant to the terms of, (1) any other
present or future obligation to such Bank(s), including, without limitation, any
other loan, line of credit, revolving credit, guaranty or letter of credit
reimbursement obligation, or (2) any other present or future agreement
purporting to convey to such Bank(s) a Lien upon any Property or assets of
Borrower, such Subsidiary, or such other Obligor, as the case may be;
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9.12 The occurrence of any default or event of default under or within the
meaning of any agreement, document or instrument evidencing, securing,
guaranteeing the payment of or otherwise relating to any Indebtedness of
Borrower or any Subsidiary for borrowed money (other than the Borrower's
Obligations) having an aggregate outstanding principal balance in excess of Five
Million Dollars ($5,000,000.00);
9.13 One or more judgments, decrees, arbitration awards or rulings
(including without limitation, rulings of the Board of Contract Appeals, the
General Accounting Office, the Defense Contract Audit Agency or the appropriate
Contracting Office of the United States Navy) shall be entered against the
Borrower or any Subsidiary involving in the aggregate a liability (not paid or
fully covered by insurance) of $5,000,000.00 or more and all such judgments,
decrees, awards, and rulings shall not have been vacated, paid, discharged,
stayed or suspensively appealed within thirty days from the entry thereof;
9.14 Any of the following events shall occur with respect to any Pension
Plan (a) the institution by Borrower, any ERISA Affiliate or any Subsidiary of
steps to terminate any Pension Plan if, as a result of such termination,
Borrower, such ERISA Affiliate or such Subsidiary, as the case may be, could be
required to make a contribution to such Pension Plan, or could incur a liability
or obligation to such Pension Plan or any of its participants or beneficiaries,
in the aggregate in excess of Five Million Dollars ($5,000,000.00), (b) the
institution by the PBGC of steps to terminate any Pension Plan, or (c) a
contribution failure occurs with respect to any Pension Plan sufficient to give
rise to a Lien under Section 302 (f) of ERISA;
9.15 The occurrence of any Change in Control;
9.16 Borrower shall for thirty (30) consecutive days fail to have
independent certified public accountants of nationally recognized standing
retained to audit the financial statements of Borrower and its Subsidiaries; or
9.17 If (i) Borrower or any of its Subsidiaries is debarred or suspended
from contracting (as a first tier or any level of subcontractor) for, bidding
on, or entering into a Government Contract, or receives notice of a proposed
suspension of or disbarment from acquiring or performing a Government Contract,
or (ii) if a current or backlogged Government Contract is forfeited or
terminated for the default by Borrower or any Subsidiary, as the case may be;
THEN, and in each such event (other than an event described in Sections
9.1, 9.2, 9.8 or 9.9), the Agent shall, if requested in writing by the Required
Banks, and may, in its sole and absolute discretion, upon the oral request of
the Required Banks, declare that the obligation of the Banks to make Loans under
this Agreement and to issue Letters of Credit under this Agreement have
terminated, whereupon such obligations of the Banks shall be immediately and
forthwith terminated, and the Agent shall, if requested in writing by the
Required Banks, and may, in its sole and absolute discretion, upon the oral
request of the Required Banks, declare the entire outstanding principal balance
of and all accrued and unpaid interest on the Notes and all of
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the other Loans under this Agreement and all of the other Obligations to be
forthwith due and payable, whereupon all of the unpaid principal balance of and
all accrued and unpaid interest on the Notes and all of the other Loans under
this Agreement and all such other Obligations shall become and be immediately
due and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by Borrower, and the Agent and
each of the Banks may exercise any and all other rights and remedies which they
may have under any of the other Transaction Documents or under applicable law;
provided, however, that upon the occurrence of any event described in Sections
9.1, 9.2, 9.8 or 9.9, the obligation of the Banks to make Loans under this
Agreement and to issue Letters of Credit under this Agreement shall
automatically terminate and the entire outstanding principal balance of and all
accrued and unpaid interest on the Notes and all of the other Loans under this
Agreement and all of the other Obligations shall automatically become
immediately due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by Borrower, and
the Agent and each of the Banks may exercise any and all other rights and
remedies which they may have under any of the other Transaction Documents or
under applicable law.
SECTION 10. AGENT.
10.1 Appointment. Whitney is hereby appointed by the Banks as Agent
under and for purposes of this Agreement, the Notes and the other Transaction
Documents. The Agent agrees to act as such upon the express conditions contained
in this Agreement and the other Transaction Documents. The Agent shall hold all
Collateral as the agent for all of the Banks and all net proceeds of the
Collateral shall be shared by the Banks ratably in accordance with their
respective Pro Rata Shares.
10.2 Powers.
(a) The Agent shall have and may exercise such powers hereunder as are
specifically delegated to the Agent by the terms of this Agreement and the other
Transaction Documents, together with such powers as are reasonably incidental
thereto. Each Bank and the Agent hereby authorizes the Agent to enter into the
Transaction Documents to which Agent is a party and to take all actions
contemplated thereby and confirms its appointment of Whitney National Bank as
Agent under the terms and conditions of the Transaction Documents. Each Bank
hereby confirms its agreement to be bound by the terms and conditions of the
security documents included within the Transaction Documents. The Agent shall
have no implied duties to the Banks, nor any obligation to the Banks to take any
action under this Agreement or any of the other Transaction Documents, except
any action specifically provided by this Agreement or any of the other
Transaction Documents to be taken by the Agent. Without limiting the generality
of the foregoing, the Agent shall not be required to take any action with
respect to any Default or Event of Default, except as expressly provided in
Section 9. Each Bank and the Agent agree that no Bank shall have any right
individually to seek to realize upon the Collateral granted for the benefit of
the Agent and the Banks pursuant to any of the Transaction Documents, it being
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understood and agreed that such rights and remedies may be exercised by the
Agent as Agent for the benefit of the Agent and the Banks upon the terms of the
Transaction Documents.
