SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1998
Commission file number 0-15087
TRAILER BRIDGE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3617986
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
10405 New Berlin Road E., Jacksonville, FL 32226
(904) 751-7100
(Address and telephone number of Principal executive offices)
-------------------------
Securities Registered Pursuant to section 12(b) of the Act: None
Securities Registered Pursuant to section 12(g) of the Act:
$0.01 Par Value
Common Stock
Indicate by check mark whether the registrant (1) has filed all report required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing require-
ments 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 the registrant's definitive proxy statement
incorporated by reference in Part III of this Form 10-K. [ ]
The aggregate market value of the shares of the registrant's $0.01 par value
common stock held by non-affiliates of the registrant as of March 19, 1999 was
$7,328,723 (based upon $2.42 per share being the average of the closing bid and
asked price on that date as reported by NASDAQ). In making this calculation the
issuer has assumed, without admitting for any purpose, that all executive
officers and directors of the registrant are affiliates.
As of March 31, 1999, 9,777,500 shares of the registrant's common stock, par
value $.01 per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: The information set forth under Part III,
Items 10, 11, 12, and 13 of this Report is incorporated by reference from the
registrant's definitive proxy statement for the 1999 annual meeting of
stockholders that will be filed no later than 120 days after the end of the year
to which this report relates.
PART I
Item 1. Business
BUSINESS OVERVIEW
Trailer Bridge, headquartered in Jacksonville, Florida, is an
integrated trucking and marine freight carrier that provides truckload freight
transportation primarily between the continental U.S. and Puerto Rico. Founded
in 1991 by transportation pioneer Malcom P. McLean, the Company combines an
efficient and dedicated motor carrier with a low cost barge and tug marine
transportation system. Trailer Bridge is the only company serving markets
governed by the Jones Act which exclusively operates marine vessels fully
configured to carry 48' and 53' long, 102" wide, "high-cube" equipment. This
configuration enables the Company to achieve equipment utilization rates and
other operating efficiencies not readily available to traditional ocean carriers
that primarily use smaller capacity equipment, such as 40' containers.
Trailer Bridge's differentiated service quickly gained the
acceptance of U.S. to Puerto Rico shippers, leading to rapid growth and high
equipment utilization. In 1993, the Company's first full year of operation,
Trailer Bridge achieved a 93% outbound (continental U.S. to Puerto Rico) vessel
utilization rate and captured 5% of the continental U.S. to Puerto Rico marine
freight market. In response to the rapid market share gains experienced by
Trailer Bridge, in 1996 the Company increased its vessel capacity by 56% by
inserting midsections ("mid-bodies") into its two existing barges, increasing
the capacity of each barge from 266 to 416 48' equivalent truckload units.
Trailer Bridge increased its vessel capacity again in 1998 when it
took delivery of four 403' long container carrying barges designed specifically
for the Company's integrated truckload marine transportation system and bearing
the Company's Triplestack Box Carrier(TM) trade name. The first Triplestack Box
Carrier(TM) was delivered to the Company in January 1998. A fifth vessel was
delivered in February, 1999. The Triplestack Box Carriers(TM) are versatile,
low-draft vessels that have a capacity of 213 53' containers, stacked three-high
on a single deck. The first three vessels have been deployed in the Company's
existing Puerto Rico freight operation and a Newark , New Jersey - Jacksonville,
Florida coastwise service. The fourth Triplestack Box Carrier was utilized to
provide a third sailing on alternate weeks between Jacksonville, Florida and San
Juan, Puerto Rico during the fourth quarter of 1998. The fifth Triplestack Box
Carrier has not yet entered service.
OPERATIONS
At December 31, 1998, Trailer Bridge operated a fleet of 148
tractors, 1,869 high-cube trailers, 2,134 53' high cube containers and 1,668 53'
chassis which transport truckload freight between the Company's Jacksonville
port facility and inland points in the U.S. The Company also provides full
truckload service between interior points within the continental U.S., primarily
to increase equipment utilization, minimize empty miles and maximize revenue
while repositioning equipment to carry Puerto Rico bound freight. The Company
maintains a centralized dispatch and customer service operation at its
Jacksonville headquarters to schedule pickup and delivery of customer freight.
The operations center features a fully integrated computerized dispatch and
customer service network. Customer service representatives solicit and accept
freight, quote freight rates and serve as the primary contact with customers.
Dispatch and customer service personnel work together to coordinate Puerto Rico
and non-Puerto Rico freight to achieve the most optimum load balance and
minimize empty miles within the Company's truckload operation.
At December 31, 1998, Trailer Bridge operated two 736' triple-deck,
roll-on/roll-off (ro/ro) ocean-going barges and four 408' Triplestack Box
Carriers. Loading of the ro/ro barges is performed with small maneuverable yard
tractors operated by stevedores hired by an outside contractor. Each ro/ro
vessel is towed at approximately 9 knots by one 7,200 horsepower diesel-powered
tug. Each Triplestack Box Carrier is towed at approximately 9 knots by one 4,000
horsepower diesel-powered tug. The tugs are time-chartered and are manned by
employees of two unaffiliated tug owners. Compared to a self-propelled vessel, a
towed barge has reduced Coast Guard manning requirements and higher fuel
efficiency. Similarly, the large number of U.S. tugs available for charter
provides the Company with a reliable source for towing services.
MARKETING AND CUSTOMERS
The Company's sales and marketing function is led by senior
management and sales professionals based in Jacksonville, San Juan and other key
strategic U.S. cities. These sales personnel aggressively market Trailer Bridge
to shippers as a customer-oriented provider of value-priced and dependable
service. The Company targets major shippers with high volume, repetitive
shipments whose freight lends itself to integrated trucking and marine service.
The Company believes that price is the primary determinant in the
freight lanes in which it is involved. Nonetheless, the Company also believes
that it provides enhanced service that results from its single company control
of the entire freight movement over land and water. This service frees the
customer from the operational complexities of coordinating the interface between
over-the-road and marine service. The Company's customer service philosophy has
generated increased demand from existing customers for additional equipment and
sailings and has led to ongoing relationships with customers such as
DaimlerChrysler, General Motors, K Mart, WalMart, Hanes/Sara Lee, Georgia
Pacific, Baxter Healthcare, General Electric and DuPont.
The Company has a diversified customer base. Typical shipments to
Puerto Rico include furniture, consumer goods, toys, new and used cars and
apparel. Typical shipments from Puerto Rico include health products,
electronics, shoes and scrap aluminum. Typical coastwise shipments include paper
products, household goods, foodstuffs and tires. Management intends to continue
the Company's efforts both to increase business with existing customers and add
new core carrier relationships.
The Company has written contracts with the majority of its
customers. These contracts generally specify service standards and rates,
eliminating the need for negotiating the rate for individual shipments. Although
a contract typically runs for a specified term of at least one year, it
generally may be terminated by either party upon 30 days' notice. The penalties
for a shipper for breach of contract are minimal.
VESSELS
At December 31, 1998, the Company operated two 736' by 104'
triple-deck roll-on/roll-off barges. Each deck has ten lanes which are accessed
from the stern of the vessel via ramp structures in Jacksonville and San Juan
that have been built specifically for the Company. Four lanes on each vessel
have been converted to carry new and used automobiles on car decks that allow
approximately 11 cars to fit in the space previously used for one 48' unit. The
trailers are secured on the vessel by attachment to pullman stands which are
engaged and disengaged with specially configured yard tractors used to pull the
trailers into position on the vessel.
At December 31, 1998 the Company operated four Triplestack Box
Carriers(TM) that are single deck barges designed to carry 53' containers. The
first of the Triplestack Box Carriers was delivered to the Company in January
1998 and the fifth and final Triplestack Box Carrier was delivered in February,
1999. These vessels utilize the same port facilities as the ro/ro barge vessels.
Wheeled vehicles known as reach-stackers carry and load the containers. These
highly maneuverable vehicles are also used by railroads to load containers on
rail cars for intermodal transportation. The reach-stackers are significantly
less expensive than the cranes typically required for loading and unloading
containers from the holds of large cargo ships and instead directly access the
deck of the vessel via simple and movable linear planks. The Company has filed
for patent protection for its unique loading and unloading method.
RAMP STRUCTURES
The loading and unloading of the Company's two 736' by 104'
triple-deck roll-on/roll-off barges is accomplished through the use of separate
ramp structures. The Company has the exclusive right to use two floating ramp
structures under the charter agreement, with an affiliate, for the two 736' by
104' triple-deck roll-on/roll-off barges.
SAN JUAN
In September 1998, Hurricane Georges struck Puerto Rico causing
extensive damage on the island. During this storm, the floating loading ramp
used by the Company was damaged. The Company contracted for the ramp to be
re-floated and repaired. The top section of the structure was partially removed.
In January 1999 the ramp was successfully re-floated. The ramp was repaired and
returned to active cargo operations for the first two decks in March, 1999. The
top section is expected to be reinstalled in early April, 1999 at which time
normal operations will resume on all three decks. The cost of re-floating the
ramp structure and its repair was insured and the Company expects to receive
reimbursement of these expenses, less a $50,000 deductible.
JACKSONVILLE
In May 1998, the Company ceased using the floating ramp structure in
Jacksonville when it was replaced by a land based ramp structure built by the
Jacksonville Port Authority. The Company retained the unused floating ramp
structure in Jacksonville, Florida to be used as an alternative and to explore
its use at other ports. In December, 1998 the Jacksonville floating ramp
structure suffered a casualty and became submerged in Jacksonville. The
Company's naval engineers and the representatives of the insurer insuring the
ramp structure determined that the structure had suffered irreparable damage.
The Company, with the consent of the owner of the ramp structure contracted for
the removal of the ramp structure as a wreck. The Company believes the cost of
such removal is covered by the Company's liability insurance. The ramp structure
was insured for insured perils of the sea. The Company intends to file a claim
under this policy for the $3.7 million insured value of the ramp structure. It
is unknown whether this claim will be accepted by the insurer in whole or part,
however, the owner of the ramp structure has agreed that any recovery under the
policy will be assigned to the Company.
REVENUE EQUIPMENT
Trailer Bridge's equipment strategy is to operate modern tractors
and trailers in order to (i) reduce fuel, maintenance and parts costs, (ii)
increase reliability, and (iii) help attract and retain drivers. At December 31,
1998, the Company had 148 tractors. These power units are conventional tractors
which, among other amenities preferred by drivers, include the pro sleeper
package. The Company's practice is to trade or replace its tractors on a
450,000-mile cycle which generally occurs during the fourth year.
The Company has designed and built units to transport automobiles on
its vessels. These units designated by the Company as Vehicle Transport
Modules(TM), or VTM's(TM), can hold up to three vehicles and provide an
efficient unit for loading and unloading. The Company built 304 of these units
and has applied for patent protection on the design of the units.
At December 31, 1998, the Company operated 1,869 dry van trailers,
1,340 of which were 48' x 102" models and 529 of which were 53' x 102" models.
At December 31, 1998 the Company operated 2,134 53' containers and 1,668
chassis. At December 31, 1998 the Company operated 304 Vehicle Transportation
Modules. The Company's current practice is to trade or replace owned trailers on
a seven-year cycle and replace leased trailers with owned trailers as leases
expire.
The Company performs preventative maintenance on equipment at its
Jacksonville operations center, with major maintenance and repairs handled by
outside contractors.
DRIVER RECRUITING AND RETENTION
The Company offers competitive compensation and full health care
benefits differentiating it from many truckload operators. Management also
promotes driver retention by assigning drivers a tractor for the life of the
unit. Drivers are assigned a single dispatcher, regardless of geographic area,
awarding dedicated routes and regional positions to support operations, while
providing more predictable home time for its drivers. The Company believes its
driver turnover of 31.0% in 1998 is well below that typically reported by other
truckload carriers despite an industry-wide driver shortage and vigorous
competition for drivers.
FUEL AVAILABILITY AND COST
The Company actively manages its fuel costs by requiring drivers to
fuel in Jacksonville at an offsite fuel facility where the Company has
established a bulk purchasing arrangement. Whenever possible in route, drivers
are required to fuel at truck stops and service centers with which the Company
has established volume purchasing arrangements. The Company offers
fuel-conservation bonuses to its drivers based on achieving miles per gallon
goals.
Although the Company pays for the marine fuel used by the large tugs
it charters, the actual fuel loading is controlled by tug crew personnel
employed by the tug owner. The fuel is purchased and loaded in Jacksonville at a
nearby fuel facility during cargo loading operations. By negotiating directly
with fuel vendors and offering volume contracts for its marine fuel needs, the
Company has obtained better prices than it would have otherwise been able to
attain.
Trailer Bridge does not engage in any fuel hedging activities.
SAFETY AND INSURANCE
Trailer Bridge emphasizes safety in all aspects of its operations.
The Company maintains its own strict standards for recruiting drivers, including
a minimum of five years of verifiable commercial driving experience, a safe
driving history and a successful physical examination, including drug and
alcohol testing. Its ongoing driver safety program includes an initial
orientation for all new drivers, 100% log monitoring and strong adherence to all
speed and weight regulations.
The Company bids annually for both marine and land insurance
policies. Major coverages include hull and protection indemnity, pollution,
excess liability, marine cargo, truckers liability, workers' compensation and
commercial property.
TECHNOLOGY
The Company utilizes an IBM AS-400 computer system to handle its
accounting and operations requirements. The computer system links Company
headquarters, the truck operations center, the San Juan office and the marine
terminals in Jacksonville, San Juan and Newark. The system enhances the
Company's operating efficiency by providing cost effective access to detailed
information concerning available equipment, loads, shipment status and specific
customer requirements, and permits the Company to respond promptly and
accurately to customer requests.
The Company's electronic data interchange ("EDI") capability allows
customers to tender loads, receive load confirmation, check load status and
receive billing information via computer. The Company's EDI system also is
designed to accelerate receivables collection. The Company's largest customers
require EDI service from their core carriers. Management believes that advanced
technology will be required by an increasing number of large shippers as they
reduce the number of carriers they use in favor of core carriers. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Year 2000".
COMPETITION
The Company currently competes with four carriers for freight moving
between the U.S. and Puerto Rico where its market share at December 31, 1998 was
approximately 10%. The current operators in the Puerto Rico trade are Navieras
de Puerto Rico ("NPR"), Sea-Land Service, Inc., Crowley American Transport, Sea
Star Line and Trailer Bridge. Based on available industry data for 1998, NPR,
has approximately 33% of the market and operates four container vessels
configured to carry primarily 40' marine containers. Sea-Land Service, Inc., a
subsidiary of CSX Corporation, has approximately 24% of the market and operates
five container vessels that also carry mainly 40' containers. Crowley American
Transport, a subsidiary of privately held Crowley Maritime Corp., has
approximately 27% of the market and operates eleven roll-on/roll-off barges in
various services between the U.S. and Puerto Rico. Although Crowley now uses
some 48' and 53' trailers, its main equipment size is 45' trailers. Sea Star
Line has approximately 6% of the market with one combination ro/ro container
vessel and two container barges that primarily carry 40' marine containers.
Puerto Rico shippers select carriers based primarily upon price. To
a lesser extent, criteria such as frequency, transit time, consistency, billing
accuracy and claims experience are considered. The Company faces vigorous price
competition from competitors in the Puerto Rico market, two of which are part of
larger transportation organizations that possess greater financial resources
than the Company. While the Company believes it is the lowest cost per unit
operator in the Puerto Rico traffic lane, it does not always offer the lowest
effective price as certain operators at times engage in a practice of freight
rate discounting.
The Company's coastwise service competes primarily with large
railroads that move intermodal freight and, to a lesser extent, trucking
companies. Intermodal freight service competes primarily on the basis of price.
Although trucking companies serving the same routes as the Company's coastwise
service typically target a customer base that requires faster delivery times,
such trucking companies also compete primarily on the basis of price. Many of
the Company's competitors are significantly larger and possess substantially
greater financial resources than the Company. The Company competes by offering
customers value-based pricing derived from its lower linehaul cost per unit. The
Company targets customers with less time sensitive-freight whose priority is
reducing freight costs rather than obtaining the shortest possible transit
times.
The truckload segment of the trucking industry is highly competitive
and fragmented, and no carrier or group of carriers dominates the market. The
Company's non-Puerto Rico domestic truckload operations, which are used
primarily to balance its core Puerto Rico service, compete with a number of
trucking companies as well as private truck fleets used by shippers to transport
their own products. Truckload carriers compete primarily on the basis of price.
The Company's truck freight service also competes to a limited extent with rail
and rail-truck intermodal service, but the Company attempts to limit this
competition by seeking more time and service-sensitive freight. There are other
trucking companies, including diversified carriers with larger fleets and
possessing substantially greater financial resources than the Company.
REGULATION
As a common and contract motor carrier, the Company is regulated by
the Surface Transportation Board (the successor federal agency to the Interstate
Commerce Commission) and various state agencies. The Company's drivers,
including owner-operators, also must comply with the safety and fitness
regulations promulgated by the Department of Transportation, including those
relating to drug testing and hours of service.
The Company's operations are subject to various federal, state and
local environmental laws and regulations, implemented principally by the
Environmental Protection Agency and similar state regulatory agencies. These
regulations govern the management of hazardous wastes, discharge of pollutants
into the air, surface and underground waters, and the disposal of certain
substances. Management is not aware of any water or land fuel spills or
hazardous substance contamination on its properties and believes that its
operations are in material compliance with current environmental laws and
regulations.
The Company's marine operations are conducted in the U.S. domestic
trade. A set of federal laws known as the Jones Act requires that only U.S.
built, owned and crewed vessels move freight between ports in the U.S.,
including the noncontiguous areas of Puerto Rico, Alaska, Hawaii and Guam. These
marine operations are subject to regulation by various federal agencies,
including the Surface Transportation Board, the U.S. Maritime Administration and
the U.S. Coast Guard. These regulatory authorities have broad powers governing
activities such as operational safety, tariff filings of freight rates, certain
mergers, contraband, environmental contamination and financial reporting.
Management believes that its operations are in material compliance with current
marine laws and regulations, but there can be no assurance that current
regulatory requirements will not change.
The Maritime Security Act of 1996 implemented the Maritime Security
Program (the "MSP") under which vessel operators can receive subsidy payments
from the United States government relating to their operation of vessels in
foreign service. Payments under the MSP are not made in relation to service
between the mainland of the United States and Puerto Rico. As a condition of
participation in the MSP, recipients of subsidy must agree to limit their
service in the noncontiguous domestic trades, including Puerto Rico, to
historical levels. The Company does not receive payments under the MSP and is
not under any restriction. Two of the Company's competitors in the Puerto Rico
trade received MSP payments in 1998 and were constrained in increasing their
service between the mainland United States and Puerto Rico.
EMPLOYEES
At December 31, 1998, Trailer Bridge had 274 employees, 137 of whom
were drivers.
Item 2. Properties
Trailer Bridge is headquartered in Jacksonville, Florida, where it
owns a 16,000 square foot office building adjacent to its truck operations
center. This facility allows 75 Jacksonville personnel to be centralized in one
location. The office building has also been designed so that additions can be
constructed to serve the Company's future needs. The truck operations center
property consists of 17.8 acres near Interstate 95, approximately 2 miles from
the Company's marine terminal on Blount Island. In addition to the office
building, the property includes a 11,400 square foot tractor maintenance shop
where oil changes and light preventative maintenance are performed, a trailer
washing facility, a drivers lounge and parking space for tractors and trailers.
The Company maintains small sales office facilities in Georgia,
North Carolina, Illinois, Ohio and New Jersey which are utilized by sales
personnel. The Company also rents a 2,600 square foot office in San Juan where
11 Puerto Rico administrative and sales personnel are based.
PORT FACILITIES
The Company utilizes port facilities in Jacksonville, San Juan and
Port Newark, New Jersey where its vessels are loaded and freight is stored
awaiting further movement by either vessel or truck. Trailer Bridge's terminal
in Jacksonville is located on Blount Island and consists of a berthing area and
17 acres leased from the Jacksonville Port Authority. The lease, which expires
in 2002, allows the Company to use the berthing area on a preferential, although
non-exclusive, basis and the land area on an exclusive basis. The Company pays
the Jacksonville Port Authority a monthly rental payment plus a wharfage payment
based upon total cargo volume. The Company's marine terminal in San Juan
consists of berthing areas and 31 acres that the Company utilizes on a
preferential basis under a stevedoring services agreement with the contractor
who provides cargo handling services. This agreement, which expires in 2006,
calls for the Company to make fixed payments as well as payments based upon
total cargo volume and the prevailing wharfage rates of the Puerto Rico Ports
Authority. The Company's marine operations in Newark, New Jersey consist of five
acres utilized pursuant to a service agreement with a third party.
Item 3. Legal Proceedings
The Company from time to time is a party to litigation arising in
the ordinary course of its business, substantially all of which involves claims
for personal injury and property damage incurred in the transportation of
freight. The Company presently is not a party to any legal proceeding other than
litigation arising from vehicle accidents or cargo damage, and management is not
aware of any claims or threatened claims that reasonably would be expected to
exceed insurance limits or have a material adverse effect upon the Company's
operations or financial position. The Company is subject to numerous taxing
jurisdictions. The Company is presently contesting a tax assessed by the
jurisdiction of Guaynabo, Puerto Rico arising out of the Company's operations in
that jurisdiction. The Company believes that it will be successful in reducing
the amount of the tax claimed by the jurisdiction and that such tax will not
have a material adverse effect upon the Company's operations or financial
condition.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's security
holders during the fourth quarter of 1998.
PART II
Item 5. Market For Registrant's Common Equity and Related
Stockholder Matters
The Company's Common Stock began trading on the Nasdaq National
Market tier of The Nasdaq Stock Market on July 29, 1997 under the symbol: TRBR.
The following table represents the high and low sales price since
its initial trading date.
1997 High Low
---- ---- ---
Third Quarter (from July 29) 14 10 1/4
Fourth Quarter 13 3/4 8 3/8
1998
----
First Quarter 10 7/8 6 3/4
Second Quarter 10 3/8 3 1/2
Third Quarter 5 1/8 1 25/32
Fourth Quarter 2 7/8 1 1/2
The Company has never paid cash dividends on its Common Stock and
does not anticipate doing so in the foreseeable future. Certain of the Company's
loan documents prevent the payment of cash dividends under certain
circumstances.
As of March 19, 1999 there were 39 stockholders of record in
addition to approximately 1,500 stockholders whose shares were held in nominee
name.
Item 6. Selected Financial Data
The selected financial data set forth below has been derived from
the financial statements of the Company. The selected financial information set
forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Financial
Statements and notes thereto appearing elsewhere in this report.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues............. $ 72,192 $ 62,531 $ 63,148 $ 66,389 $ 77,241
Operating income(loss)......... $ 6,175 $ 8,778 $ 44,425 ($ 1,816) ($ 3,046)
Net income (loss)
(pro forma for
1994 to 1997)(1)............... $ 2,343 $ 4,360 $ 2,073 ($ 2,416) ($ 2,516)
Net income (loss)
(pro forma for 1994 to 1997)
per common share .............. $ .30 $ .65 $ .31 ($ .30) ($ .26)
BALANCE SHEET DATA:
Working capital
(deficit)...................... ($ 10,188) ($ 4,697) ($ 1,719) $ 13,980 $ 3,963
Total assets................... $ 23,521 $ 20,226 $ 24,764 $ 76,894 $ 89,229
Long-term debt,
capitalized leases and
due to affiliate(2)............ $ 20,776 $ 13,461 $ 13,879 $ 37,335 $ 44,056
Stockholders' equity
(deficit)...................... ($ 2,856) $ 2,673 $ 6,045 $ 33,860 $ 31,344
</TABLE>
- - ------------------------------
(1) Until the Company's initial public offering the Company operated
as an S Corporation under the Internal Revenue Code and the laws of the states
that recognize S Corporation status. As a result, the Company's taxable earnings
were taxed directly to the Company's then-existing stockholders. Pro forma net
income assumes that the Company was subject to federal and state income taxes
and was taxed as a C Corporation at the effective tax rates that would have
applied for all periods. See Notes to the Financial Statements. Effective July
29, 1997, the Company became subject to federal and state income taxes.
(2) Includes current maturities.
Item 7. Management's Discussion And Analysis Of Financial Condition
And Results Of Operations
RESULTS OF OPERATIONS
Year ended December 31, 1998 Compared to Year ended December 31,
1997
Operating revenues increased $10.8 million, or 16.3%, to $77.2
million during 1998 from $66.4 million during 1997. This increase was due to a
$11.8 million or 19.4% increase in total Puerto Rico revenue to $72.8 million
through the utilization of additional capacity in the Puerto Rico market, offset
by a $1.0 million or 18.5% decrease in non-Puerto Rico revenue. Core trailer
volume to Puerto Rico increased 38.8% in 1998 compared to 1997, and total car
and other volume increased 20.6% compared to 1997. As a result, core trailer
revenue to Puerto Rico increased $9.5 million or 27.6% and car and other revenue
increased $1.5 million or 10.6% compared to 1997. Revenue from shipper owned or
leased equipment moving to Puerto Rico increased $796,187 or 19.3% from 1997.
Revenue from northbound shipments from Puerto Rico increased $65,591 or .8% from
1997.
While trailer volume to and from Puerto Rico increased 30.0% in
1998, related revenue increased only $11.8 million or 19.4% compared to 1997
implying, an overall yield reduction of 8.1%. Vessel capacity deployed on the
core continental U.S. to Puerto Rico traffic lane increased 47.3% during 1998
compared to 1997. Vessel capacity utilization on the core continental U.S. to
Puerto Rico traffic lane was 75.1% during 1998, compared to 84.1% during 1997.
In September 1998, Hurricane Georges struck Puerto Rico causing
extensive damage on the island. During this storm, the Company's floating
loading ramp was damaged. The Company contracted for the ramp to be re-floated
and repaired. The top section of the structure was partially removed. In January
1999 the ramp was successfully re-floated. The ramp was repaired and returned to
active cargo operations for the first two decks in March, 1999. The top section
is expected to be reinstalled in late March or early April, 1999 at which time
normal operations will resume on all three decks. The cost of re-floating the
ramp structure and its repair was insured and the Company expects to receive
reimbursement of these expenses, less a $50,000 deductible.
The owner of the San Juan ramp structure waived $600,000 in charter
hire payments in the third quarter of 1998 to partially offset the expected
additional costs incurred by the company due to the unavailability of the San
Juan ramp structure.
The Company reported an operating loss of $3.0 million for 1998
compared to operating income, excluding the nonrecurring, non-cash charge for
compensation, of $6.7 million for 1997. The Company recorded a nonrecurring,
non-cash charge for compensation and a credit to paid-in capital of $8.5 million
during 1997. This charge represented the difference between the exercise price
of the option and the initial public offering price of $10.00 per share.
Operating income was negatively impacted by $3.4 million of
additional costs related to the disruption caused by the loss of use of the San
Juan ramp structure resulting from Hurricane Georges. The $3.4 million of
estimated additional costs included $1,622,613 in additional operating and
maintenance costs (comprised primarily of stevedoring and port related items),
$1,450,427 in additional rent and purchased transportation expense (comprised
primarily of terminal equipment rental, trucking expense in San Juan and the
U.S. and revenue equipment rental), $117,954 in salaries and wages, $102,374 in
insurance and claims and $67,715 in communications and other operating expenses.
The inability to utilize the San Juan ramp structure necessitated
alternative methods of discharging and re-loading the two ro/ro vessels. Instead
of typical cargo operations of between 14 and 16 hours at the Company's San Juan
terminal, the two ro/ro vessels utilized other terminals where total cargo
operations required between 48 and 50 hours. While the ramp was out of service,
the middle deck of the ro/ro vessels remained inaccessible to trailers and could
be used only for vehicles, which resulted in sub-optimum utilization of
one-third of vessel space.
The additional time required to service the ro/ro vessels in San
Juan resulted in schedule tightness that required most cargo operations to be
performed during weekends where higher overtime rates applied. This schedule
tightness and the resultant uncertainty affected costs in addition to those
directly related to San Juan cargo operations, including trucking costs on the
mainland. The Company's goal during this period of disruption, which lasted
longer than expected, was to continue to provide a high level of service to
customers despite certain adverse cost consequences. The Triplestack Box
Carriers(TM) do not utilize the floating ramp structure and were not adversely
affected by Hurricane Georges.
Operating expenses for 1998 increased $20.6 million or 34.5% from
1997 exclusive of the charge for compensation in 1997 discussed above. This
increase was due to an increase in expenses associated with an overall 30.0%
increase in Puerto Rico volume, and the $3.4 million in additional costs related
to the inefficiency of servicing the ro/ro vessels while the San Juan ramp
structure was out of service and the impact of the commencement of the new
coastwise service. As a result, the Company's operating ratio increased to
103.9% during 1998 from 89.9% during 1997 exclusive of the charge for
compensation in 1997.
Interest expense (net) increased $487,138 or 88.8% to $1.1 million
in 1998 from $548,631 in 1997 due to increased average long-term debt
outstanding, increased amounts outstanding under the Company's revolving line of
credit and less interest income earned on short-term investments.
As a result of the factors described above including the charge for
compensation in 1997 and after application of income taxes, the Company reported
a net loss of $2.5 million for 1998 compared to pro forma net loss of $2.4
million in 1997.
Year ended December 31, 1997 Compared to Year ended December 31,
1996
Operating revenues increased $3.2 million, or 5.1%, to $66.4 million
during 1997 from $63.1 million during 1996. This increase was due to a $5.0
million (8.9%) increase in Puerto Rico revenue to $61.3 million through the
utilization of a portion of the additional capacity resulting from the mid-body
project, offset by a 25.8% decrease in non-Puerto Rico revenue as available
tractor capacity was targeted further towards Puerto Rico revenue. While core
trailer volume to Puerto Rico increased 27.3% in 1997 compared to 1996, total
car volume was down 8.8% compared to 1996. As a result, core trailer revenue to
Puerto Rico increased $6.4 million or 22.8% and car revenue decreased $1.7
million or 9.5% compared to 1996. This reduction in car volume was most
pronounced in used car shipments during the second half of the year as sales of
used cars in Puerto Rico were soft due to several factors, including attractive
new car and repossessed car pricing. Presently, approximately two-thirds of
Trailer Bridge's car volume is represented by new cars. Revenue from shipper
owned equipment and other vehicles increased $.8 million or 13.7% in 1997
compared to 1996. While trailer volume from Puerto Rico increased 3.0% in 1997,
related revenue decreased $.4 million or 4.6% compared to 1996 due to rate
pressure on the limited volumes moving inbound from Puerto Rico. Vessel capacity
utilization on the core continental U.S. to Puerto Rico traffic lane was 84.1%
during 1997, compared to 87.9% during 1996 when a smaller substitute vessel was
utilized.
In connection with the grant of an option by the Company's principal
stockholder to its Chairman and CEO, the Company recorded a nonrecurring,
non-cash charge for compensation and a credit to paid-in capital of $8.5 million
during 1997. This charge represented the difference between the exercise price
of the option and the initial public offering price of $10.00 per share. The
option does not involve the issuance of additional shares of Common Stock by the
Company and therefore, any subsequent purchase of shares under the option will
not have a dilutive effect on the Company's book value or earnings per share
amounts. As a result of this option, the Company sustained a pro forma net loss
of $2.4 million or $.30 per share, for 1997.
Excluding the charge for compensation discussed above, operating
expenses for 1997 increased $1.0 million from 1996. This increase was due to an
increase in expenses associated with an overall 17.3% increase in Puerto Rico
volume, offset by a decrease in handling costs from 1996 related to the
complexity and inefficiency of loading substitute vessels during the mid-body
expansion project. As a result, excluding the charge for compensation the
Company's operating ratio improved to 89.9% during 1997 from 93.0% during 1996.
Interest expense (net) decreased $532,444 (49.3%) to $548,631 in
1997 from $1.1 million in 1996 due to reductions in amounts owed to an
affiliate, the capitalization of interest related to new vessel construction and
increased interest income resulting from the unused proceeds of the Company's
initial public offering.
As a result of the factors described above including the charge for
compensation and after application of pro forma income taxes, the Company
reported a pro forma net loss of $2.4 million for 1997 compared to pro forma net
income of $2.1 million in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used by operations was $40,447 in 1998 compared to net cash
provided by operations of $10.0 million in 1997. This represented a decrease of
$10.0 million from 1997. Net cash used in investing activities of $15.3 million
in 1998 reflects $36.2 million of capital expenditures, which were primarily
attributable to payments for the construction of the three of the Company's new
Triplestack Box Carriers and the purchase of containers and chassis. These
payments were partially offset by a decrease of restricted cash and investments
of approximately $19.7 million representing the proceeds of the Company's Title
XI bond issuances which were used to fund the construction of the Company's
three new Triplestack Box Carriers discussed above and by the sale of tractors
and trailers of $1.1 million.
At December 31, 1998 cash amounted to $5.6 million, working capital
was $4.0 million, and stockholders' equity amounted to $31.3 million. Management
believes that available borrowings under lines of credit, equipment financings
and cash flow generated from operations will allow the Company to meet its
working capital requirements, anticipated capital expenditures and other obli-
gations at least through calendar 1999.
YEAR 2000
The Year 2000 issue derives from computer programs being written
using two digits rather than four to determine the applicable year. The Company
recognizes that the approach of the Year 2000 brings a unique challenge to the
ability of computer systems to recognize the date change from December 31, 1999,
to January 1, 2000. As a result, the arrival of the Year 2000 could result in
system failures or miscalculations, causing disruption of operations, including,
among other things, a temporary inability to process transactions or to conduct
other normal business activity. Management of the Company concluded that Year
2000 would impact its internal information technology ("IT") and non-information
technology ("Non-IT") systems. In addition, the Company believes that the Year
2000 will impact its supplier chain environment and electronic data-interchange
environment. The Company has designated a group of personnel to manage the
conversion process for its own internal systems, including purchased software,
and to monitor the conversion process for supplier chain environment systems and
effects, as well as for the Company's data-interchange environment. A discussion
of the status of each of these areas follows:
INTERNAL IT AND NON-IT SYSTEMS
Year 2000 conversions within the Company's mainframe environment
have been completed. Mainframe environment conversions included the Company's
hardware and operating systems, its customized applications, and its purchased
software. The Year 2000 conversion for customized applications is Year 2000
operational at the present time. The Company elected to retain certain purchased
software systems and replace certain other purchased software systems.