(b) Each Bank hereby agrees, and each holder of any Obligations by the
acceptance thereof will be deemed to agree, that, except as otherwise set forth
herein, any action taken by the Agent or the Required Banks in accordance with
the provisions of this Agreement or the other Transaction Documents, and the
exercise by the Agent or the Required Banks of the powers set forth herein or
therein, together with such other powers as are reasonably incidental thereto,
shall be authorized and binding upon all of the Banks. The Agent is hereby
authorized on behalf of all of the Banks, without the necessity of any notice to
or further consent from any Bank, from time to time, to take any action with
respect to any Collateral or Transaction Documents which may be necessary to
perfect and maintain perfected the Liens on the Collateral granted by the
Transaction Documents. The Banks irrevocably authorize the Agent at its option
and in its discretion, to release any Lien granted to or held by the Agent upon
any Collateral (i) upon termination of the Revolving Credit Commitments and
payment in full of all Obligations; (ii) constituting property sold or to be
sold or disposed of as part of or in connection with any disposition permitted
hereunder or by any other Transaction Document; (iii) constituting property in
which neither Borrower nor any Subsidiary owned any interest at the time the
Lien was granted or at any time thereafter; (iv) constituting property leased to
Borrower or any Subsidiary under a lease which has expired or been terminated in
a transaction permitted under this Agreement or is about to expire and which has
not been, and is not intended by Borrower or any Subsidiary to be, renewed or
extended; (v) consisting of an instrument evidencing Indebtedness if the
Indebtedness evidenced thereby has been paid in full; or (vi) if approved,
authorized or ratified in writing by the Required Banks. Upon request by the
Agent at any time, the Banks will confirm in writing the Agent's authority to
release particular types or items of Collateral pursuant to this Section 10.2.
10.3 General Immunity. Neither the Agent nor any of its directors,
officers, employees, agents or advisors shall be liable to any of the Banks for
any action taken or not taken by it (i) with the consent or at the request of
the Required Banks or (ii) in the absence of its own gross negligence or willful
misconduct.
10.4 No Responsibility for Loans, Recitals, Etc. Neither the Agent nor
any of its directors, officers, employees, agents or advisors shall (i) be
responsible for or have any duty to ascertain, inquire into or verify any
recitals, reports, statements, representations, warranties or representations
contained in this Agreement or any of the other Transaction Documents or
furnished pursuant hereto or thereto; (ii) be responsible for any Loans or
Letters of Credit hereunder (except in Agent's capacity as a Bank hereunder with
respect to its Pro Rata Share thereof pursuant to the terms of this Agreement
and except for the Swing Loans), (iii) be bound to ascertain or inquire as to
the performance or observance of any of the terms of this Agreement or any of
the other Transaction Documents; (iv) be responsible for the satisfaction of any
condition specified in Section 6, except receipt of items required to be
delivered to the Agent; or (v) be responsible for the validity, effectiveness,
genuineness or enforceability of this Agreement
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or any of the other Transaction Documents; or (vi) be responsible for the
creation, attachment or perfection of any security interests or liens purported
to be granted to the Agent or any of the Banks pursuant to this Agreement or any
of the other Transaction Documents. The Agent shall not incur any liability by
acting in reliance upon any notice, consent, certificate, statement or other
writing (which may be a bank wire, telex, telecopy or similar writing) believed
by it to be genuine or to be signed by the proper party or parties.
10.5 Right to Indemnity. Notwithstanding any other provision contained
in this Agreement to the contrary, to the extent Borrower fails to reimburse the
Agent pursuant to Section 11.3, Section 11.4 or Section 11.5, or if any Default
or Event of Default shall occur under this Agreement, the Banks shall ratably in
accordance with their respective Pro Rata Shares of the aggregate amount of
Loans and Letters of Credit then outstanding, or if no Loans or Letters of
Credit are then outstanding, their respective Pro Rata Shares of the total
Commitments of all of the Banks, indemnify the Agent and hold it harmless from
and against any and all liabilities, losses (except losses occasioned solely by
failure of Borrower to make any payments or to perform any obligations required
by this Agreement (other than those described in Sections 11.3, 11.4 and 11.5),
the Notes, the Letter of Credit Applications or any of the other Transaction
Documents), costs and/or expenses, including, without limitation, reasonable
attorneys' fees and expenses, which the Agent may incur, directly or indirectly,
in connection with this Agreement, the Notes or any of the other Transaction
Documents, or any action or transaction related hereto or thereto; provided only
that the Agent shall not be entitled to such indemnification for any losses,
liabilities, costs and/or expenses directly and solely resulting from its own
gross negligence or willful misconduct. This indemnity shall be a continuing
indemnity, contemplates all liabilities, losses, costs and expenses related to
the execution, delivery and performance of this Agreement, the Notes and the
other Transaction Documents, and shall survive the satisfaction and payment of
the Loans, the expiration or other termination of the Letters of Credit and the
termination of this Agreement.
10.6 Action Upon Instructions of Required Banks. The Agent agrees, upon
the written request of the Required Banks, to take any action of the type
specified in this Agreement or any of the other Transaction documents as being
within the Agent's rights, duties, powers or discretion. Notwithstanding the
foregoing, the Agent shall be fully justified in failing or refusing to take any
action hereunder, unless it shall first be indemnified to its satisfaction by
the Banks pro rata against any and all liabilities, losses, costs and expenses
(including, without limitation, attorneys' fees and expenses) which may be
incurred by it by reason of taking or continuing to take any such action, other
than any liability which may arise out of Agent's gross negligence or willful
misconduct. The Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder in accordance with written instructions signed
by the Required Banks, and such instructions and any action taken or failure to
act pursuant thereto shall be binding on all of the Banks and on all holders of
the Notes. In the absence of a request by the Required Banks, the Agent shall
have authority, in its sole discretion, to take or not to take any action,
unless this Agreement or any of the other Transaction Documents specifically
requires the consent of the Required Banks or of all of the Banks.