Installation of Year 2000 compliant versions of retained and purchased software
systems have been completed. The carrying value of software systems to be
replaced for Year 2000 compliance is nominal. Year 2000 conversions of the
Company's desk-top environment, which includes network hardware and operating
systems software, as well as the networked PC hardware operating systems and
applications inventory, were completed in 1998. The Company has completed Year
2000 conversions of its electronic data-interchange software.
EXTERNAL IT AND NON-IT SYSTEMS
The Company is in the process of obtaining an inventory of critical
exposure arising from the Company's suppliers. The Company's list of suppliers
includes financial institutions, telecommunications providers, utility companies
and insurance providers, as well as basic suppliers critical to the operations
of the Company. The Company has sent and is continuing to send questionnaires to
suppliers considered to be significant to operations to determine their status
with respect to Year 2000 issues. The Company continually updates its list of
critical exposures. The Company has completed an inventory of Year 2000 exposure
with respect to data communication business partners. The Company does not have
any single customer that would be material to the Company as a whole. However,
the Company has some customers which, in the aggregate, are significant to the
Company's operations and financial results. The Company is in the process of
surveying significant customers' readiness for Year 2000. The information
provided by significant customers with respect to their Year 2000 readiness will
be considered in the development of the Company's contingency plan.
YEAR 2000 COSTS
The Company is using existing and contract personnel to perform Year
2000 conversions and evaluations of third-party systems. Since the beginning of
the process, the Company estimates its expenditures at approximately $50,000,
including labor costs and costs that relate to equipment and software purchases.
Year 2000 costs have been absorbed in the Company's normal operating expenses
which are funded with the Company's internally generated funds or its revolving
credit facility. The Company's cash flows have not been adversely impacted to a
material degree by Year 2000 costs. It is management's conclusion that there
have been no significant projects deferred as a result of Year 2000 efforts. The
Company does not expect to incur additional expenditures for Year 2000
conversion costs.
CONTINGENCY PLANNING
The Company is in the process of developing an assessment of its
most reasonably likely worst case Year 2000 scenario and its Year 2000
contingency plan. The responses the Company receives from suppliers regarding
their Year 2000 readiness will play a critical role in these determinations. The
Company currently plans to have made an assessment of its most reasonably likely
worst case Year 2000 scenario by April 1, 1999. This and other relevant
information will be utilized to develop the Company's contingency plan. It is
presently expected that the contingency plan will be developed by June 30, 1999.
Like virtually all other public and private companies, the Company's day-to-day
business is dependent on telecommunications services, banking services and
utility services provided by a large number of entities. At this time, the
Company is not aware of any of these entities or of any significant suppliers or
customers that has disclosed that it will not be Year 2000 compliant by January
1, 2000. However, many of these entities are, like the Company, still engaged in
the process of attempting to become Year 2000 compliant. The Company plans to
attempt to obtain written assurance of Year 2000 compliance from all entities
which management considers critical to operations of the Company. However, it is
likely that some critical suppliers or customers will not give written assurance
as to Year 2000 compliance because of concerns as to legal liability. Even where
written assurance is provided by critical suppliers or customers and a
contingency plan is developed by the Company to deal with possible
non-compliance by other critical suppliers or customers, the Year 2000
conversion process will continue to create risk to the Company which is outside
the control of the Company. There can be no assurance that a major Year 2000
disruption will not occur in a critical supplier or customer which would have a
material impact on the Company.
INFLATION
Inflation has had a minimal effect upon the Company's profitability
in recent years. Most of the Company's operating expenses are
inflation-sensitive, with inflation generally producing increased costs of
operation. The Company expects that inflation will affect its costs no more than
it affects those of other truckload and marine carriers.
SEASONALITY
The Company's marine operations are subject to the seasonality of
the Puerto Rico freight market where shipments are generally reduced during the
first calendar quarter and increased during the fourth calendar quarter of each
year in anticipation of Christmas. This seasonality is expected to have a
greater impact with the Company's additional capacity.
<PAGE>
The following table sets forth certain unaudited financial
information for the Company for each of the last eight quarters (in thousands
except per share amounts):
<TABLE>
<CAPTION>
1997 1998
---- ----
By Quarter
First Second Third Fourth First Second Third Fourth
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues............ $16,446 $16,171 $16,676 $17,096 $16,347 $18,408 $18,852 $23,633
Operating income (loss)....... 1,748 (6,733) 1,517 1,653 286 411 (398) (3,345)
Pro forma net income (loss)(1) 909 (5,254) 2,446 1,103 69 149 (436) (2,299)
</TABLE>
(1) See Note 2 to the Financial Statements.
This 10-K contains statements which constitute forward looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. The matters discussed in this Report include statements regarding the
intent, belief or current expectations of the Company, its directors or its
officers with respect to the future operating performance of the Company.
Investors are cautioned that any such forward looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those in the forward looking
statements as a result of various factors. Without limitation, these risks and
uncertainties include the risks of economic recessions, changes in demand for
transportation services offered by the Company, and changes in rate levels for
transportation services offered by the Company.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk from changes in interest
rates. For certain debt instruments, a change in interest rates effects the
amount of interest expense incurred. The debt instruments subject to changes in
interest rates are the $8,550,000 revolving line of credit with a weighted
average interest rate of 6.49% and $2,598,911 of notes payable with a weighted
average interest rate of 9.17% with maturity dates ranging from May 29, 2001 to
October 29, 2001.
Item 8. Financial Statements and Supplementary Data
TRAILER BRIDGE, INC.
Financial Statements for the Three Years
in the Period Ended December 31, 1998
and Independent Auditors' Report
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Trailer Bridge, Inc.
Jacksonville, Florida
We have audited the accompanying balance sheets of Trailer Bridge, Inc. (the
"Company") as of December 31, 1998 and 1997, and the related statements of
operations, changes in stockholders' equity, and cash flows for the three years
in the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the 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, such financial statements present fairly, in all material
respects, the financial position of Trailer Bridge, Inc. as of December 31, 1998
and 1997, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
Deloitte & Touche, LLP
Jacksonville, Florida
March 31, 1999
<PAGE>
TRAILER BRIDGE, INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,561,996 $ 14,277,445
Trade receivables, less allowance for doubtful
accounts of $1,093,403 and $1,165,874 13,491,451 7,747,600
Other receivables 1,376,576 141,339
Due from affiliate 552,134
Prepaid expenses 840,887 764,975
------------ ------------
Total current assets 21,823,044 22,931,359
------------ ------------
PROPERTY AND EQUIPMENT, net 62,054,638 30,282,611
GOODWILL, less accumulated amortization of
$311,322 and $264,543 857,620 904,399
RESTRICTED CASH AND INVESTMENTS 1,190,918 20,909,904
OTHER ASSETS 3,302,869 1,866,184
------------ ------------
TOTAL ASSETS $ 89,229,089 $ 76,894,457
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 7,341,141 $ 2,137,251
Other accrued liabilities 6,017,108 3,398,858
Current portion of notes payable 3,988,067 3,156,142
Current portion of capital lease obligations 42,945 35,908
Unearned revenue 470,684 163,084
Due to affiliate 60,300
------------ ------------
Total current liabilities 17,859,945 8,951,543
NOTES PAYABLE, less current portion 31,399,115 33,960,518
REVOLVING LINE OF CREDIT 8,550,000
CAPITAL LEASE OBLIGATIONS, less current portion 76,102 122,439
------------ ------------
TOTAL LIABILITIES 57,885,162 43,034,500
------------ ------------
COMMITMENTS (Notes 4, 7 and 12)
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 1,000,000 shares
authorized; no shares issued or outstanding
Common stock, $.01 par value, 20,000,000 authorized
shares; 9,777,500 shares outstanding 97,775 97,775
Additional paid-in capital 37,982,818 37,982,818
Accumulated deficit (6,736,666) (4,220,636)
------------ ------------
Total stockholders' equity 31,343,927 33,859,957
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 89,229,089 $ 76,894,457
============ ============
</TABLE>
See notes to financial statements.
<PAGE>
TRAILER BRIDGE, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
OPERATING REVENUES $ 77,240,644 $ 66,388,577 $ 63,148,218
OPERATING EXPENSES:
Salaries, wages, and benefits 16,284,073 14,722,568 13,288,633
Compensation expense recognized
for stock option 8,528,670
Rent and purchase transportation:
Related party 6,736,500 7,500,000 5,900,000
Other 20,305,185 10,019,705 10,331,461
Fuel 5,701,701 5,617,199 5,883,378
Operating and maintenance (exclusive of
depreciation shown separately below) 19,849,857 12,869,034 14,210,787
Taxes and licenses 558,866 452,275 455,407
Insurance and claims 2,014,729 1,900,334 2,121,039
Communications and utilities 825,309 587,655 607,833
Depreciation and amortization 3,574,132 2,597,887 2,944,069
Other operating expenses 4,435,941 3,409,127 2,981,104
----------- ----------- -----------
80,286,293 68,204,454 58,723,711
----------- ----------- -----------
OPERATING (LOSS) INCOME (3,045,649) (1,815,877) 4,424,507
NONOPERATING INCOME (EXPENSE):
Interest expense, net:
Related party (278,641) (457,743)
Other (1,035,769) (269,990) (623,332)
Gain (loss) on sale of equipment, net 207,255 (80,851) 66,523
----------- ----------- -----------
(828,514) (629,482) (1,014,552)
----------- ----------- -----------
(LOSS) INCOME BEFORE PROVISION AND PRO FORMA
PROVISION FOR INCOME TAXES (3,874,163) (2,445,359) 3,409,955
BENEFIT (PROVISION) FOR INCOME TAXES 1,358,133 426,566 (38,581)
---------- -------- --------
NET (LOSS) INCOME BEFORE PRO FORMA PROVISION
FOR INCOME TAXES (2,516,030) (2,018,793) 3,371,374
PRO FORMA PROVISION FOR INCOME TAXES (NOTE 2) (397,329) (1,298,442)
----------- ----------- -----------
PRO FORMA NET (LOSS) INCOME (NOTE 2) $ (2,516,030) $ (2,416,122) $ 2,072,932
============ =========== ===========
PRO FORMA NET (LOSS) INCOME
PER COMMON SHARE
Basic $ (0.26) $ (0.30) $ 0.31
=========== =========== ===========
Diluted $ (0.26) $ (0.30) $ 0.31
=========== =========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
TRAILER BRIDGE, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Retained
Common Stock Additional Earnings
---------------------------- Paid-in (Accumulated
Share Amounts Capital Deficit) Total
-------------- ------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 6,672,500 $ 66,725 $ (66,300) $ 2,672,745 $ 2,673,170
Net income 3,371,374 3,371,374
--------- ------- ----------- ------------ -----------
BALANCE, DECEMBER 31, 1996 6,672,500 66,725 (66,300) 6,044,119 6,044,544
Compensation expense recognized
for stock options 8,528,670 8,528,670
Distributions to stockholders 1,060,212 (8,245,962) (7,185,750)
Net proceeds from initial public
offering of common stock 3,105,000 31,050 28,460,236 28,491,286
Net loss (2,018,793) (2,018,793)
--------- ------- ----------- ------------ -----------
BALANCE, DECEMBER 31, 1997 9,777,500 97,775 37,982,818 (4,220,636) 33,859,957
Net loss (2,516,030) (2,516,030)
--------- ------- ----------- ------------ -----------
BALANCE, DECEMBER 31, 1998 9,777,500 $ 97,775 $ 37,982,818 $ (6,736,666) $ 31,343,927
========= ======= =========== ============ ===========
</TABLE>
See notes to financial statements.
<PAGE>
TRAILER BRIDGE, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income $ (2,516,030) $ (2,018,793) $ 3,371,374
Adjustments to reconcile net (loss) income
to net cash provided by operating activities:
Depreciation and amortization 3,574,132 2,597,887 2,944,069
Provision for uncollectible accounts 1,040,721 381,691 673,699
(Gain) loss on sale of equipment (207,255) 80,851 (66,523)
Compensation expense recognized for stock option 8,528,670
Deferred income taxes (1,332,642) (652,876)
Change in assets and liabilities:
(Increase) decrease in:
Trade receivables (6,784,572) 176,581 (70,153)
Other receivables (1,235,237) (141,339)
Due from affiliate (612,434)
Prepaid expenses (75,912) 199,996 (353,742)
Other assets 59,936 67,014 (13,217)
Increase (decrease) in:
Accounts payable 5,203,890 155,830 659,377
Accrued liabilities 2,618,250 763,759 145,544
Unearned revenue 307,600 (60,543) (55,271)
------------ ------------- -----------
Net cash provided by operating activities 40,447 10,078,728 7,235,157
------------ ------------- -----------
INVESTING ACTIVITIES:
Due to affiliate (4,592,892) (3,171,944)
Purchases and construction of property and equipment (36,172,044) (20,434,204) (6,707,075)
Proceeds from the sale of equipment 1,126,390 31,764 426,462
Decrease (increase) in restricted cash and investments 19,718,986 (20,909,904)
------------ ------------- -----------
Net cash used in investing activities (15,326,668) (45,905,236) (9,452,557)
------------ ------------- -----------
FINANCING ACTIVITIES:
Proceeds from borrowings on notes payables 1,746,591 31,740,797 6,637,569
Proceeds from borrowings on revolving line of credit 8,550,000
Proceeds from sale of common stock 28,491,286
Payments on notes payable (3,476,069) (3,650,278) (3,125,722)
Payments of dividends (7,185,750)
Debt issue costs (210,450) (909,729)
Payments on capital lease obligations (39,300) (41,294) (133,854)
------------ ------------- -----------
Net cash provided by financing activities 6,570,772 48,445,032 3,377,993
------------ ------------- -----------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (8,715,449) 12,618,524 1,160,593
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 14,277,445 1,658,921 498,328
------------ ------------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 5,561,996 $ 14,277,445 $ 1,658,921
============ =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION AND NONCASH
INVESTING AND FINANCING ACTIVITIES:
Cash paid for state income taxes $ 134,127 $ 46,145 $ 68,035
============ =========== ===========
Cash paid for interest, net of amount capitalized:
Related party $ 283,653 $ 457,151
Other $ 2,249,445 419,739 652,554
------------ ----------- -----------
$ 2,249,445 $ 703,392 $ 1,109,705
============ =========== ===========
Book value of like kind assets exchanged $ 610,041
============ =========== ===========
Equipment acquired under capital lease agreements $ 211,060
===========
</TABLE>
See notes to financial statements.
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
- - --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Trailer Bridge, Inc. (the "Company") is a domestic trucking
and marine transportation company with contract and common carrier
authority. Highway transportation services are offered in the continental
United States, while marine transportation is offered primarily between
Newark, New Jersey, Jacksonville, Florida and San Juan, Puerto Rico.
Cash and Cash Equivalents - The Company considers cash on hand and amounts
on deposit with financial institutions with original maturities of three
months or less to be cash equivalents.
Use of 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.
Allowance for Doubtful Accounts - The Company provides an allowance for
doubtful accounts on trade receivables based upon estimated collectibility
and collection experience.
Property and Equipment - Property and equipment are stated at cost and the
capitalized interest costs associated with significant capital additions
less accumulated depreciation. Property and equipment are depreciated on a
straight-line method based on the following estimated useful lives:
Years
-----
Buildings and structures 40
Office furniture and equipment 6-10
Freight equipment 4-25
Leasehold improvements 2-5
Equipment under capital leases 5
Tires on revenue equipment purchased are capitalized as part of the
equipment cost and depreciated over the life of the vehicle. Replacement
tires are expensed when placed in service.
Leasehold improvements and equipment under capital leases are amortized
over the lesser of the estimated lives of the asset or the lease terms.
Maintenance and repairs which do not materially extend useful life and
minor replacements are charged to earnings as incurred.
The Company periodically reviews property and equipment for potential
impairment. If this review indicates that the carrying amount of these
assets may not be recoverable, the Company estimates the future cash flows
expected with regards to the asset and its eventual disposition. If the sum
of these future cash flows (undiscounted and without interest charges) is
less than the carrying amounts of the assets, the Company records an
impairment loss based on the fair value of the asset.
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (Continued)
- - --------------------------------------------------------------------------------
Goodwill - Goodwill is being amortized on a straight-line basis over
twenty-five years.
Restricted Cash and Investments - Restricted cash and investments consist
of cash and investments held in trust and committed for the construction of
the Company's Triplestack Box Carrier(TM) vessels and investments held by a
letter of credit for the continued use of a newly constructed land-based
ramp. These funds have been invested in highly liquid interest bearing
deposits, U.S. Treasury bills and money market accounts and are carried at
cost which approximates market.
Insurance - The Company is self-insured for employee medical coverage above
deductible amounts. Reinsurance is obtained to cover losses in excess of
certain limits. Provisions for losses are determined on the basis of claims
reported and an estimate of claims incurred but not reported.
Revenue Recognition - Common carrier operations revenue is recorded on the
percentage-of-completion basis and direct costs are expensed as incurred.
Income Taxes - Deferred income taxes are provided for the temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities.
The Company was organized under Subchapter S of the Internal Revenue Code
until this election was terminated effective with the Company's initial
public offering in July 1997. Under Subchapter S, the Company was not
subject to federal income taxes.
Earnings Per Share - Basic earnings per share ("EPS") is computed by
dividing earnings available to common shareholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS reflects
the potential dilution of securities that could share in the earnings.
Stock-Based Compensation - In accordance with SFAS No. 123, "Accounting for
Stock-Based Compensation," ("SFAS No. 123") the Company has elected to
continue to account for its employee stock compensation plans under APB
Opinion No. 25 with pro-forma disclosures of net earnings and earnings per
share, as if the fair value based method of accounting defined in SFAS No.
123 had been applied. Under the intrinsic value based method, compensation
cost is the excess, if any, of the quoted market price of the stock at the
grant date or other measurement date over the amount an employee must pay
to acquire the stock. Under the fair value based method, compensation cost
is measured at the grant date based on the value of the award and is
recognized over the service period, which is usually the vesting period.
Recently Adopted Accounting Standards - In June, 1997 the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130")
effective for fiscal years beginning after December 15, 1997. SFAS No. 130
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. SFAS No. 130 does not require a specific format for that
financial statement but requires that an entity display an amount
representing total comprehensive income for the period in that statement.
SFAS No. 130 requires that an entity classify items of other comprehensive
income by their nature in a financial statement. For example, other
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (Continued)
- - --------------------------------------------------------------------------------
comprehensive income may include foreign currency and unrealized gains and
losses on certain investments in debt and equity securities. In addition,
the accumulated balance of other comprehensive income must be displayed
separately from retained earnings and additional paid in capital in the
equity section of a statement of financial position. Adoption of SFAS No.
130 had no impact on the financial statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information"
("SFAS No. 131") effective for fiscal years beginning after December 15,
1997. SFAS No. 131 establishes standards for reporting information about
operating segments in annual financial statements and requires selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. Operating
segments are defined as components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in
assessing performance. SFAS No. 131 requires reporting of segment profit or
loss, certain specific revenue and expense items and segment assets. It
also requires reconciliations of total segment revenues, total segment
profit or loss, total segment assets, and other amounts disclosed for
segments to corresponding amounts reported in the financial statements.
Adoption of SFAS No. 131 did not have a material impact on the financial
statements.
In February 1998, the FASB issued SFAS No. 132, "Employer's Disclosures
about Pensions and Other Postretirement Benefits" ("SFAS No. 132"),
effective for fiscal years beginning after December 15, 1997. SFAS No. 132
revises employer disclosures about pension and other postretirement benefit
plans. It does not change the measurement or recognition of those plans.
This statement standardizes the disclosure requirements for pensions and
other postretirement benefits to the extent practicable, requires
additional information on changes in the benefit obligations and fair
values of plan assets that will facilitate financial analysis and
eliminates certain disclosures. Restatement of disclosures for earlier
periods is required. Adoption of SFAS No. 132 did not have a material
impact on the financial statements.
New Accounting Standards - In June 1998, the FASB issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No.
133"), effective for fiscal years beginning after June 15, 1999. SFAS No.
133 requires companies to record derivatives on the balance sheet as assets
and liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for depending
on the use of the derivative and whether it qualifies for hedge accounting.
The Company has determined that the implementation of this statement will
not have a material impact on the financial statements.
Reclassification - Certain prior year amounts have been reclassified to
conform to current year presentation.
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (Continued)
- - --------------------------------------------------------------------------------
2. PRO FORMA INCOME TAXES
For informational purposes, the statements of operations for years ended
December 31, 1997 and 1996 contain a pro forma adjustment for income tax
expense which would have been recorded if the Company had not been an S
Corporation and had been subject to corporate income taxes based on the tax
laws in effect during those periods.
3. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1998 and 1997 consist of the
following:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Land $ 917,885 $ 504,703
Construction in progress 6,739,792 11,673,923
Buildings and structures 2,542,581 2,377,131
Office furniture and equipment 2,396,311 1,710,120
Freight equipment 54,677,780 18,621,149
Leasehold improvements 1,355,871 672,909
Equipment under capital leases 263,105 263,105
Less accumulated depreciation and amortization (6,838,687) (5,540,429)
----------- -----------
Fixed assets, net $ 62,054,638 $ 30,282,611
=========== ===========
</TABLE>
Depreciation and amortization expense on property and equipment and
equipment under capital leases was $3,480,882, $2,551,108 and $2,897,290
in 1998, 1997 and 1996, respectively. Interest cost of $918,838 and
$296,771 was capitalized during 1998 and 1997, respectively.
4. TRANSACTIONS WITH AFFILIATED COMPANY
Due to/from Affiliate - Amounts due from affiliate include prepaid barge
charterhire lease rent and reimbursable miscellaneous repair payments made
by the Company related to assets of the affiliate. Prior year balance
represented barge charterhire lease rent due to affiliate.
Lease Agreements - The Company leases two roll-on/roll-off barge vessels
and the use of two ramps from an affiliate under operating lease
agreements. For the period from January 1, 1995 through May 10, 1996 for
one vessel and through July 19, 1996, as to the other vessel, the lease
payment was $5,000 per day for each vessel. Upon completion of the
renovations to the vessels during 1996 which extended the barges from a
length of approximately 500 feet to a length of approximately 750 feet, the
lease payments were increased to $10,500 per day for each vessel. Effective
July 23, 1997, the lease payments were adjusted to $10,050 per day for each
vessel. The leases expire at the later of September 1, 2010 or the
repayment of all obligations under an affiliate's construction loan related
to the vessel renovations. Such construction loan is scheduled to be repaid
in quarterly
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (Continued)
- - --------------------------------------------------------------------------------
installments ending June 30, 2003. The leases provide the Company the
option to extend the leases through September 1, 2018 for total payments of
$11,000 per vessel per day or, alternatively, the Company may purchase the
vessels at their then fair market values. In the third quarter of 1998, the
lease payments to affiliate were reduced by a $600,000 non-recurring
forgiveness in recognition of the impact of Hurricane Georges and in
consideration of the efforts of the Company to recover and repair the San
Juan triple-deck ramp structure utilized by the two triple-deck barges.
Total lease expense under these leases from affiliate totaled $6,736,500,
$7,500,000 and $5,900,000 in 1998, 1997 and 1996, respectively.
While the vessels were undergoing renovations, the Company leased barges
from a third party. In recognition of the $1,160,000 of additional barge
rent and $509,000 of other transitional expenses incurred in 1996, during
the renovation period, the affiliate agreed to reduce the charter rental
due from the Company by approximately $1,669,000.
5. CAPITALIZED LEASE OBLIGATIONS
Future minimum lease payments under capitalized computer equipment leases
as of December 31, 1998 are as follows:
1999 $ 51,780
2000 51,780
2001 29,999
--------
Total minimum lease payments 133,559
Interest portion (14,512)
--------
Present value of minimum lease payments 119,047
Less current portion (42,945)
--------
$ 76,102
========
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (Continued)
- - --------------------------------------------------------------------------------
6. NOTES PAYABLE
Following is a summary of long-term debt at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Ship-financing bonds and notes (Title XI) totaling $16,918,000
maturing on March 30, 2023; payable in 50 semi-annual installments
of principal and interest; interest is fixed at 6.52%; collateralized
by vessels with a carrying value of $18,942,200 at December 31, 1998;
amount is guaranteed by The United States of America under the Title XI
Federal Ship Financing Program $ 16,579,640 $ 16,918,000
Ship-financing bonds and notes (Title XI) totaling $10,515,000 maturing
on September 30, 2022; payable in 50 semi-annual installments of
principal and interest; interest is fixed at 7.07%; collateralized by
vessels with a carrying value of $12,871,133 at December 31, 1998; amount
is guaranteed by The United States of America under the Title XI
Federal Ship Financing Program 10,094,400 10,515,000
Borrowings under a $25 million revolving credit and term loan agreement
maturing April 1, 2000 and April 1, 2001; payable in monthly installments
of principal and interest; interest at fixed rates ranging from 7.38% to
8.08%; collateralized by tractors with a carrying value of $6,317,914 at
December 31, 1998 4,292,729 3,957,902
Notes payable to finance company totaling $4,957,569 maturing from June
to October 2001; payable in 60 monthly installments of principal and
interest; interest at fixed rates ranging from 8.867% to 9.290%;
collateralized by trailers with a carrying value of $3,970,661 at
December 31, 1998 2,814,648 3,764,498
Note payable to bank totaling $1,680,000 maturing October 2006; payable
in 120 monthly installments of principal and interest; interest is fixed
at 7.95%; collateralized by land and buildings and structures with a
carrying value of $2,331,504 at December 31, 1998 1,316,000 1,484,000
</TABLE>
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (Continued)
- - --------------------------------------------------------------------------------
In August 1998, the Company entered into a revolving credit and term loan
agreement that provides for borrowings of up to $25,000,000. At the
election of the Company, interest on each borrowing under the line of
credit will accrue at (a) a variable interest rate of the financial
institution's Base Rate plus the Applicable Margin then applicable to Base
Rate Loans, or (b) the Eurodollar Rate determined for such Interest Period
plus the Applicable Margin then applicable to Eurodollar Rate Loans.
Borrowings outstanding under the agreement at December 31, 1998 totaled
$12,842,729 which were comprised of $8,550,000 under the revolving credit
and $4,292,729 under the term loan portion of the agreement.
The debt agreements contain certain restrictive covenants, including
requirements to maintain tangible net worth (as defined), a debt ratio,
interest coverage and debt service coverage at certain levels.
At December 31, 1998, the Company was in non-compliance with certain
restrictive financial covenants related to the revolving credit and term
loan agreement as a result of the additional costs incurred related to the
loss of the San Juan ramp structure following Hurricane Georges. The
Company received a waiver of compliance with such covenants for the
December 31, 1998 and March 31, 1999 measurement periods. The restrictive
covenants resume with the June 30, 1999 measurement period. The Company
expects to be in compliance with the restrictive covenants for the
remainder of 1999.
Following are maturities of long-term debt for each of the next five years:
1999 $ 3,988,067
2000 4,615,952
2001 2,568,360
2002 1,265,320
2003 1,265,320
Thereafter 21,684,163
-----------
$ 35,387,182
===========
7. OPERATING LEASES
The Company has various operating lease agreements, principally for its
office facilities, terminals and equipment. Certain of the leases contain
provisions calling for additional contingent rentals based on volume of
transportation activity.
Future minimum rental payments required under operating leases that have
initial or remaining noncancellable lease terms in excess of one year as of
December 31, 1998 are as follows:
1999 $ 25,593,906
2000 24,728,006
2001 21,832,841
2002 21,298,358
2003 20,100,341
Thereafter 86,707,637
------------
Total minimum payments required $ 200,261,089
============
Lease expense for all operating leases, including leases with terms of less
than one year, was $19,027,272, $16,879,647 and $14,806,980 for 1998, 1997
and 1996.
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (Continued)
- - --------------------------------------------------------------------------------
8. OTHER ACCRUED LIABILITIES
1998 1997
---- ----
Fringe benefits $ 901,573 $ 600,674
Marine expense 3,149,861 925,731
Salaries and wages 336,510 352,362
Other 1,629,164 1,520,091
---------- ----------
$ 6,017,108 $ 3,398,858
========== ==========
9. INCOME TAXES
The components of the benefit (expense) for income taxes is comprised of
the following as of December 31, 1998 and 1997:
1998 1997
---- ----
Current:
Federal $ 22,808 $ (201,164)
State 2,683 (25,146)
---------- ---------
25,491 (226,310)
---------- ---------
Deferred:
Federal 140,278 580,334
State 1,192,364 72,542
---------- ---------
1,332,642 652,876
---------- ---------
$ 1,358,133 $ 426,566
========== =========
Income taxes for the year ended December 31, 1998 and 1997 differ from the
amount computed by applying the statutory Federal corporate rate to income
before income taxes. The differences are reconciled as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Tax benefit at statutory Federal rate $ 1,317,216 $ 831,422
Valuation allowance (900,000)
Nondeductible expenses (51,136) (68,693)
State income taxes, net of federal benefit 154,966 39,334
Pro rata income allocated to S Corporation year (428,382)
Recognition of deferred tax liability 994,060
Other (62,913) (41,175)
---------- ---------
Total income tax benefit $ 1,358,133 $ 426,566
========== =========
</TABLE>
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (Continued)
- - --------------------------------------------------------------------------------
The components of the Company's net deferred tax asset at December 31, 1998
and 1997 is as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Employee stock option $ 3,240,895 $ 3,240,895
Net operating loss 4,297,455 185,934
Accrued expense 189,475 110,360
Allowance for bad debts 415,493 443,032
---------- ----------
Gross deferred assets 8,143,318 3,980,221
Deferred tax liabilities:
Fixed asset basis 5,178,795 2,359,343
Other 79,005 68,002
---------- ----------
Gross deferred tax liabilities 5,257,800 2,427,345
Deferred tax asset valuation allowance 900,000 900,000
---------- ----------
Net deferred tax asset $ 1,985,518 $ 652,876
========== ==========
</TABLE>
Prior to July 23, 1997, the Company was organized under Subchapter S of the
Internal Revenue Code for income tax purposes and therefore, all Federal
and certain state income taxes were the responsibility of the Company's
stockholders. The Company was subject to state income taxes in those states
that do not recognize Subchapter S elections. State income tax expense for
1998, 1997 and 1996 was not significant due to the utilization of net
operating loss carryforwards.
At December 31, 1998, the Company had available net operating loss ("NOL")
carryforwards for regular federal income tax purposes of approximately
$11,309,000, of which $489,000 will expire beginning in the year 2005.
Under Internal Revenue code Section 382, the $489,000 of net operating
losses become available in equal amounts through the year 2005.
10. COMMON STOCKHOLDERS' EQUITY
Common Stock:
In July 1997, the Company completed an underwritten initial public offering
("IPO") of 3,105,000 shares of its common stock at an initial offering
price of $10.00 per share, yielding gross proceeds of $31,050,000. Net
proceeds to the Company as a result of the IPO were $28,491,286 after
deduction of underwriting, legal, accounting and other offering related
expenses totaling $2,558,714.
Also in July 1997, the Company's Board of Directors and stockholders
authorized the following which became effective in connection with the
Company's initial public offering: (i) a 15,700-for-1 stock split, (ii) an
increase in the authorized number of common shares from 2,000 to
20,000,000, (iii) a change in the par value of common stock from $1.00 to
$.01 and (iv) 1,000,000 shares of preferred stock with a par value of $.01
per share. Stockholder's equity has been restated to give retroactive
recognition to the stock split and change in par value in prior periods. In
addition, all references in the financial statements to the number of
shares and per share amounts have been restated.
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (Continued)
- - --------------------------------------------------------------------------------
Earnings Per Share:
For the years ended December 31, 1998 and 1997, outstanding options to
purchase shares of common stock at an exercise price of $10.00 per share
were not included in the computation to arrive at diluted EPS because the
options' exercise price exceeded the average market price of the common
shares.
Stock Options:
In May 1997, the majority stockholder of the Company granted to the
Company's Chairman and Chief Executive Officer, an option to purchase up to
942,000 shares of common stock (adjusted for the 15,700-for-1 stock split)
owned by him at an exercise price of $.95 per share. The option was
immediately exercisable with a term of 10 years. In connection with this
option, the Company recorded a non-recurring, non-cash charge to
compensation expense during the year ended December 31, 1997. This option
does not involve the issuance of additional shares of common stock by the
company and therefore, any purchase of shares under the option will not
have a dilutive effect on the Company's book value or earnings per share
amounts.
Compensation cost charged to operations associated with the Company's stock
option plans was $8,528,670 in 1997. Compensation cost was based on the
difference between the value of the shares of common stock vested during
the year and the exercise price of such shares.
The Company's Board of Directors and stockholders authorized the
establishment of an Incentive Stock Plan (the "Plan"). The purpose of the
Plan is to promote the interests of the Company and its shareholders by
retaining the services of outstanding key management members and employees
and encouraging them to have a greater financial investment in the Company
and increase their personal interest in its continued success. The Company
has reserved 785,000 shares of common stock for issuance pursuant to the
Incentive Stock Plan to eligible employees under the Plan.
In January 1998, the Company's Board of Directors authorized and granted an
additional 130,000 non-qualified options to executives under the Company's
Incentive Stock Plan. The exercise price is $10 per share and vest equally
over a period of five years.
In July 1997, the Company awarded non-qualified options to executives
covering an aggregate of 392,500 shares at an exercise price equal to the
initial public offering price of the common stock. The Board of Directors
also granted non-qualified options to purchase 78,500 additional shares to
other employees at an exercise price equal to the initial public offering
price. Such options become exercisable at the rate of 20% per year
beginning on the first anniversary date of the offering. Options that
expire unexercised or are forfeited become available again for issuance
under the Plan.