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10.7 Reliance on Documents; Employment of Agents and Counsel. The Agent
shall be entitled to rely upon any note, notice, consent, certificate,
affidavit, letter, telegram, statement, paper or document believed by it to be
genuine and correct and to have been signed or sent by the proper person or
persons. The Agent may execute any of its duties as Agent hereunder by or
through employees, agents, and attorneys-in-fact and shall not be answerable to
the Banks for the default or misconduct of any such agents or attorneys-in-fact
selected by it in good faith and with reasonable care, except as to money or
securities received by it or its authorized agents. The Agent shall be entitled
to advice and opinion of legal counsel concerning all legal matters and all
matters pertaining to the duties of the Agent.
10.8 May Treat Payee as Owner. The Agent may deem and treat the payee of
any Note as the owner thereof for all purposes hereof unless and until a written
notice of the assignment or transfer thereof shall have been filed with the
Agent pursuant to Section 11.14. Any request, authority or consent of any
person, firm or corporation who at the time of making such request or giving
such authority or consent is the holder of any such Note shall be conclusive and
binding on any subsequent holder, transferee or assignee of such Note or of any
Note issued in exchange therefor.
10.9 Agent's Reimbursement. Each Bank agrees to reimburse the Agent pro
rata in accordance with its Pro Rata Share for any out-of-pocket expenses not
reimbursed by Borrower (a) for which the Agent is entitled to reimbursement by
the Borrower under this Agreement or any of the other Transaction Documents and
(b) for any other out-of-pocket expenses incurred by the Agent on behalf of the
Banks, in connection with the preparation, execution, delivery, amendment,
modification, extension, renewal, administration and/or enforcement of this
Agreement and/or any of the other Transaction Documents.
10.10 Rights as a Bank. With respect to its commitment, the Loans made by
it and the Notes issued to it, the Agent shall have the same rights and powers
hereunder as any Bank and may exercise the same as though it were not the Agent,
and the terms "Bank" and "Banks" shall, unless the context otherwise indicates,
include the Agent in its individual capacity. The Agent may accept deposits
from, lend money to and generally engage in any kind of banking or trust
business with the Borrower as if it were not the Agent.
10.11 Independent Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank and based on
the financial statements referred to in Section 7.4 and such other documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and the other Transaction Documents. Each
Bank also acknowledges that it will, independently and without reliance upon the
Agent or any other Bank and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Transaction
Documents.
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10.12 Resignation of Agent. Subject to the appointment of a successor
Agent, the Agent may resign as Agent for the Banks under this Agreement and the
other Transaction Documents at any time by thirty (30) days notice in writing to
the Banks. Such resignation shall take effect upon appointment of such
successor Agent. The Required Banks shall have the right to appoint a successor
Agent (and if no Default or Event of Default then exists hereunder, such
appointment shall be with the consent of the Borrower, which consent shall not
be unreasonably withheld), and the successor Agent shall be entitled to all of
the rights of, and vested with the same powers as, the original Agent under this
Agreement and the other Transaction Documents. Resignation by the Agent shall
not affect or impair the rights of the Agent under Sections 10.5 and 10.9 hereof
with respect to all matters preceding such resignation. Any successor Agent
must be a national banking association or a bank chartered in any State of the
United States and having at least $200,000,000.00 in capital and surplus.
10.13 Removal of Agent. Subject to the appointment of a successor Agent,
the Banks (by a unanimous vote of all Banks other than the Bank then acting as
the Agent hereunder), may remove the Agent for the Banks under this Agreement
and the other Transaction Documents at any time by thirty (30) days' notice in
writing to the Agent. Such removal shall take effect upon appointment of such
successor Agent. The Required Banks shall have the right to appoint a successor
Agent who shall be entitled to all of the rights of, and vested with the same
powers as, the original Agent under this Agreement and the other Transaction
Documents. If no Default or Event of Default then exists hereunder, then the
decision to remove the Agent and the subsequent appointment of a successor Agent
shall both be made only with the consent of the Borrower (which consent will not
be unreasonably withheld). The removal of the Agent shall not affect or impair
the rights of the Agent under Sections 10.5 and 10.9 hereof with respect to all
matters preceding such removal. Any successor Agent must be a national banking
association or a bank chartered in any State of the United States and having at
least $200,000,000.00 in capital and surplus.
10.14 Duration of Agency. The agency established by Section 10.1 hereof
shall continue, and Sections 10.1 through and including this Section 10.14 shall
remain in full force and effect, until all of the Borrowers' Obligations shall
have been paid in full and the Banks' commitments to make Loans, issue Letters
of Credit and/or extend credit to or for the benefit of the Borrower shall have
terminated or expired.
10.15 Documentation Agent. The Documentation Agent, in its capacity as
such, shall have no rights, powers, duties or obligations under this Agreement
or any of the other Transaction Documents.
10.16 Syndication Agent. The Syndication Agent, in its capacity as such,
shall have no rights, powers, duties or obligations under this Agreement or any
of the other Transaction Documents.
SECTION 11. GENERAL.
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11.1 No Waiver. No failure or delay by the Agent or any of the Banks in
exercising any right, remedy, power or privilege hereunder or under any other
Transaction Document shall operate as a waiver thereof; nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The remedies provided
herein and in the other Transaction Documents are cumulative and not exclusive
of any remedies provided by law. Nothing herein contained shall in any way
affect the right of any of the Banks to exercise any statutory or common law
right of banker's lien or setoff.
11.2 Right of Setoff. Upon the occurrence and during the continuance of
any Event of Default, each of the Banks is hereby authorized at any time and
from time to time, without notice to Borrower (any such notice being expressly
waived by Borrower) and to the fullest extent permitted by law, to setoff and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held by such Bank(s) and any and all other indebtedness at
any time owing by such Bank(s) to or for the credit or account of Borrower
against any and all of the Obligations irrespective of whether or not such
Bank(s) shall have made any demand hereunder or under any of the other
Transaction Documents and although such obligations may be contingent or
unmatured. Each of the Banks agrees to promptly notify Borrower after any such
setoff and application made by such Bank(s), provided, however, that the failure
to give such notice shall not affect the validity of such setoff and
application. The rights of the Banks under this Section 11.2 are in addition to
any other rights and remedies (including, without limitation, other rights of
setoff) which the Banks may have. Nothing contained in this Agreement or any
other Transaction Document shall impair the right of any of the Banks to
exercise any right of setoff or counterclaim it may have against Borrower and to
apply the amount subject to such exercise to the payment of indebtedness of
Borrower unrelated to this Agreement or the other Transaction Documents.
11.3 Cost and Expenses. Borrower agrees, whether or not any Loan is made
hereunder or any Letter of Credit is issued hereunder, to pay the Agent upon
demand (i) all out-of-pocket costs and expenses and all reasonable attorneys'
fees of the Agent in connection with the preparation, documentation,
negotiation, execution, amendment, modification, extension and/or renewal of
this Agreement, the Notes, the Letter of Credit Application(s) and the other
Transaction Documents, (ii) all out-of-pocket costs and expenses and all
reasonable attorneys' fees of the Agent in connection with the preparation of
any waiver or consent hereunder or under any other Transaction Documents, (iii)
if an Event of Default occurs, all out-of-pocket costs and expenses and all
reasonable attorneys' fees incurred by the Agent and each of the Banks in
connection with such Event of Default and collection and other enforcement
proceedings resulting therefrom, (iv) all out-of-pocket costs and expenses and
all reasonable attorneys' fees of the Agent in connection with recording the
Collateral Mortgages, Deeds of Trust, Preferred Ship Mortgages and UCC-1
Financing Statements executed in connection therewith or in connection with the
Security Agreements; (v) if an Event of Default occurs, all out-of-pocket costs
and expenses and all reasonable attorneys' fees of the Agent in connection with
recording the Florida Mortgages; (vi) if an Event of Default occurs, all
reasonable out-of-pocket costs and expenses for appraisals, title
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insurance, environmental site assessments and surveys of the Property of
Borrower and each Subsidiary incurred by the Agent and each of the Banks, (vii)
all out-of-pocket costs and expenses and all reasonable attorneys' fees incurred
by the Agent and each of the Banks in connection with the enforcement of any
rights and/or remedies of the Agent or any of the Banks to collect any of the
Obligations, and (viii) all other reasonable attorneys' fees and out-of-pocket
costs and expenses incurred by the Agent relating to or arising out of or in
connection with this Agreement or any of the other Transaction Documents.
Borrower further agrees to pay or reimburse the Agent and each of the Banks for
any stamp or other taxes which may be payable with respect to the execution,
delivery, recording and/or filing of this Agreement, the Notes, the Letter of
Credit Application(s) or any of the other Transaction Documents (provided that
Borrower shall not be obligated to reimburse Agent for costs of recording the
Florida Mortgages until the occurrence of an Event of Default). All of the
obligations of Borrower under this Section 11.3 shall survive the satisfaction
and payment of the Obligations and the termination of this Agreement.
11.4 Environmental Indemnity. Borrower hereby agrees to protect, defend
and indemnify the Agent and each of the Banks and hold the Agent and each of the
Banks and any holder(s) of the Notes, and the officers, directors, employees,
agents and affiliates of the Agent, each of the Banks and such holder(s)
(collectively, the "Indemnitees") harmless from and against any and all losses,
liabilities, damages, injuries, costs, expenses and claims of any and every kind
whatsoever (including, without limitation, reasonable court costs and attorneys'
fees and expenses) which at any time or from time to time may be paid, incurred
or suffered by the Indemnitees, with respect to or as a direct or indirect
result of the violation by Borrower or any Subsidiary of any Environmental Laws;
or with respect to, or as a direct or indirect result of the presence on or
under, or the escape, seepage, leakage, spillage, discharge, emission or Release
from, properties owned or operated by Borrower and/or any Subsidiary of any
Hazardous Substances or any other hazardous or toxic waste, substance or
constituent or other substance (including, without limitation, any losses,
liabilities, damages, injuries, costs, expenses or claims asserted or arising
under the Environmental Laws); and the provisions of and undertakings and
indemnification set out in this Section 11.4 shall survive the satisfaction and
payment of the Obligations and the termination of this Agreement; provided that
Borrower shall have no obligation to an Indemnitee hereunder with respect to
indemnified liabilities arising from the gross negligence or willful misconduct
of that Indemnitee.