The Company has elected to continue to account for its employee stock
compensation plans under APB opinion No. 25 with pro forma disclosures of
net earnings and earnings per share as if the fair value based method of
accounting defined in SFAS No. 123 had been applied. Had compensation
expense for stock options been determined based upon the fair value at the
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (Continued)
- - --------------------------------------------------------------------------------
grant date, consistent with the methodology prescribed under SFAS No. 123,
the Company's net earnings and net earnings per share would have changed to
the pro forma amounts indicated below.
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
As reported
Pro forma net loss $ (2,516,030) $ (2,416,122)
Net loss per share - Basic and Diluted (0.26) (0.30)
Pro forma for SFAS No. 123
Net loss $ (2,930,148) $ (2,588,671)
Net loss per share - Basic and Diluted (0.30) (0.32)
</TABLE>
The Company used the Black-Scholes option-pricing model to determine the
fair value of grants made. There were no options granted in 1996. The
following assumptions were applied in determining the pro forma
compensation cost:
Years ended December 31 1998 1997
Risk-free interest rate 5.76% 6.16%
Expected dividend yield 0% 0%
Expected option life 7 years 7 years
Expected stock price volatility 81.93% 69.32%
A summary of the status of options under the Company's stock-based
compensation plans as of December 31, 1998 and 1997 is presented below:
<TABLE>
<CAPTION>
1998 1997
-------------------------- --------------------------
Exercise Exercise
Options Price Options Price
------- -------- ------- --------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 468,126 $ 10.00
Granted 130,000 10.00 471,000 $ 10.00
Exercised
Forfeited (76,944) 10.00 (2,874) 10.00
-------- --------
Outstanding at end of year 521,182 10.00 468,126 10.00
======== ========
Grants exercisable at year-end 93,262
Weighted-average fair value of
options granted during the year $ 7.36 $ 7.13
</TABLE>
The following table summarizes information about the outstanding grants at
December 31, 1998:
Weighted-Average
Exercise Options Remaining Options
Price Outsanding Contractual Life Exercisable
-------- ---------- ---------------- -----------
$ 10.00 521,182 8.8 93,262
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (Continued)
- - --------------------------------------------------------------------------------
Remaining non-exercisable options as of December 31, 1998 become
exercisable as follows:
1999 101,730
2000 101,730
2001 101,730
2002 101,730
2003 21,000
--------
427,920
========
11. EMPLOYEE BENEFIT PLANS
The Company has a 401(k) Plan which covers substantially all employees in
the United States. Participants are allowed to make contributions of up to
15% of their compensation not to exceed certain limits. The Company makes
matching contributions to the Plan at a rate not in excess of 3.0% of
compensation. The Company contributed approximately $214,000, $176,000 and
$166,000 to the Plan during 1998, 1997 and 1996. The Company made an
optional contribution of $0, $39,000 and $32,700 in December 1998, 1997 and
1996.
In addition, the Company has a 165(e) Plan that covers substantially all
employees in Puerto Rico. The Company made contributions of approximately
$15,000, $13,000 and $10,000 to the Plan during 1998, 1997, and 1996.
In March 1998, the Board of Directors authorized an Employee Stock Purchase
Plan which covers substantially all employees. The Plan allows employees to
invest up to 10% of their base compensation through payroll deductions. The
purchase price will be 15% less than the fair market value on the last day
of the purchase period. The Company made contributions of approximately
$6,000 to the Plan during 1998.
The Company has a Profit Sharing Plan in which they contributed
approximately $24,000, $688,000 and $430,000 to the Plan during 1998, 1997,
and 1996.
12. COMMITMENT AND CONTINGENCIES
At December 31, 1998, the Company is obligated under construction
agreements totaling approximately $530,000.
The Company is involved in litigation on a number of matters and is subject
to certain claims which arise in the normal course of business, none of
which, in the opinion of management, are expected to have a materially
adverse effect on the Company's financial statements.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to
estimate that value:
Cash and Cash Equivalents - For those short-term instruments, the carrying
amount is a reasonable estimate of fair value.
<PAGE>
TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (Concluded)
- - --------------------------------------------------------------------------------
Restricted Cash and Investments - For those interest bearing deposits and
short-term investments, the carrying amount is a reasonable estimate of
fair value.
Notes Payable - Interest rates that are currently available to the Company
for issuance of debt with similar terms and remaining maturities are used
to estimate fair value for debt instruments. The Company believes the
carrying amount is a reasonable estimate of such fair value.
14. SEGMENTS
The Company's primary business is to transport freight from its origination
point in the continental United States to San Juan, Puerto Rico and from
San Juan, Puerto Rico to its destination point in the continental United
States. The Company provides a domestic trucking system and a barge vessel
system, which work in conjunction with each other to service its customers.
The Company would not employ either system separately; therefore segment
reporting was not necessary.
15. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
March 31, June 30, September 30, December 31,
Quarter Ended 1998 1998 1998 1998
-------------------- --------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Operating revenues $ 16,347,403 $ 18,408,322 $ 18,851,977 $ 23,632,942
Operating income (loss) 286,042 410,872 (397,792) (3,344,771)(1)
Net income (loss) before
income tax 128,995 308,227 (641,217) (3,670,168)
Net income (loss) 69,156 149,098 (435,605) (2,298,679)
Net income
(loss) per share - basic 0.01 0.02 (0.04) (0.24)
</TABLE>
<TABLE>
<CAPTION>
March 31, June 30, September 30, December 31,
Quarter Ended 1997 1997 1997 1997
-------------------- --------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Operating revenues $ 16,446,066 $ 16,170,687 $ 16,676,100 $ 17,095,724
Operating income (loss) 1,747,899 (6,733,430) 1,516,502 1,653,152
Net income (loss) before
income tax 1,484,483 (6,991,319) 1,364,856 1,696,621
Pro forma net income (loss) 909,263 (5,253,990) 2,445,963 1,103,016
Pro forma net income
(loss) per share - basic 0.14 (0.79) 0.28 0.11
</TABLE>
_________________________________
(1) Operating income was negatively impacted by $3.4 million of additional
costs related to the disruption caused by the loss of use of the San Juan
ramp structure resulting from Hurricane Georges. The $3.4 million of
estimated additional costs included $1,622,613 in additional operating and
maintenance costs (comprised primarily of stevedoring and port related
items), $1,450,427 in additional rent and purchased transportation expense
(comprised primarily of terminal equipment rental, trucking expense in San
Juan and the U.S. and revenue equipment rental), $117,954 in salaries and
wages, $102,374 in insurance and claims and $67,715 in communications and
other operating expenses.
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1998
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND DEDUCTIONS END
YEAR OF YEAR EXPENSES (CHARGEOFFS) OF YEAR
---- ---------- --------- ------------ ----------
1996 655,440 673,699 (423,558) 905,581
1997 905,581 381,691 (121,398) 1,165,874
1998 1,165,874 1,040,721 (1,113,192) 1,093,403
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure
Not Applicable
PART III
Incorporated by Reference
The information called for by Item 10 -- "Directors and Executive
Officers of the Registrant", Item 11 -- "Executive Compensation", Item 12 --
"Security Ownership of Certain Beneficial Owners and Management" and Item 13 --
"Certain Relationships and Related Transactions" is incorporated herein by this
reference to the Company's definitive proxy statement for its annual meeting of
stockholders scheduled to be held in May 1999, which definitive proxy statement
is expected to be filed with the Commission not later than 120 days after the
end of the fiscal year to which this report relates.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) Documents Filed as Part of this Report
Page
1. Financial Statements:
Independent Auditors' Report ................. 15
Balance Sheets ............................... 16
Statements of Operations ..................... 17
Statements of Changes in Common Stockholders'
Equity ....................................... 18
Statements of Cash Flows ..................... 19
Notes to Financial Statements ................ 20
2. Financial Statement Schedules:
II - Valuation And Qualifying Accounts
Three Years Ended December 31, 1998
All other financial statement schedules have been omitted either
because they are not applicable or because the information that would be
included in such schedules is included elsewhere in the financial statements or
notes thereto.
<PAGE>
3. Exhibits.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
*3.1 -- Form of Amended and Restated Certificate of
Incorporation of the Registrant
*3.2 -- Form of Amended and Restated Bylaws of the Registrant
*4.1 -- See Exhibits 3A and 3B for provisions of the Certificate
of Incorporation and Bylaws of the Registrant defining
the rights of holders of the Registrant's Common Stock
#*10.1 -- Form of Indemnification Agreement with Directors and
Executive Officers
*10.2 -- Bareboat Charter Party dated February 1992
*10.2.1 -- Amendment to Bareboat Charter Party dated December 31,
1994
*10.2.2 -- Second Amendment to Bareboat Charter Party dated October
1995
*10.2.3 -- Third Amendment to Bareboat Charter Party dated March 1,
1997
*10.2.4 -- Form of Fourth Amendment to Bareboat Charter Party
**10.2.5 -- Fourth Amendment to Bareboat Charter Party dated June
30, 1997
*10.3 -- Promissory Note dated January 1, 1997 payable to
Kadampanattu Corp. in the principal amount of $4,569,131
*10.4 -- Construction and Term Loan Agreement dated as of October
13, 1995 between the Registrant, Kadampanattu Corp. and
The First National Bank of Boston, as Agent
*10.4.1 -- First Amendment to Construction and Term Loan Agreement
dated as of May 9, 1996
*10.4.2 -- Second Amendment to Construction and Term Loan Agreement
dated as of July 10, 1996
*10.4.3 -- Third Amendment to Construction and Term Loan Agreement
and Consent and Limited Waiver dated as of January 1,
1997
*10.5 -- Chattel Mortgage Line of Credit Agreement dated as of
February 28, 1997
*10.6 -- Vessel Construction Contract dated as of December 30,
1996 between Coastal Ship, Inc. and Halter Marine, Inc.
*10.6.1 -- Assignment of Vessel Construction Contract dated
March 24, 1997 between Coastal Ship, Inc. and the
Registrant
*10.6.2 -- Amendment No. 1 to Vessel Construction Contract dated as
of April 1997
*10.7 -- Real Estate Promissory Note dated April 18, 1996 between
the Registrant and First Union National Bank of Florida
*10.8 -- Commitment to Guarantee Obligations
*10.8.1 -- Trust Indenture
*10.8.2 -- United States Government Ship Financing Bond, 1997
Series in the amount of $10,515,000
*10.8.3 -- Title XI Reserve Fund and Financial Agreement
****10.8.4 -- Commitment to Guarantee Obligations
****10.8.5 -- Trust Indenture
****10.8.6 -- United States Government Ship Financing Bond, 1997
Series in the amount of $16,918,000
****10.8.7 -- Title XI Reserve Fund and Financial Agreement
*10.9 -- Agreement and Lease dated as of August 1, 1991 between
the Registrant and the Jacksonville Port Authority
*10.9.1 -- Amendment #5 to Exhibit B, Schedule of Fees and Charges
#*10.11 -- Incentive Stock Plan
#*10.11.1 -- Form of Stock Option Award Agreement
***10.12 -- Trailer Bridge, Inc. Employee Stock Purchase Plan
****10.13 -- Revolving Credit and Term Loan Agreement dated as of
August 28, 1998 among Trailer Bridge, Inc., BankBoston,
N.A. and BankBoston, N.A. as agent
****27.1 -- Financial Data Schedule
* Incorporated by reference to the indicated exhibit to the Company's
Registration Statement on Form S-1 (File No. 333-28221) which became
effective on July 23, 1997.
** Incorporated by reference to the indicated exhibit to the Company's
Form 10-Q for the quarter ended September 30, 1997.
*** Incorporated by reference to the indicated exhibit to the Company's
Form 10-K for the year ended December 31, 1997.
**** Filed herewith
# Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the last
quarter of the fiscal year covered by this report.
<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, in the City of New York,
and State of New York, on this 29th day of March 1999.
TRAILER BRIDGE, INC.
By: /s/ John D. McCown
John D. McCown
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ John D. McCown Chairman of the Board and
John D. McCown Chief Executive Officer
and Director (Principal
Executive Officer) March 31, 1999
/s/ Mark A. Tanner Vice President --
Mark A. Tanner Administration and Chief
Financial Officer
(Principal Financial and
Accounting Officer) March 31, 1999
/s/ Malcom P. McLean Director
Malcom P. McLean March 31, 1999
/s/ Kenneth G. Younger Director
Kenneth G. Younger March 31, 1999
/s/ Artis E. James Director
Artis E. James March 31, 1999
<PAGE>
EXHIBIT INDEX
(Exhibits being filed with this Form 10-K)
*3.1 -- Form of Amended and Restated Certificate of
Incorporation of the Registrant
*3.2 -- Form of Amended and Restated Bylaws of the Registrant
*4.1 -- See Exhibits 3A and 3B for provisions of the Certificate
of Incorporation and Bylaws of the Registrant defining
the rights of holders of the Registrant's Common Stock
#*10.1 -- Form of Indemnification Agreement with Directors and
Executive Officers
*10.2 -- Bareboat Charter Party dated February 1992
*10.2.1 -- Amendment to Bareboat Charter Party dated December 31,
1994
*10.2.2 -- Second Amendment to Bareboat Charter Party dated October
1995
*10.2.3 -- Third Amendment to Bareboat Charter Party dated March 1,
1997
*10.2.4 -- Form of Fourth Amendment to Bareboat Charter Party
**10.2.5 -- Fourth Amendment to Bareboat Charter Party dated June
30, 1997
*10.3 -- Promissory Note dated January 1, 1997 payable to
Kadampanattu Corp. in the principal amount of $4,569,131
*10.4 -- Construction and Term Loan Agreement dated as of October
13, 1995 between the Registrant, Kadampanattu Corp. and
The First National Bank of Boston, as Agent
*10.4.1 -- First Amendment to Construction and Term Loan Agreement
dated as of May 9, 1996
*10.4.2 -- Second Amendment to Construction and Term Loan Agreement
dated as of July 10, 1996
*10.4.3 -- Third Amendment to Construction and Term Loan Agreement
and Consent and Limited Waiver dated as of January 1,
1997
*10.5 -- Chattel Mortgage Line of Credit Agreement dated as of
February 28, 1997
*10.6 -- Vessel Construction Contract dated as of December 30,
1996 between Coastal Ship, Inc. and Halter Marine, Inc.
*10.6.1 -- Assignment of Vessel Construction Contract dated
March 24, 1997 between Coastal Ship, Inc. and the
Registrant
*10.6.2 -- Amendment No. 1 to Vessel Construction Contract dated as
of April 1997
*10.7 -- Real Estate Promissory Note dated April 18, 1996 between
the Registrant and First Union National Bank of Florida
*10.8 -- Commitment to Guarantee Obligations
*10.8.1 -- Trust Indenture
*10.8.2 -- United States Government Ship Financing Bond, 1997
Series in the amount of $10,515,000
*10.8.3 -- Title XI Reserve Fund and Financial Agreement
****10.8.4 -- Commitment to Guarantee Obligations
****10.8.5 -- Trust Indenture
****10.8.6 -- United States Government Ship Financing Bond, 1997
Series in the amount of $16,918,000
****10.8.7 -- Title XI Reserve Fund and Financial Agreement
*10.9 -- Agreement and Lease dated as of August 1, 1991 between
the Registrant and the Jacksonville Port Authority
*10.9.1 -- Amendment #5 to Exhibit B, Schedule of Fees and Charges
#*10.11 -- Incentive Stock Plan
#*10.11.1 -- Form of Stock Option Award Agreement
***10.12 -- Trailer Bridge, Inc. Employee Stock Purchase Plan
****10.13 -- Revolving Credit and Term Loan Agreement dated as of
August 28, 1998 among Trailer Bridge, Inc., BankBoston,
N.A. and BankBoston, N.A. as agent
****27.1 -- Financial Data Schedule
* Incorporated by reference to the indicated exhibit to the Company's
Registration Statement on Form S-1 (File No. 333-28221) which became
effective on July 23, 1997.
** Incorporated by reference to the indicated exhibit to the Company's
Form 10-Q for the quarter ended September 30, 1997.
*** Incorporated by reference to the indicated exhibit to the Company's
Form 10-K for the year ended December 31, 1997.
**** Filed herewith
# Management contract or compensatory plan or arrangement.
Exhibit 10.8.4
CONFORMED COPY AS DELIVERED
---------------------------
Document 1
Contract No. MA-13344
COMMITMENT TO GUARANTEE OBLIGATIONS
BY
THE UNITED STATES OF AMERICA
UNDER TITLE XI
OF THE MERCHANT MARINE ACT, 1936, AS AMENDED
ACCEPTED BY
TRAILER BRIDGE, INC.