11.5 General Indemnity. Except as may be otherwise provided in this
Agreement, in addition to the payment of expenses pursuant to Section 11.3,
whether or not the transactions contemplated hereby shall be consummated,
Borrower hereby agrees to protect, defend and indemnify Indemnitees and hold
Indemnitees harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including,
without limitation, the reasonable fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not such Indemnitees shall be
designated a party thereto), that may be imposed on, incurred by or
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asserted against the Indemnitees, in any manner relating to or arising out of
this Agreement, any of the other Transaction Documents or any other agreement,
document or instrument executed and delivered by Borrower or any other Obligor
in connection herewith or therewith, the statements contained in any commitment
letters delivered by the Agent or any of the Banks, the agreement of any of the
Banks to make the Loans hereunder, the agreement of Banks to issue the Letters
of Credit hereunder or the use or intended use of the proceeds of any Loan
hereunder (collectively, the "Indemnified Liabilities"); provided that Borrower
shall have no obligation to an Indemnitee hereunder with respect to indemnified
liabilities arising from the gross negligence or willful misconduct of that
Indemnitee. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in the preceding sentence may be unenforceable because it is
violative of any law or public policy, Borrower shall contribute the maximum
portion that it is permitted to pay and satisfy under applicable law to the
payment and satisfaction of all indemnified liabilities incurred by the
Indemnitees or any of them. The provisions of the undertakings and
indemnification set out in this Section 11.5 shall survive satisfaction and
payment of the Obligations and the termination of this Agreement. No provision
contained in this Section 11.5 shall affect any rights the Borrower may have
against any Bank which defaults under this Agreement or is intended to indemnify
any such Agent or Bank which defaults under this Agreement (but only such Agent
or Bank that defaults under this Agreement) for any such Indemnified Liabilities
arising from such defaulting Bank's action.
11.6 Authority to Act. The Agent shall be entitled to act on any notices
and instructions (telephonic or written) believed by the Agent in good faith to
have been sent or delivered by any person identifying himself or herself as John
Dane III, Rick S. Rees or Emile J. Dumesnil (or any other person from time to
time authorized to act on behalf of Borrower pursuant to a resolution adopted by
the Board of Directors of Borrower and certified by the Secretary of Borrower
and delivered to the Agent), regardless of whether such notice or instruction
was in fact delivered by such person, and Borrower hereby agrees to indemnify
the Agent and hold the Agent harmless from and against any and all losses and
expenses, if any, ensuing from any such action.
11.7 Notices. Any notice, request, demand, consent, confirmation or
other communication hereunder shall be in writing and delivered in person or
sent by telecopy or registered or certified mail, return receipt requested and
postage prepaid, to the applicable party at its address or telecopy number set
forth on the signature pages hereof, or at such other address or telecopy number
as any party hereto may designate as its address for communications hereunder by
notice so given. Such notices shall be deemed effective on the day on which
delivered or sent if delivered in person or sent by telecopy, or on the third
(3rd) Business Day after the day on which mailed, if sent by registered or
certified mail; provided, however, that notices to the Agent under Section 3
shall not be effective until actually received by the Agent.
11.8 CONSENT TO JURISDICTION, WAIVER OF JURY TRIAL. BORROWER IRREVOCABLY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF ANY LOUISIANA STATE COURT OR ANY
UNITED STATES OF AMERICA COURT SITTING IN THE EASTERN DISTRICT OF LOUISIANA, AS
THE AGENT MAY ELECT, IN ANY
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SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OTHER TRANSACTION DOCUMENT. BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS
IN RESPECT TO SUCH SUIT, ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY
OF SUCH COURTS. BORROWER IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH BORROWER MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT, AND
BORROWER FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
BORROWER AUTHORIZES THE SERVICE OF PROCESS UPON BORROWER BY REGISTERED MAIL SENT
TO BORROWER AT ITS ADDRESS SET FORTH IN SECTION 11.7. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF THE AGENT UNDER THIS AGREEMENT, ANY BANK OR THE HOLDER OF
ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST BORROWER OR ANY SUBSIDIARY IN ANY
OTHER JURISDICTION. BORROWER, THE AGENT AND THE BANKS IRREVOCABLY WAIVE THE
RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY ACTION IN WHICH BORROWER AND THE
AGENT AND/OR ANY OF THE BANKS ARE PARTIES RELATING TO OR ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS.
11.9 Sharing of Payments. The Banks agree among themselves that except
as otherwise expressly set forth herein, in the event that any of the Banks
shall directly or indirectly obtain any payment (whether voluntary, involuntary,
through the exercise of any right of setoff, banker's lien or counterclaim,
through the realization, collection, sale or liquidation of any collateral or
otherwise) on account of or in respect of any of the Loans or other Obligations
in excess of its Pro Rata Share of all such payments, such Bank(s) shall
immediately purchase from the other Bank(s) participations in the Loans or other
Obligations owed to such other Bank(s) in such amounts, and make such other
adjustments from time to time, as shall be equitable to the end that the Banks
share such payment ratably in accordance with their respective Pro Rata Shares.
The Banks further agree among themselves that if any such excess payment to a
Bank shall be rescinded or must otherwise be restored, the other Bank(s) which
shall have shared the benefit of such payment shall, by repurchase of
participation theretofore sold, or otherwise, return its share of that benefit
to the Bank whose payment shall have been rescinded or otherwise restored.
Borrower agrees, to the fullest extent it may effectively do so under applicable
law, that any holder of a participation in any of the Obligations, whether or
not acquired pursuant to the foregoing arrangements, may exercise rights of
setoff, banker's lien or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of Borrower in the amount of such participation. If under any
applicable bankruptcy, insolvency or other similar law any of the Banks receives
a secured claim in lieu of a setoff to which this Section 11.9 would apply, such
Bank(s) shall, to the extent practicable, exercise their
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rights in respect of such secured claim in a manner consistent with the rights
of the Bank(s) entitled under this Section 11.9 to share in the benefits of any
recovery of such secured claim.
11.10 Governing Law. This Agreement, the Notes, the Letter of Credit
Application(s) and all of the other Transaction Documents shall, except as may
otherwise be provided in any Transaction Document, be governed by and construed
in accordance with the internal laws of the State of Louisiana.
11.11 Amendments and Waivers. Any provision of this Agreement, the Notes,
the Letter of Credit Application(s) or any of the other Transaction Documents
may be amended or waived if, but only if, such amendment or waiver is in writing
and is signed by Borrower and the Required Banks (and, if the rights or duties
of the Agent in its capacity as Agent are affected thereby, by the Agent);
provided that no such amendment or waiver shall, unless signed by all of the
Banks, (i) increase the Commitment of any Bank, (ii) reduce the principal amount
of or rate of interest on any Loan or any fees hereunder or the amount for which
Borrower or any Subsidiary is obligated to reimburse an Issuer in respect of a
drawing under a Letter of Credit, (iii) postpone the date fixed for any payment
of principal of or interest on any Loan or any reimbursement obligation in
respect of a drawing under a Letter of Credit, or any fees hereunder, (iv)
change the Pro Rata Share of the Commitments or of the aggregate principal
amount of Loans or Letters of Credit of any Bank, (v) change the number of Banks
which shall be required for the Banks or any of them to take any action or
obligations under this Section or under any other provision of this Agreement,
(vi) postpone the scheduled expiration date of the Revolving Credit Period or
the Letter of Credit Period hereunder or extend the expiry date of a Letter of
Credit beyond the Letter of Credit Period; or (vii) amend this Section 11.11.
11.12 References: Headings for Convenience. Unless otherwise specified
herein, all references herein to Section numbers refer to Section numbers of
this Agreement, all references herein to Exhibits A, B, C, D, E, F, G, H, I(1),
I(2), J(1), J(2), K(1), K(2), L(1), M(1), N, O(1) and O(2) refer to annexed
Exhibits A, B, C, D, E, F, G, H, I(1), I(2), J(1), J(2), K(1), K(2), L(1), M(1),
N, O(1) and O(2) which are hereby incorporated herein by reference and all
references herein to Schedules 2.1(a), 2.1(b), 2.1(c), 2.1(d), 2.1(e), 4.1(a),
5.15(b), 7.10, 7.11, 7.16, and 7.17 refer to annexed Schedules 2.1(a), 2.1(b),
2.1(c), 2.1(d), 2.1(e), 4.1(a), 5.15(b), 7.10, 7.11, 7.16, and 7.17 which are
hereby incorporated herein by reference. The Section headings are furnished for
the convenience of the parties and are not to be considered in the construction
or interpretation of this Agreement.
11.13 Successors and Assigns, Participations.
(a) The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns,
except that Borrower may not assign or otherwise transfer any of its rights or
delegate any of its obligations under this Agreement. Any Bank may sell
participations in its Notes and its rights under this Agreement in whole or in
part to any commercial bank organized under the laws of the United States or any
state thereof that is
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a member of both the Federal Deposit Insurance Corporation and the Federal
Reserve System without the consent of Borrower or the Agent so long as each
agreement pursuant to which any such participation is granted provides that no
such participant shall have any rights under this Agreement or any other
Transaction Document (the participants' rights against the Bank granting its
participation to be those set forth in the Participation Agreement between the
participant and such Bank), and such selling Bank shall retain the sole right to
approve or disapprove any amendment, modification or waiver of any provision of
this Agreement or any of the other Transaction Documents other than any
amendment, modification or waiver (i) reducing the principal amount of or rate
of interest on any Loan or any fees hereunder, (ii) postponing the date fixed
for any payment of principal of or interest on any Loan or any fees hereunder,
or (iii) releasing any substantial portion of any Collateral (including, without
limitation, release of any Continuing Guarantee) other than pursuant to Section
10.2(b). Each such participant shall be entitled to the benefits of the yield
protection provisions hereof to the extent such Bank would have been so entitled
had no such participation been sold.
(b) Any Bank which, in accordance with Section 11.13(a), grants a
participation in any of its rights under this Agreement or its Notes shall give
prompt notice thereof to the Agent and Borrower.
(c) Unless otherwise agreed to by Borrower in writing, no Bank shall,
as between Borrower and that Bank, be relieved of any of its obligations under
this Agreement as a result of such Bank's granting of a participation in all or
any part of such Bank's Notes or all or any part of such Bank's rights under
this Agreement.
11.14 Assignment Agreements. Each Bank may, from time to time, with the
consent of Agent and Borrower (neither of which will in any instance be
unreasonably withheld), sell or assign a pro rata part of all of the
indebtedness evidenced by the Notes then owed by it together with an equivalent
proportion of its obligation to make Loans hereunder and the credit risk
incidental to the Letters of Credit pursuant to an Assignment Agreement
substantially in the form of Exhibit G attached hereto, executed by the
assignor, the assignee and the Borrower (but only if Borrower's consent is
required), which agreements shall specify in each instance the portion of the
indebtedness evidenced by the Notes which is to be assigned to each such
assignee and the portion of the Commitments of the assignor and the credit risk
incidental to the Letters of Credit (which portions shall be equivalent) to be
assumed by it (the "Assignment Agreements"), provided that (i) the Borrower may
in its sole discretion withhold its consent to any assignment by a Bank of less
than all of its Commitment if as a result thereof the assignor or the assignee
would have a Commitment hereunder of less than $5,000,000.00, further provided
that nothing herein contained shall restrict, or be deemed to require any
consent as a condition to, or require payment of any fee in connection with, any
sale, discount or pledge by any Bank of any Note or other obligation hereunder
to a Federal reserve bank and (ii) the consent of the Borrower or the Agent
shall not be required for assignments or sales to a Bank, unless after giving
effect to such assignment or sale there are fewer than 5 Banks or any Bank would
have Commitments hereunder equal to or greater than 50% of the aggregate
Commitments hereunder, in which case
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the consent of Borrower may be withheld in Borrower's sole discretion, and (iii)
the consent of Borrower shall not be required so long as any Event of Default
has occurred and is continuing. Upon the execution of each Assignment Agreement
by the assignor, the assignee and the Borrower (if required) and consent thereto
by the Agent (i) such assignee shall thereupon become a "Bank" for all purposes
of this Agreement with a Commitment in the amount set forth in such Assignment
Agreement and with all the rights, powers and obligations afforded a Bank
hereunder, (ii) the assignor shall have no further liability for funding the
portion of its Commitments assumed by such other Bank and (iii) the address for
notices to such Bank shall be as specified in the Assignment Agreement, and the
Borrower shall execute and deliver Notes to the assignee Bank in the amount of
its Commitments and new Notes to the assignor Bank in the amount of its
Commitments after giving effect to the reduction occasioned by such assignment,
all such Notes to constitute "Notes" for all purposes of this Agreement, and
there shall be paid to the Agent, as a condition to such assignment, an
administration fee of $2,500 plus any out-of-pocket costs and expenses incurred
by it in effecting such assignment, such fee to be paid by the assignor or the
assignee as they may mutually agree, but under no circumstances shall any
portion of such fee be payable by or charged to the Borrower.