Dated as of December 4, 1997
<PAGE>
COMMITMENT TO GUARANTEE OBLIGATIONS
by
THE UNITED STATES OF AMERICA
Accepted by
TRAILER BRIDGE, INC
Shipowner
(Under Title XI, Merchant Marine Act, 1936,
as amended, and in effect on the
date of this Guarantee Commitment)
TABLE OF CONTENTS
Document
Number Document
-------- --------
1 Commitment to Guarantee Obligations
Schedule One -- Form of Opinion of Counsel
2 Appendix I -- Form of Bond Purchase Agreement
3 Appendix II -- Form of Trust Indenture
4 Schedule A -- Schedule of Definitions to Trust Indenture
5 Exhibit 1 -- General Provisions Incorporated into the
Trust Indenture by Reference
6 Exhibit 2 -- Forms of Bond, Guarantee and Trustee's
Authentication Certificate
7 Exhibit 3 -- Authorization Agreement
8 Exhibit 4 -- Form of Secretary's Supplemental Indenture
9 Appendix III -- Security Agreement
10 Exhibit 1 -- General Provisions Incorporated into the
Security Agreement by Reference
11 Schedule X -- Schedule of Definitions
12 Exhibit 2 -- Form of Secretary's Note
13 Exhibit 3 -- Form of First Preferred Mortgage
14 Exhibit 4 -- Amended and Restated Title XI Reserve Fund
and Financial Agreement
i
<PAGE>
15 General Provisions Incorporated into the Title XI Reserve
Fund and Financial Agreement
16 Exhibit 6 -- Consent of Shipyard
17 Exhibit 7-- Construction Contract
18 Exhibit 8-- Depository Agreement
19 Exhibit 9--- Intercreditor Agreement
ii
<PAGE>
Contract No.
MA-13344
COMMITMENT TO GUARANTEE OBLIGATIONS
by
THE UNITED STATES OF AMERICA
accepted by
TRAILER BRIDGE, INC.
Shipowner
TABLE OF CONTENTS*
Page
----
Parties..................................................................... 1
Recitals.................................................................... 1
ARTICLE I Findings and Determinations of Secretary.................. 3
ARTICLE II Commitment to Guarantee Obligations....................... 4
ARTICLE III The Obligations........................................... 4
ARTICLE IV Covenants of the Shipowner................................ 5
ARTICLE V Conditions to Execution and Delivery of the Authorization
Agreement and the Security Agreement; Conditions to be
Fulfilled on the Bond Closing Date........................ 6
ARTICLE VI Variation of Guarantee Commitment......................... 9
ARTICLE VII Termination or Assignment of Guarantee Commitment......... 9
ARTICLE VIII Conformity To Regulations................................. 10
ARTICLE IX Miscellaneous............................................. 10
Signatures................................................ 12
- - ----------------
*This Table of Contents is not a part of the Guarantee Commitment and has no
bearing upon the interpretation of any of its terms and provisions.
iii
<PAGE>
Table A
Schedule One to Guarantee Commitment
Appendix I - Form of Bond Purchase Agreement
Appendix II - Form of Trust Indenture
Appendix III - Security Agreement
iv
<PAGE>
COMMITMENT TO GUARANTEE OBLIGATIONS
by
THE UNITED STATES OF AMERICA
Accepted by
TRAILER BRIDGE, INC.
Shipowner
-------------------
THIS COMMITMENT TO GUARANTEE OBLIGATIONS, dated as of December 4, 1997
(the "Guarantee Commitment"), made and entered into by the UNITED STATES OF
AMERICA (the "United States"), represented by the SECRETARY OF TRANSPORTATION,
acting by and through the MARITIME ADMINISTRATOR (the "Secretary"), and accepted
on said date by TRAILER BRIDGE, INC. a Delaware corporation (the "Shipowner").
RECITALS:
- - --------
A. The Shipowner is proposed to become the sole owner of the three
408'9" x 100' container deck barges (the "Vessels" when used collectively and
each a "Vessel" when used singularly) to be built pursuant to a certain
construction contract, dated December 30, 1996 (as heretofore or hereafter
amended, including by Amendment No. 1 hereinafter referred to, the "Construction
Contract") originally made with Halter Marine, Inc., a Nevada corporation (the
"Shipyard") by Shipowner's affiliate Coastal Ship, Inc., assigned to Shipowner
and amended pursuant to Amendment No. 1 thereto dated as of October 8, 1997 and
by a certain Intercreditor Agreement dated as of the Closing Date among
Shipowner, the Shipyard, and the Secretary, among others.
B. To aid in financing the construction of the Vessels, the Shipowner
will borrow an aggregate principal amount approximately equal to, but in no
event in excess of 87 1/2% of the Actual Cost computed as of the Closing Date.
C. As one means of such financing, the Shipowner has entered into a
bond purchase agreement (the "Bond Purchase Agreement") with the purchaser named
therein providing for the sale and delivery, on the Closing Date, of not in
excess of $16,918,000 aggregate principal amount of bonds designated "United
States Government Guaranteed Ship Financing Bonds, 1997 Series II" (the
"Obligations") having the maturity date and interest rate set forth in the Bond
Purchase Agreement and the Obligations.
1
<PAGE>
D. The Shipowner will on the Closing Date, execute and deliver an
Indenture (the "Indenture"), between the Shipowner and State Street Bank and
Trust Company, as Indenture Trustee (the "Indenture Trustee"), in connection
with the Obligations to be issued in respect of the Vessels, in the aggregate
amount, with the maturity and bearing interest at the rate specified in the
Trust Indenture.
E. Under the Authorization Agreement (the "Authorization Agreement"),
Contract MA-13345 to be entered into on the Closing Date between the Secretary
and the Indenture Trustee, the Indenture Trustee will be authorized to endorse
and execute, by means of facsimile signature of the Secretary and the facsimile
seal of the Department of Transportation, on each of the Obligations issued and
to authenticate a guarantee by the Secretary of the payment in full of all the
unpaid interest on, and the unpaid balance of the principal of, each Obligation,
including interest accruing between the date of default under such Obligation
and the date of payment by the Secretary (individually, a "Guarantee" and,
collectively, the "Guarantees").
F. The Shipowner, as security for the Guarantees, and as security to
the Secretary for the payment to the Secretary of the principal of, and the
interest due or to become due on, the Secretary's Note to be executed in
accordance with the terms thereof, will, on the Closing Date, enter into a
Security Agreement with the Secretary (the "Security Agreement"), Contract
MA-13346, pursuant to which the Shipowner will assign to the Secretary, among
other things, all of the Shipowner's interest in the Construction Contract, and
all other contracts which relate to the construction of the Vessels, as
specified therein, and all property, including the Vessels, in which the
Shipowner has or will have an interest pursuant to the Construction Contract.
G. The Shipowner will as further security to the Secretary, execute and
deliver on the date of the delivery of the first Vessel to be delivered pursuant
to the Construction Contract, a First Preferred Fleet Mortgage, Contract
MA-13347, created under and pursuant to Chapter 313, Title 46 United States
Code, to the Secretary, as Mortgagee, upon and attaching to such Vessel in the
form of Exhibit 3 to the Security Agreement (or in the case of the second Vessel
and third to be delivered, in the form provided for in Exhibit B to said Exhibit
3).
H. In connection with the execution and delivery of the Security
Agreement, the Shipyard will enter into a consent to the assignment of the
Construction Contract (the "Consent of Shipyard").
I. In order to implement certain aspects of the transactions
contemplated by the Security Agreement and the Indenture, the Secretary, the
Shipowner and State Street Bank and Trust Company (the "Depository") will enter
into an Amendment and Restatement of the Depository Agreement, Contract MA-13308
(as so amended and restated, the "Depository Agreement") and the parties thereto
will enter into the Intercreditor Agreement.
2
<PAGE>
J. The Shipowner will as further security to the Secretary, enter into
an Amendment and Restatement of the Title XI Reserve Fund and Financial
Agreement, Contract MA-13309, with the Secretary (as so amended and restated,
the "Title XI Reserve Fund and Financial Agreement").
W I T N E S S ET H:
------------------
That under the provisions of Title XI of the Merchant Marine Act, 1936,
as amended and in effect on the date hereof (said provisions, as so amended and
in effect on the date hereof, being called "Title XI") and in consideration of
(i) the covenants of the Shipowner contained herein, (ii) the payment by the
Shipowner to the Secretary of the charges for this Guarantee Commitment pursuant
to Section 1104(f) of Title XI and (iii) other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Secretary
hereby commits itself as herein provided.
The forms of following executed documents are annexed to each
counterpart of this Guarantee Commitment: the Security Agreement, the Title XI
Reserve Fund and Financial Agreement, and the Depository Agreement.
Annexed to each counterpart of this Guarantee Commitment are also the
forms of the Construction Contract, Consent of Shipyard, the Bond Purchase
Agreement, the Indenture, the Bonds, the Authorization Agreement, the Mortgage,
the Intercreditor Agreement, and the Secretary's Note. As used herein, the
"Closing Date" refers to the date for the execution and delivery of the
Obligations as provided in the Bond Purchase Agreement annexed hereto, subject
to the conditions contained in Article V hereof.
The Consent of Shipyard, the Construction Contract, the Security
Agreement, the Title XI Reserve Fund and Financial Agreement, the Intercreditor
Agreement, the Bond Purchase Agreement, the Indenture, the Bonds, the
Authorization Agreement, the Mortgage, and the Secretary's Note (except as
otherwise required by the Secretary), shall be executed and delivered
substantially in the respective forms annexed hereto, except that the blanks, if
any, therein shall be filled in as contemplated therein and herein and, except
further that the interest rates of the Bonds must be further approved by the
Secretary.
ARTICLE I
Findings and Determinations of Secretary
Pursuant to Section 1104(d) of Title XI, the Secretary has found that
the property or project with respect to which the Obligations will be executed
will be, in his opinion, economically sound.
3
<PAGE>
Pursuant to Sections 1101(f), 1101(g) and 1104(b)(2) of Title XI, the
Secretary has determined that the aggregate of the Actual Cost of the Vessels is
$19,335,870. The Actual Cost for each Vessel is comprised of the amounts
determined by the Secretary set forth in Table A annexed hereto, and the
Secretary has determined that the amounts set forth in said Table A are itemized
as also set forth therein. The Secretary may make a redetermination of the
Actual Cost of one or more of the Vessels to include, in addition to the items
set forth or referred to in said Table A, any other items or any increase or
decrease in the amounts of the items set forth or referred to therein.
On the Closing Date, the aggregate principal amount of the Bonds will
not exceed 871/2% of the Actual Cost as of the Closing.
Pursuant to Section 1104(b)(3) and 1104(b)(5) of Title XI,
respectively, the Secretary has determined that the maturity date of the
Obligations is satisfactory and that the interest rate to be borne by the Bonds
(exclusive of the charges for the Guarantee Fee and service charges, if any) to
be issued on the Closing Date is reasonable, taking into account the range of
interest rates prevailing in the private market for similar loans and risks
assumed by the Secretary.
Pursuant to Section 1104(b)(4) of Title XI, the Secretary has
determined that payments of principal required by the Obligations are
satisfactory.
ARTICLE II
Commitment to Guarantee Obligations
The United States, represented by the Secretary, HEREBY COMMITS ITSELF
TO GUARANTEE (as provided in the Obligations) the payment of the unpaid interest
on, and the unpaid balance of the principal of, the Obligations, including
interest accruing between the date of default under the Obligations and the
payment in full of the Guarantees, and, to effect this Guarantee Commitment,
hereby commits itself to execute and deliver the Authorization Agreement, the
Security Agreement, the Title XI Reserve Fund and Financial Agreement, and the
Depository Agreement on the Closing Date and to execute the Mortgage on each
Vessel on the date of her respective delivery.
4
<PAGE>
ARTICLE III
The Obligations
The Obligations shall be as provided in the Indenture and in the form of
the Obligations annexed as Exhibit 2 to the Indenture. The Obligations shall be
subject to all of the terms and conditions set forth in the Indenture and in the
forms thereof. The Indenture, the Bonds, the Secretary's Note, the Mortgage, the
Title XI Reserve Fund and Financial Agreement, and the Depository Agreement
shall be executed and delivered by the Shipowner on (except for the Mortgage,
which the Shipowner covenants to execute upon each Vessel on the respective date
of her delivery) the Closing Date. The forms of the Bond Purchase Agreement, the
Offering Circular, the Indenture, the Obligations, the Authorization Agreement,
the Security Agreement, the Mortgage, the Secretary's Note, the Title XI Reserve
Fund and Financial Agreement, and the Depository Agreement are hereby approved
by the Secretary.
ARTICLE IV
Covenants of the Shipowner
The Shipowner represents and, until termination of this Guarantee
Commitment, agrees:
(a) that each Vessel has been or will be constructed
substantially in accordance with the plans and specifications, as applicable,
pursuant to the Construction Contract in a shipyard within the United States
approved by the Secretary and on the respective delivery date of each Vessel,
each Vessel will be documented under the laws of the United States;
(b) to furnish to the Secretary, promptly upon written
request, such reasonable, material and pertinent reports, evidence, proof or
information, in addition to that furnished pursuant to the further provisions of
this Guarantee Commitment or in the application for this Guarantee Commitment
under Title XI or otherwise available to the Secretary, as the Secretary may
reasonably deem necessary or appropriate in connection with the performance by
the Secretary of his duties and functions under the Act;
(c) to maintain records of all amounts paid or obligated to be
paid by or for the account of the Shipowner for the construction of each Vessel;
(d) to permit the Secretary, promptly upon request, to make
such reasonable, material and pertinent examination and audit of the Shipowner's
books, records and accounts and to take such information therefrom and make such
transcripts or copies thereof, as the Secretary may reasonably deem necessary or
appropriate in connection with the performance by the Secretary of his duties
and functions under the Act;
(e) to maintain its United States citizenship within the
meaning of Section 2 of the Shipping Act, 1916, as amended, for the purpose of
operation of the Vessels in the trade or trades in which the Shipowner proposes
to operate the Vessels, to the satisfaction of the Secretary and, at the time of
the execution and delivery of the Authorization Agreement, to submit to the
Secretary such supplemental proof of citizenship as the Secretary may deem
appropriate to evidence the continued United States citizenship of the Shipowner
for said purpose; and
(f) to execute and deliver the Bond Purchase Agreement, the
Bonds, the Security Agreement, the Indenture, the Secretary's Note, the
Mortgage, the Title XI Reserve Fund and Financial Agreement, the Consent of
Shipyard and the Depository Agreement.
5
<PAGE>
ARTICLE V
Conditions to Execution and Delivery of the
Authorization Agreement and the Security Agreement
On the Closing Date, the Authorization Agreement shall be executed and
delivered by the United States and the Indenture Trustee; the Security Agreement
and the Title XI Reserve Fund and Financial Agreement shall be executed and
delivered by the Shipowner and the Secretary; the Indenture shall be executed
and delivered by the Shipowner and the Indenture Trustee; the Construction
Contract shall have been executed and delivered by the Shipowner and the
Shipyard; the Consent of the Shipyard shall be executed and delivered by the
Shipyard; the Intercreditor Agreement shall have been executed and delivered by
all parties thereto; the Depository Agreement shall be executed and delivered by
the Shipowner, the Secretary and the Depository; the Secretary's Note shall be
executed and delivered and the Bonds shall be issued and delivered by the
Shipowner; and the Bond Purchase Agreement shall be executed and delivered by
the Shipowner and the purchaser of the Bonds. The obligation of the United
States represented by the Secretary to execute and deliver the Authorization
Agreement, the Security Agreement, the Mortgage, the Depository Agreement and
the Title XI Reserve Fund and Financial Agreement on the Closing Date shall be
subject to the following conditions unless waived in writing by the Secretary:
(a) the Closing Date shall occur prior to December 31, 1997;
(b) on the Delivery Date, each Vessel shall be free of any claim, lien,
charge, mortgage or other encumbrance of any character (except the Security
Agreement, and liens otherwise permitted by Section 2.04 of Exhibit 1 to the
Security Agreement); and on the Closing Date the Bond Purchase Agreement shall
have been executed and delivered on or prior to the Closing Date and the
Indenture and the Obligations shall have been duly executed and delivered on the
Closing Date;
(c) on the Closing Date, the Shipowner shall be a citizen of the United
States within the meaning of Section 2 of the Shipping Act, 1916, as amended,
and shall have furnished to the Secretary an affidavit setting forth data
showing such citizenship to the Secretary's satisfaction at least 20 days prior
to the Closing Date and the Shipowner shall have submitted pro forma affidavits
at least ten days prior to the Closing Date;
(d) (i) there shall have been delivered to the Secretary two executed
counterparts of the Bond Purchase Agreement, and two executed counterparts of
the Indenture, (ii) two specimen copies of the Obligations issued under the
Indenture; and (iii) two copies of all other documents delivered by the
Shipowner or the Indenture Trustee on the Closing Date;
6
<PAGE>
(e) the following representations and warranties shall have been made
to the Secretary in writing and shall be true as of the Closing Date:
(i) the Shipowner is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware,
has not failed to qualify to do business in any jurisdiction in the
United States in which its business or properties require such
qualification, and had and has full legal right, corporate power and
authority to own its own properties and assets and conduct its business
as it is presently conducted;
(ii) the Shipowner had and has legal power and authority to
enter into and carry out the terms of this Guarantee Commitment, the
Construction Contract, the Bond Purchase Agreement, the Obligations,
the Indenture, the Security Agreement, the Secretary's Note, the
Mortgage, the Title XI Reserve Fund and Financial Agreement, the
Intercreditor Agreement, and the Depository Agreement;
(iii) each and all of the documents and instruments referred
to in clause (ii) hereof have been duly authorized, executed and
delivered by the Shipowner and constitute, in accordance with their
respective terms, legal, valid and binding instruments enforceable
against the Shipowner, except to the extent limited by applicable
bankruptcy, reorganization, insolvency, moratorium or the similar laws
of general application relating to or affecting the enforcement of
creditors rights as from time to time in effect;
(iv) the consummation of the transactions contemplated by and
compliance by the Shipowner of all the terms and provisions of the
documents and instruments referred to in clause (ii) hereof will not
violate any provisions of the Certificate of Incorporation or By-laws
of the Shipowner and will not result in a breach of the terms and
provisions of, or constitute a default under any other agreement or
undertaking by the Shipowner or by which the Shipowner is bound or any
order of any court or administrative agency entered into in any
proceedings to which the Shipowner is or has been a party;
(v) there is no litigation, proceeding or investigation
pending or, to the best of the Shipowner's knowledge, threatened,
involving the Shipowner or any of its property which could prevent or
jeopardize the performance by the Shipowner of the documents and
instruments referred to in clause (ii) hereof.