11.15 Binding Agreement. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that Borrower may not assign or delegate any of its
rights or obligations under this Agreement.
11.16 NO ORAL AGREEMENTS, ENTIRE AGREEMENT. ORAL AGREEMENTS OR
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT
OF A DEBT, INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT, ARE NOT ENFORCEABLE.
TO PROTECT BORROWER, THE AGENT AND THE BANKS FROM MISUNDERSTANDING OR
DISAPPOINTMENT, ANY AGREEMENT REACHED BY BORROWER, THE AGENT AND THE BANKS
COVERING SUCH MATTERS ARE CONTAINED IN THIS AGREEMENT AND THE OTHER TRANSACTION
DOCUMENTS, WHICH AGREEMENT AND OTHER TRANSACTION DOCUMENTS ARE A COMPLETE AND
EXCLUSIVE STATEMENT OF THE AGREEMENT AMONG BORROWER, THE AGENT AND THE BANKS,
EXCEPT AS BORROWER, THE AGENT AND THE BANKS MAY LATER AGREE IN WRITING TO MODIFY
THEM. THIS AGREEMENT EMBODIES THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE
PARTIES HERETO AND SUPERSEDES ALL PRIOR AGREEMENTS AND UNDERSTANDINGS (ORAL OR
WRITTEN) RELATING TO THE SUBJECT MATTER HEREOF. Without limiting the generality
of the foregoing, this Agreement supersedes and replaces the Original Credit
Agreement.
11.17 Severability. In the event any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
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11.18 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.19 Resurrection of the Obligations. To the extent that any of the
Banks receives any payment on account of any of the Obligations, and any such
payment(s) or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, subordinated and/or required to be repaid
to a trustee, receiver or any other Person under any bankruptcy act, state or
federal law, common law or equitable cause, then, to the extent of such
payment(s) received, the Obligations or part thereof intended to be satisfied
and any and all Liens upon or pertaining to any Property or assets of Borrower
and theretofore created and/or existing in favor of such Bank(s) as security for
the payment of such Obligations shall be revived and continue in full force and
effect, as if such payment(s) had not been received by such Bank(s) and applied
on account of the Obligations.
11.20 Independence of Covenants. All of the covenants contained in this
Agreement and the other Transaction Documents shall be given independent effect
so that if a particular action, event or condition is prohibited by any one of
such covenants, the fact that it would be permitted by an exception to, or
otherwise be in compliance within the provisions of, another covenant shall not
avoid the occurrence of a Default or Event of Default if such action is taken,
such event occurs or such condition exists.
11.21 Confidentiality. The Agent and each of the Banks shall keep
confidential any information delivered, made available or otherwise conveyed by
the Borrower or any of its Subsidiaries in connection with this Agreement and
the transactions contemplated hereby; provided that, the provisions of this
Section 11.21 shall not be construed to prohibit Agent or any Bank from
disclosing any information to (i) Agent or any Bank (or any attorneys, agents or
consultants of Agent or any Bank), (ii) any participant or assignee or
prospective participant or assignee of any Bank (so long as such participant or
assignee or prospective participant or assignee agrees to be bound by the
provisions of this Section 11.21), (iii) any affiliate of Agent or any Bank or
(iv) any Person as required by law, regulation or court order. The
confidentiality obligations of Agent and the Banks under the foregoing shall not
apply to (i) any information that is in the public domain, unless wrongfully
placed in the public domain by Agent or any Bank or (ii) any information which
was rightfully and lawfully obtained by Agent or a Bank from any third party not
subject to confidentiality restrictions.
11.22 Certain Indemnification Procedures. Notwithstanding any provision
to the contrary contained in this Agreement, in the event Borrower is obligated
to defend the Agent or any of the Banks under the terms of this Agreement,
Borrower shall be entitled, at is option, to assume the defense of such action
on behalf of such indemnified party or parties with counsel which is selected by
Borrower and reasonably acceptable to such indemnified parties. In no event
shall Borrower: (i) be required to employ more than one (1) firm of attorneys in
defense of any matter where Borrower is required to defend the Agent or any of
the Banks, but nothing contained
-84-
<PAGE>
herein shall prevent Borrower from employing multiple firms of attorneys, at its
option; or (ii) be liable for any legal fees and expenses in excess of the
reasonable fees and expenses of the one (1) firm of attorneys whether or not
selected by Borrower pursuant to clause (i) of this Section 11.22 and the fees
and expenses of any additional firms employed by Borrower pursuant to said
clause (i) (provided that Borrower shall not have the right to challenge the
reasonableness of the fees of any firm of attorneys selected by Borrower).
11.23. Conflicting Provisions. In the event any of the terms and
provisions of this Agreement conflict with any terms and provisions contained in
any other Transaction Document, the terms and provisions of this Agreement shall
govern; provided that nothing contained herein shall be construed to limit the
property encumbered by the Transaction Documents.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
IN WITNESS WHEREOF, Borrower, the Agent and the Banks have executed this
Amended and Restated Revolving Credit Agreement effective as of the 23rd day of
April, 1999.
HALTER MARINE GROUP, INC.
BY: ________________________
ITS: ________________________
13085 Seaway Road
Gulfport, MS 39503
Telecopy number: (601) 897-4888
-85-
<PAGE>
Revolving Credit Commitment: WHITNEY NATIONAL BANK
$23,333,333.33
BY: ________________________
ITS: ________________________
228 St. Charles Avenue
New Orleans, LA 70130
Telecopy number: (504) 552-4622
Revolving Credit Commitment: THE FIRST NATIONAL BANK OF CHICAGO
$40,000,000.00
BY: _________________________
ITS: _________________________
910 Travis
Houston, TX 77002-5860
Telecopy number: (713) 751-6304
Revolving Credit Commitment: BANKBOSTON, N.A.
$23,333,333.33
BY: ________________________
ITS: ________________________
MS. 01-08-01
100 Federal Street
Boston, MA 02110
Telecopier number (617) 434-1955
-86-
<PAGE>
Revolving Credit Commitment: HIBERNIA NATIONAL BANK
$14,166,666.67
BY: ________________________
ITS: ________________________
313 Carondelet Street
New Orleans, LA 70130
Telecopy number: (504) 533-5434
Revolving Credit Commitment: THE BANK OF NOVA SCOTIA
$10,000,000.00
BY: ________________________
ITS: ________________________
600 Peachtree Street NE
Suite 2700
Atlanta, GA 30308
Telecopy number: (404) 888-8998
Revolving Credit Commitment: THE BANK OF TOKYO - MITSUBISHI, LTD.
$14,166,666.67
BY: _________________________
ITS: _________________________
1100 Louisiana Street
Suite 2800
Houston, TX 77002-5216
Telecopy number: (713) 658-0116
-87-
<PAGE>
EXHIBIT 21
HALTER MARINE GROUP, INC. SUBSIDIARIES
<TABLE>
<C> <S> <C>
1. Amcane Company MN
2. AmClyde Engineered Products Company, Inc. DE
3. Bludworth Bond Holding, Inc. DE
4. Bludworth Bond, L.L.C. LA
5. Bludworth Bond, L.P. LA
6. Equitable Shipyards, L.L.C. f/k/a Equitable Shipyards, Inc. LA
7. Fritz Culver, Inc. LA
8. Gretna Machine & Iron Works, L.L.C.
(f/k/a Gretna Machine & Iron Works, Inc.) LA
9. Gulf Coast Fabrication, Inc. MS
10. Halter-Calcasieu, L.L.C. (merger of Calcasieu Shipyard, Inc. & Crawford Shipyard, Inc.) LA
11. Halter Engineered Products Group, Inc. DE
12. Halter Marine Group, Inc. Charitable Foundation, Inc. MS
13. Halter Gulf Repair, Inc. DE
14. Halter Lockport*
15. Halter Marine Gulfport, Inc. NV
16. Halter Marine, Inc. (NV) (f/k/a Trinity Marine, Inc.) NV
17. Halter Marine, Inc. (LA) LA
18. Halter Marine International, Inc. Barbados
19. Halter Marine Panama City, Inc. DE
20. Halter Marine Pascagoula, Inc. DE
21. Halter Marine Services, Inc. MS
22. Halter Moss Point*
23. McElroy Marine Machinery*
24. Marine Cleaning, L.L.C. LA
25. Marinsco, Inc. LA
26. Maritime Holdings, Inc. (merged w/Maritime Capital Corporation) DE
27. Moss Point Marine*
28. Offshore Marine Indemnity Company VT
29. TDI-Halter, L.L.C. (limited partner of TDI-Halter, Limited Partnership) LA
30. TDI-Halter, Limited Partnership (f/k/a TDI-Halter, Inc.) LA
31. TDI-Orange, L.L.C. (limited partner of TDI-Orange, Limited Partnership) LA
32. TDI-Orange, Limited Partnership LA
33. TDI International, Inc. Cayman Islands
34. Trinity Yachts, Inc. DE
35. Utility Steel Fabrication, Inc. LA
36. Washington Marine Fabricators, Inc. WA
37. Belleli Offshore International, Inc. (Minority - 35%) Italy
38. Process Technologies LLC (50%) DE
39. Zentec, Inc. (Minority - 20%) TX
40. Sabre Personnel Associates, Inc. (Minority - 40%) LA
</TABLE>
* Denotes a non-incorporated facility owned by Halter Marine, Inc.
<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 May 12, 1999 (except for Note 17,
as to which the date is June 1, 1999), 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, 1999.
/s/ ERNST & YOUNG LLP
New Orleans, Louisiana
June 25, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1999
<CASH> 3,927
<SECURITIES> 0
<RECEIVABLES> 117,376
<ALLOWANCES> 0
<INVENTORY> 33,501
<CURRENT-ASSETS> 312,525
<PP&E> 170,972
<DEPRECIATION> 17,854
<TOTAL-ASSETS> 591,780
<CURRENT-LIABILITIES> 177,611
<BONDS> 215,000
0
0
<COMMON> 288
<OTHER-SE> 119,910
<TOTAL-LIABILITY-AND-EQUITY> 591,780
<SALES> 998,149
<TOTAL-REVENUES> 998,149
<CGS> 912,131
<TOTAL-COSTS> 66,287
<OTHER-EXPENSES> (719)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,135
<INCOME-PRETAX> 12,315
<INCOME-TAX> (1,017)
<INCOME-CONTINUING> 13,332
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,332
<EPS-BASIC> 0.46
<EPS-DILUTED> 0.46
</TABLE>