(f) there shall have been delivered to the Secretary a copy of each
document and legal opinion delivered to the Purchasers of the Obligations on the
Closing Date;
(g) the Secretary shall have received the initial Guarantee Fee payable
under the Security Agreement;
(h) all charges levied or assessed by the Secretary under Section
1104(f) of Title XI shall have been paid by the Shipowner;
7
<PAGE>
(i) the Shipowner shall have performed without material breach its
agreements under Article IV hereof, and the further terms, conditions and
provisions of this Guarantee Commitment shall have been complied with in all
material respects;
(j) there shall not have occurred any event which constitutes (or after
any period of time or any notice, or both, would constitute) a "Default" under
the Security Agreement;
(k) there shall have been delivered to the Secretary by the Shipowner
an opinion (or opinions) of counsel acceptable to the Secretary, and in form and
substance satisfactory to the Secretary, to the effect that:
(i) by the terms of the Security Agreement, the Shipowner has
granted to the Secretary a fully perfected, first priority security
interest in each of the assets which constitutes the Security, as
defined therein;
(ii) all filings and recordings required or available to
perfect the Secretary's first priority security interests in the
Security, as defined in the Security Agreement, granted by the
Shipowner in the Security Agreement, and to render such security
interests valid and enforceable under the laws of the States of
Mississippi and Florida (including without limitation, all filings of
financing statements under the UCC) have been duly effected, and no
periodic refiling or periodic re-recording is required to protect and
preserve the perfection and first priority of such security interests,
except as provided by the laws of such State;
(iii) under the terms of the Massachusetts UCC, upon the
moneys and the shares of the money market mutual fund being credited to
the fund or funds to be established by the Depository-Bailee in
accordance with the terms of the Depository Agreement, the Secretary's
security interest in such collateral will be perfected and the
Secretary's security interest in such collateral will be a first
priority security interest under the terms of the Massachusetts UCC
(with respect to the shares of the money market mutual fund comprised
in the collateral) and under common law (with respect to moneys
comprised in the collateral);
(l) there shall have been executed and delivered to the Secretary an
opinion of counsel to the effect stated in the form annexed hereto as Schedule
One;
(m) the Secretary shall have received a letter agreement from the
Shipowner to provide the Secretary within a reasonable time after the Closing
Date, with seven conformed copies of the Guarantee Commitment and each of the
Appendices and Exhibits thereto executed on or prior to such date;
(n) on the Closing Date, the qualifying requirements set forth in
Section 15 of the Title XI Reserve Fund and Financial Agreement shall have been
complied with and certified to as required therein;
8
<PAGE>
(o) at least ten days prior to the Closing Date, there shall have been
delivered to the Secretary, pro forma balance sheets for the Shipowner as of the
Closing Date, certified by an officer of the Shipowner showing, among other
things, all non-Title XI debt of the Shipowner;
(p) on the Closing Date, the Shipowner shall certify that all non-Title
XI loans to the Shipowner relating to the Vessels have been discharged save only
such as Shipowner expects to pay from the proceeds of the Obligations; and
(q) at least ten days prior to the Closing Date the Secretary shall
have been furnished evidence that the Vessels have been insured as required by
the Secretary,
ARTICLE VI
Variation of Guarantee Commitment
No variation from the terms and conditions hereof shall be permitted
except pursuant to an amendment executed by the Secretary and accepted by the
Shipowner.
ARTICLE VII
Termination or Assignment of Guarantee Commitment
This Guarantee Commitment may terminate and the parties hereto shall have
no further rights or obligations hereunder, upon written notice by the
Secretary, after the earlier of (a) the termination of the obligations of the
United States pursuant to the Shipowner's failure to satisfy one or more
conditions set forth in Article V hereof or (b) the execution and delivery of
the Security Agreement and the Authorization Agreement.
This Guarantee Commitment may not be assigned by the Shipowner without the
prior written approval of the Secretary and any attempt to do so shall be null
and void ab initio.
ARTICLE VIII
Conformity with Regulations
The Secretary hereby affirms that, with respect to the rights of the
Indenture Trustee and the Holders of the Obligations, this Guarantee Commitment
conforms to its existing regulations governing the issuance of commitments to
guarantee and guarantees under Title XI of the Act and that this Guarantee
Commitment contains a complete list of conditions required for the execution and
delivery of guarantees including the Guarantees.
9
<PAGE>
ARTICLE IX
Miscellaneous
(a) The table of contents and the titles of the Articles are inserted
as a matter of convenient reference and shall not be construed as a part of this
Guarantee Commitment. This Guarantee Commitment may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument.
(b) For all purposes of this Guarantee Commitment, unless otherwise
expressly provided or unless the context shall otherwise require:
(i) The terms "hereof," "herein," "hereby," "hereto,"
"hereunder," "hereinafter" and "herewith" refer to this Guarantee Commitment as
the same may be supplemented or amended as herein provided.
(ii) Terms defined in Schedule X of the Security Agreement
annexed hereto or by reference therein to other instruments shall have the
respective meanings stated in Schedule X or such other instruments.
IN WITNESS WHEREOF, this Commitment to Guarantee Obligations has been
executed by the United States and accepted by the Shipowner, all as of the day
and year first above written.
UNITED STATES OF AMERICA,
SECRETARY OF TRANSPORTATION
BY: MARITIME ADMINISTRATOR
(SEAL)
BY: /s/ Joel C. Richard
-------------------
Secretary
Maritime Administration
Attest:
/s/ Larry G. Main
- - -----------------
Assistant Secretary
Maritime Administration
ACCEPTED BY:
TRAILER BRIDGE, INC.
as Shipowner
BY: /s/ William G. Gotimer, Jr.
---------------------------
10
<PAGE>
TABLE A
The aggregate Actual Cost of the Vessels Hull No. 289, Hull No. 290,
and Hull No.291 as of the date hereof as determined by the Secretary (namely,
(i) the amounts paid by or for the account of the Shipowner as of the date
hereof for the Construction of the Hull No. 289, Hull No. 290 and Hull No. 291,
plus (ii) the amount which the Shipowner was on said date obligated under the
Construction Contract or otherwise to pay from time to time thereafter for the
Construction of the Hull No. 289, Hull No. 290 and Hull No. 291) is $19,370,872
calculated and itemized as follows:
Amount*
Amount* Obligated
Paid To be Paid Total
------- ---------- -----
Contract Price Hull 289 5,980,806
Hull 290 5.980,806
Hull 291 5,980,806
Design, Engineering
and Inspection 96,000 288,000
per Vessel
Net Interest During
Construction 132,600 397,800
per Vessel
Title XI Guarantee Fee 235,884** 707,652
per Vessel
Total Actual Cost
Per Vessel 6,445,290
Number of Vessels
3
Total Actual Cost 19,335,870
* The Secretary has not yet made findings as to the amounts actually paid to
date by the Shipowner (or hence as to the remaining amounts which the
Shipowner is obligated to pay in the future).
** Average for the three (3) Vessels.
11
<PAGE>
SCHEDULE ONE TO COMMITMENT TO GUARANTEE OBLIGATIONS:
FORM OF OPINION(S) OF COUNSEL
12
<PAGE>
Exhibit 10.8.5
---------------------------------------------------------
TRUST INDENTURE
Relating to United States Government Guaranteed
Ship Financing Obligations
Between
TRAILER BRIDGE, INC.
Shipowner
AND
STATE STREET BANK AND TRUST COMPANY
Indenture Trustee
Dated as of December 4, 1997
------------------------------------------------
<PAGE>
TRUST INDENTURE
Relating to United States Government Guaranteed
Ship Financing Obligations
Between
TRAILER BRIDGE, INC.
Shipowner
AND
STATE STREET BANK AND TRUST COMPANY
Indenture Trustee
Dated as of December 4, 1997
TABLE OF CONTENTS TO SPECIAL PROVISIONS OF THE INDENTURE 1
-------------------------------------------------------- -
Page
----
Parties.................................................................... 1
Recitals................................................................... 1
ARTICLE FIRST
Incorporation of General Provisions........................................ 2
ARTICLE SECOND
The Bonds.................................................................. 2
ARTICLE THIRD
Certain Redemptions........................................................ 3
(a) Mandatory Sinking Fund Redemptions..................................... 3
(b) [Reserved.............................................................. 3
(c) Optional Redemptions of Bonds at Premium............................... 4
- - ------------------
1/ This Table of Contents is not a part of the Indenture and has no bearing upon
the interpretation of any of its terms and provisions.
i
<PAGE>
ARTICLE FOURTH
Definitions................................................................ 4
ARTICLE FIFTH
Additions, Deletions and Amendments to Exhibit 1........................... 5
(a) Concerning Section 2.04................................................ 5
(b) Concerning Section 2.12................................................ 5
(c) Concerning Payment of the Obligations.................................. 5
(d) Concerning Selection of Bonds to be Redeemed........................... 6
(e) Concerning References to 3.09(b)....................................... 6
(f) Concerning Home Office Payment......................................... 6
(g) Concerning Section 7.02................................................ 6
(h) Concerning Section 10.01............................................... 7
(i) Concerning Notices..................................................... 7
(j) Concerning Applicable Law.............................................. 7
(k) Execution in Counterparts.............................................. 8
Signatures................................................................. 9
Acknowledgements.......................................................10 and 11
EXHIBITS TO TRUST INDENTURE
---------------------------
SCHEDULE A Schedule of Definitions to Trust Indenture
EXHIBIT 1 General Provisions of the Indenture
Incorporated by Reference
EXHIBIT 2 Forms of Bond, Guarantee and Trustee's
Authentication Certificate
EXHIBIT 3 Authorization Agreement
EXHIBIT 4 Form of Secretary Supplemental Indenture
ii
<PAGE>
TRUST INDENTURE
SPECIAL PROVISIONS
THIS TRUST INDENTURE, dated as of December 4, 1997 (said Trust
Indenture, as the same may be amended, modified or supplemented from time to
time as permitted hereunder, herein called the "Indenture"), between (i)Trailer
Bridge, Inc., a Delaware corporation (herein called the "Shipowner"), and (ii)
State Street Bank and Trust Company, a Massachusetts trust company (said Bank,
any successor or assign hereunder, herein called the "Indenture Trustee").
RECITALS:
A. As provided in Article Fourth hereof, the terms defined in Schedule
A to this Indenture shall have the respective meanings stated in said Schedule;
B. The Shipowner has duly executed this Indenture, and duly authorized
the issuance hereunder of $16,918,000 aggregate principal amount of its bonds
pursuant to Section 2.03 of Exhibit 1 to this Indenture (herein together with
any bonds issued in respect thereof pursuant to Sections 2.09, 2.10, 2.12 and
3.10(b) of said Exhibit 1, called the "Bonds" or the "Obligations") designated
"United States Government Guaranteed Ship Financing Bonds, 1997 Series II;" the
Obligations will bear interest at 6.52% per annum and mature on March 30, 2023;
C. The Obligations will be issued by the Shipowner to aid in the
financing of the cost of construction of three (3) 408'9" x 100' container deck
barges;
D. Under the Authorization Agreement in the form set forth as Exhibit 3
hereto, the Secretary, on behalf of the United States, has agreed and will agree
to execute on each of the Obligations to be issued, a Guarantee of the payment
of the unpaid interest to the date of such payment on, and the unpaid balance of
the principal of, such Obligation under the provisions of Title XI of the Act,
and the Indenture Trustee is authorized to cause the Guarantees, bearing the
facsimile signature of the Secretary, and the facsimile seal of the United
States Department of Transportation, to be imprinted on the Obligations, and to
authenticate and deliver the Obligations and the Guarantees issued on the
Closing Date, such agreements and authorizations being subject to the conditions
set forth in the Authorization Agreement;
E. Pursuant to Section 1104(b)(5) of the Act, the Secretary has
determined that the interest to be borne by the Obligations (exclusive of
charges for the guarantee fee and service charges, if any) at the rate specified
in the form thereof set forth in Exhibit 2 hereto is reasonable; and
1
<PAGE>
F. All actions necessary have been taken in order (1) to make the
Obligations, when executed by the Shipowner, authenticated by the Indenture
Trustee and issued under the Indenture, the valid, binding and legal obligations
of the Shipowner in accordance with their terms, (2) to make the Guarantees to
be endorsed on the Obligations, when executed by the Secretary, authenticated by
the Indenture Trustee and delivered under this Indenture, the valid, binding and
legal obligations of the United States in accordance with their terms, and (3)
to make this Indenture the valid, binding and legal agreement of the parties
hereto in accordance with its terms.
NOW THEREFORE, in consideration of the premises, of the mutual
covenants herein contained, of the purchase of the Obligations by the Holders
thereof, and of other good and valuable consideration, the receipt and adequacy
of which the parties hereby acknowledge, and for the equal and proportionate
benefit of all the present and future Holders of the Obligations, the parties
hereto agree as follows:
ARTICLE FIRST
INCORPORATION OF GENERAL PROVISIONS
This Indenture shall consist of two parts: the Special Provisions and
the General Provisions attached hereto as Exhibit 1, made a part of this
Indenture and incorporated herein by reference.
ARTICLE SECOND
THE BONDS
(a) The Bonds issued hereunder shall be designated "United States
Government Guaranteed Ship Financing Bonds, 1997 Series II," and shall be in the
form of Exhibit 2 to this Indenture; and, the aggregate principal amount of
Bonds which may be issued under this Indenture shall not exceed $16,918,000
except as provided in Sections 2.09, 2.10, 2.12 and 3.10(b) of Exhibit 1 hereto.
(b) The Bonds shall be in the denominations of $1,000 or any integral
multiple thereof.
(c) The Shipowner shall at the date of the Closing maintain in
Jacksonville, Florida an office or agency for the purposes specified in Section
5.03 of Exhibit 1 to this Indenture.
(d) The Indenture Trustee shall at the date of the Closing have its
Corporate Trust Office in the City of Boston, Commonwealth of Massachusetts.
(e) The Bonds shall mature on March 30, 2023.
2
<PAGE>
ARTICLE THIRD
CERTAIN REDEMPTIONS
(a) Mandatory Sinking Fund Redemptions. The Bonds are subject to
redemption at a Redemption Price equal to 100% of the principal amount thereof,
together with interest accrued thereon to the applicable sinking fund Redemption
Date, through the operation of a mandatory sinking fund providing for the
semi-annual redemption on March 30 and September 30 of each year, commencing
September 30, 1998, of $338,360 principal amount of Bonds (or such lesser
principal amount of Bonds as shall then be outstanding), which amount represents
two percent (2%) of the Original Principal Amount of Obligations, plus interest
accrued thereon to the Redemption Date. On March 30, 2023 there shall become due
and payable, and the Shipowner shall pay, the balance of the unpaid principal
amount of Bonds then outstanding, together with all interest accrued thereon to
such date.
Notwithstanding the foregoing provisions of this subsection (a), if the
principal amount of Outstanding Bonds shall be reduced by reason of any
redemption pursuant to Sections 3.04 or 3.05 of Exhibit 1 to this Indenture, the
principal amount of Bonds to be redeemed pursuant to this subsection (a) on each
subsequent mandatory sinking fund Redemption Date for such Bonds shall be
reduced by an amount equal to the principal amount of such Bonds retired by
reason of such redemption pursuant to Sections 3.04 or 3.05 of Exhibit 1 hereto
divided by the number of mandatory sinking fund Redemption Dates (including the
Stated Maturity of such Bonds) scheduled thereafter (subject to such increase as
shall be necessary so that the total principal amount of Bonds to be redeemed on
any such sinking fund redemption date shall be an integral multiple of $1,000;
provided that, the entire unpaid principal amount of the Outstanding Bonds shall
be paid not later than March 30, 2023. The Shipowner shall, in accordance with
Section 3.02(d) of Exhibit 1 hereto, promptly after each redemption pursuant to
said Section 3.04, furnish to the Secretary, the Indenture Trustee and each
Holder of an Obligation a revised table of sinking fund payments reflecting the
reductions made pursuant to this subsection (a) as a result of such redemption.
3
<PAGE>
In lieu of making all or any part of any such mandatory sinking fund
redemption of Bonds, the Shipowner may, at its option, with the prior written
consent of the Secretary, receive credit for Bonds not previously so credited or
applied to reduce the principal amount of Bonds Outstanding, (i) redeemed by the
Shipowner pursuant to the optional redemption provision provided for in
subsection (c) of this Article or purchased or acquired by the Shipowner (other
than by redemption) and delivered to the Indenture Trustee for cancellation
pursuant to Section 2.13 of Exhibit 1 hereto. The Bonds so credited or applied
shall be credited or applied, as the case may be, by the Indenture Trustee, at
100% of the principal amount thereof. If the Shipowner shall elect to receive
credit or application as aforesaid in lieu of making all or part of any
mandatory sinking fund redemption, it shall deliver to the Indenture Trustee, at
least 40 days but not more than 60 days prior to the due date for such mandatory
sinking fund redemption, a Request (i) specifying the principal amount of Bonds
so optionally redeemed or otherwise acquired, and so to be credited or applied,
as the case may be, and (ii) stating that no such Bonds have theretofore been
made the basis of any such credit or application as aforesaid, and that none of
such Obligations are subject to the terms of any agreement or contract between
the Secretary, the Shipowner and/or any other person restricting the Shipowner's
right to apply any such Obligations as a credit pursuant to the terms of this
subsection (a), together with the Bonds (uncancelled) for which such credit or
application is so requested (unless such Bonds shall theretofore have been
delivered to the Indenture Trustee).
(b) [Reserved]
(c) Optional Redemptions of Bonds at Premium. At its option, the
Shipowner may redeem the Bonds, in whole at any time, at the redemption prices
as specified in the Bonds, together with interest accrued thereon to the date
fixed for redemption; provided that, no such redemption shall be made prior to
September 30, 2008, directly or indirectly with the proceeds of, or in
anticipation of, borrowing by or for the account of the Shipowner if such
borrowing has an effective interest cost (calculated in accordance with
generally accepted financial practice) of less than the rate of interest borne
by the Bonds. If the Shipowner shall elect to make any such optional redemption,
the Shipowner shall, at least 30 days but not more than 60 days prior to the
date fixed for redemption, deliver to the Indenture Trustee a Request stating
that the Shipowner intends to exercise its rights as above set forth to make
such optional redemption and specifying the Redemption Date, and the principal
amount of Bonds which the Shipowner intends to redeem on such date (which shall
not be less than all the Bonds outstanding). In the case of any redemption
pursuant to this subsection (c) prior to September 30, 2008, the Shipowner shall
deliver to the Indenture Trustee, at the time of delivery of said Request, an
Officer's Certificate stating that such redemption shall comply with the proviso
relating to such redemption prior to such date.
ARTICLE FOURTH
DEFINITIONS
For all purposes of this Indenture, unless otherwise expressly provided
or unless the context otherwise requires:
(1) All references herein to Articles, Sections or
other subdivisions, unless otherwise specified, refer to the
corresponding Articles, Sections and other subdivisions of
this Indenture;
4
<PAGE>
(2) The terms "hereof," "herein," "hereby," "hereto,"
"hereunder" and "herewith" refer to this Indenture;
(3) The terms used herein and defined in Schedule A
to this Indenture shall have the respective meanings stated in
said Schedule.
ARTICLE FIFTH
ADDITIONS, DELETIONS AND AMENDMENTS TO EXHIBIT 1
The following additions, deletions and amendments are hereby made to
Exhibit 1 to this Indenture.
(a) Concerning Section 2.04. The Shipowner and the Indenture Trustee
shall not enter into any Supplemental Indenture, and the Indenture Trustee shall
not enter into any supplement to the Authorization Agreement, pursuant to
Section 2.04 of Exhibit 1 to this Indenture, except to provide for the issuance
of additional Obligations of any series and Stated Maturity theretofore issued,
or of one or more additional series for the purpose of aiding in financing or
refinancing the construction, reconstruction or reconditioning of one or more of
the Vessels, or to refund Obligations issued for such purpose.
(b) Concerning Section 2.12. With respect to clause (1) of the proviso
to Section 2.12 of Exhibit 1 to the Indenture, a written agreement of indemnity
which is satisfactory in form and substance to the Secretary, the Shipowner, and
the Indenture Trustee, executed and delivered by an institutional Holder having
a combined capital and surplus of at least one hundred million dollars
($100,000,000) shall be considered sufficient indemnity to the Secretary, the
Shipowner, and the Indenture Trustee in connection with the execution,
authentication and delivery of any new Obligations or the making of any payment
as contemplated by said Section 2.12.
5
<PAGE>
(c) Concerning Payment of the Obligations. Notwithstanding anything to
the contrary in Exhibit 1 hereto, the Obligations to be issued hereunder shall
be payable as to principal, premium (if any), and interest, at an office or
agency maintained by the Shipowner for such purpose at the Corporate Trust
Office of the Indenture Trustee, or at the option of the Shipowner, as to
payments of principal, premium (if any), or interest by check mailed by such
Corporate Trust Office to the addresses of the Obligees as such addresses shall
appear in the Obligation Register, subject in any event to the provisions hereof
concerning home office payment. The Indenture Trustee agrees that within 30 days
from the date of any payment of principal or interest when the same shall become
due and payable by reason of maturity or redemption, a Responsible Officer in
the Corporate Trust Office of the Indenture Trustee shall ascertain to his
satisfaction that checks in payment of such amounts have been mailed by such
Corporate Trust Office to the addresses of the Obligees as provided above, if
payment is to be made by check, or if payment is to be made by wire transfer, or
by credit to an account maintained by the Obligee with the Indenture Trustee,
that such funds have been wired or credited, or if payment is to be made at the
Corporate Trust Office, that funds were held by the Indenture Trustee for such
payment on the date the payment was due. The Indenture Trustee shall have no
obligation to determine whether such checks or payments were received by the
Obligees.
(d) Concerning Selection of Bonds to be Redeemed. Notwithstanding the
provisions of Section 3.07(b) of Exhibit 1 to this Indenture, (i) if less than
all the Bonds are to be optionally redeemed under any of the provisions
contained or referred to in Article Third hereof or Article III of Exhibit 1,
the Indenture Trustee shall select for redemption Bonds of the Stated Maturity
or Stated Maturities, and (ii) if less than all the Bonds of a particular Stated
Maturity are to be redeemed under any provisions contained or referred to in
Article Third hereof or Article III of Exhibit I to this Indenture, the
Indenture Trustee shall select the particular Bonds and/or portions ($1,000 or
any integral multiple thereof) of Bonds to be redeemed on the Redemption Date by
allocating the principal amount to be redeemed among the Holders of Bonds of
such Stated Maturity in proportion to the respective principal amount of Bonds
of such Stated Maturity registered in their respective names.
(e) Concerning Section 3.08(a). Section 3.08 (a) of Exhibit 1 is
amended by adding the following after the word "Register": "provided, however,
that the requirement in this Section 3.08(a) to include the Redemption Price in
such notice may be satisfied by stating (i) the principal amount of Obligations
being redeemed, (ii) that the Shipowner is obligated to pay such amount,
together with accrued interest at the interest rate borne by the Obligations to
the Redemption Date and the Redemption Premium, and (iii) that the Shipowner
shall calculate the Redemption Premium and furnish such calculation, together
with a reasonably detailed summary thereof, to the Indenture Trustee and each
Holder not later than the second Business Day preceding the Redemption Date."
(f) Concerning References to Section 3.09(b). All cross-references to
Section 3.09(b) made in Exhibit 1 hereto shall be deemed to refer to Section
3.10(b) of Exhibit 1 hereto.
6
<PAGE>
(g) Concerning Home Office Payment. Notwithstanding any terms of this
Indenture or the Obligations to the contrary, the Shipowner may enter into an
agreement with any Holder of an Obligation providing for payment to such Holder
by certified or official bank check, or at the request of such Holder, by credit
to an account maintained by the Holder with the Indenture Trustee, or by wire
transfer of the principal of and the premium (if any), and interest on such
Obligation or any part thereof at a place other than the place or places
specified in such Obligation as the place for such payment, and for the making
of notation (if any), of such payment on such Obligation by such Holder, or by
an agent of the Shipowner or of the Indenture Trustee without presentation of
such Obligation. The Shipowner will furnish to the Indenture Trustee a copy of
each such agreement. The Indenture Trustee hereby consents to such agreement
contained in Section 7 of the Bond Purchase Agreement dated as of the Closing
Date, between the Shipowner and the Purchasers named in Schedule 1 thereto, and
hereby acknowledges receipt of a copy thereof.
(h) Concerning Section 7.02. The amount "$3,000,000" in Section 7.02 of
Exhibit 1 hereto is hereby deleted, and there is substituted therefor the amount
"$100,000,000."
(i) Concerning Section 10.01. Paragraph (2) of Section 10.01 of Exhibit
1 to this Indenture is deleted, and the following substituted in lieu thereof:
"(2) to evidence the succession pursuant to Article VIII of
another corporation or entity to the Shipowner or any
assumption of all or a part of the Obligations pursuant to
Article VIII;"
(j) Concerning Notices. Subject to the provisions of Section 13.01 of
Exhibit 1 to this Indenture, any notice, request, demand, direction, consent,
waiver, approval or other communication to be given to a party hereto or the
Secretary, shall be deemed to have been sufficiently given or made when
addressed to:
The Indenture Trustee as: State Street Bank and Trust Company
Corporate Trust Department
Two International Place
Boston, Massachusetts 02110
The Shipowner as: Trailer Bridge, Inc.
10405 New Berlin Road E.
Jacksonville, Florida 32226
Attention: John McCown
The Secretary as: SECRETARY OF TRANSPORTATION
c/o Maritime Administrator
Department of Transportation
400 Seventh Street, SW
Washington, D.C. 20590
7
<PAGE>
(k) Concerning Applicable Law. This Indenture and each Obligation shall
be governed by the laws of the State of New York, and to the extent applicable,
the federal laws of the United States.
(l) Execution in Counterparts. This Indenture may be executed in any
number of counterparts. All such counterparts shall be deemed to be originals,
and shall constitute but one and the same instrument.
8
<PAGE>
IN WITNESS WHEREOF, this Trust Indenture has been duly executed by the
parties hereto as of the day and year first above written.
TRAILER BRIDGE, INC.
Shipowner
[SEAL] By: /s/ John D. McCown
STATE STREET BANK AND TRUST COMPANY
Indenture Trustee
By: /s/ Gerald Wheeler
------------------
Vice President
[SEAL]
9
<PAGE>
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )
On this 4th day of December, 1997 before me personally appeared John
McCown, who being by me duly sworn, did depose and say that he resides at 40
Radcliffe Drive, Woodstock, New York 12948; that he is Chairman of TRAILER
BRIDGE, INC., that he knows the seal of said Corporation; that the seal affixed
to said instrument is such corporation's seal; that it was so affixed by
authority of the Board of Directors of said corporation, and that he signed his
name thereto by like authority.
In testimony whereof, I have hereunto set my hand and seal this 4th day
of December, 1997.
/s/ William G. Gotimer, Jr.
---------------------------
William G. Gotimer, Jr.
(Notarial Stamp and Seal)
02604837705
Comm. Expires 7/31/99
10
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
) SS:
COUNTY OF SUFFOLK )
Be it known this 1st day of December, 1997 personally appeared before
me Gerald R. Wheeler, who after being duly sworn, deposed and said that he is a
Vice President of STATE STREET BANK AND TRUST COMPANY, the Massachusetts Trust
Company which is described in and executed within the instrument hereto annexed,
that he/she knows the seal of said trust company, that the seal affixed to said
instrument is said trust company's seal, that it was so affixed and that he/she
signed the instrument hereto annexed by order of the Board of Directors of the
said STATE STREET BANK AND TRUST COMPANY, and that he/she signed his/her name
thereto by like authority, and acknowledged the annexed instrument to be the
free act and deed of the said STATE STREET BANK AND TRUST COMPANY.
In testimony whereof, I have hereunto set my hand and seal this 1st day
of December, 1997.
/s/ Kevin M. Gallaher
---------------------
NOTARY PUBLIC
(Notarial Stamp and Seal)
KEVIN M. GALLAGHER
Notary Public
Commission Expires July 12, 2002
Exhibit 10.8.6
CUSIP No. 892782 AB 9
$16,918,000 No. 1
UNITED STATES GOVERNMENT GUARANTEED
SHIP FINANCING BOND, 1997 SERIES II
6.52% Sinking Fund Bond Due March 30, 2023
Issued by
TRAILER BRIDGE, INC.
Principal and interest guaranteed under Title XI of the Merchant Marine
Act, 1936, as amended.
Trailer Bridge, Inc., a Delaware corporation (herein called the
"Shipowner"), FOR VALUE RECEIVED, promises to pay to PITNEY BOWES CREDIT
CORPORATION or registered assigns, the principal sum of SIXTEEN MILLION NINE
HUNDRED EIGHTEEN THOUSAND AND NO/100 DOLLARS ($16,918,000) on March 30, 2023,
and to pay interest semiannually on March 30 and September 30 of each year,
commencing March 30, 1998, on the unpaid principal amount of this Bond at the
rate of 6.52% per annum (calculated on the basis of a 360-day year of twelve
30-day months) from the interest payment date referred to above next preceding
the date of this Bond to which interest on the Bonds has been paid (unless the
date hereof is the date to which interest on the Bonds has been paid, in which
case from the date of this Bond), or if no interest has been paid on the Bonds
since the original issue date (as defined in the Indenture hereinafter
mentioned) of this Bond, from such original issue date, until payment of said
principal sum has been made or duly provided for, and at the same rate per annum
on any overdue principal.
<PAGE>
The principal of and the interest on this Bond, as well as any premium
hereon in case of certain redemptions hereof prior to maturity, are payable to
the registered owner hereof at the Corporate Trust Office of State Street Bank
and Trust Company, a Massachusetts trust company, as Indenture Trustee (together
with its successors, the "Indenture Trustee") or at the offices or agencies
which may be maintained from time to time by the Shipowner for such purposes in
any coin or currency of the United States of America which at the time of
payment is legal tender for the payment of public and private debts therein;
provided that, interest may be paid at the option of the Shipowner by check
mailed to the address of the registered owner hereof as such address shall
appear on the Obligation Register of said Indenture Trustee, and provided
further, that the Shipowner and the registered owner hereof may enter into other
arrangements as to payment in accordance with the Special Provisions of the
Indenture (as defined below).
This Bond is one of an issue of bonds of the Shipowner of $16,918,000
aggregate principal amount of sinking fund bonds, designated as its "United
States Government Guaranteed Ship Financing Bonds, 1997 Series II", all issued
under a Trust Indenture dated as of December 4, 1997 (said Trust Indenture, as
the same may be amended, modified or supplemented from time to time as permitted
thereunder, herein called the "Indenture"), between the Shipowner and the
Indenture Trustee to aid in financing the cost of the construction by the
Shipowner of the Vessels (as defined in the Indenture). Reference is hereby made
to the Indenture for definition of certain terms used herein and a description
of the rights, limitations of rights, obligations, duties and immunities
thereunder of the Shipowner and the Indenture Trustee and the rights and
limitations of rights of the Holders of the Bonds.
In accordance with the terms of an Authorization Agreement, dated as of
December 4, 1997 (herein the "Authorization Agreement"), between the United
States of America, represented by the Secretary of Transportation, acting by and
through the Maritime Administrator (herein called the "Secretary"), and the
Indenture Trustee, and by endorsement of the guarantee of the United States of
America (herein collectively called the "Guarantees") on each of the Bonds and
the authentication and delivery of the Guarantees by the Indenture Trustee, all
pursuant to Title XI of the Merchant Marine Act, 1936, as amended, and in effect
on December 4, 1997 (herein called the "Act"), the Bonds are guaranteed by the
United States of America as provided in the Authorization Agreement and in the
Guarantees endorsed thereon. Reference is hereby made to the Authorization
Agreement for a description of the rights, limitations of rights, obligations,
duties and immunities thereunder of the Secretary and the Indenture Trustee and
the rights and limitations of rights of the Holders of the Bonds.
Section 1103(d) of Title XI of the Act provides that:
"The full faith and credit of the United States is pledged to the
payment of all guarantees made under this title with respect to
both principal and interest, including interest, as may be
provided for in the guarantee, accruing between the date of
default under a guaranteed obligation and the payment in full of
the guarantee."
2
<PAGE>
If an Indenture Default (defined in Section 6.01 of Exhibit 1 to the
Indenture as a Payment Default, or the giving of a Secretary's Notice) shall
have occurred and be continuing, the Indenture Trustee, as provided in the
Indenture shall, not later than 60 days from the date of such Indenture Default,
demand payment by the Secretary of the Guarantees, whereupon the entire unpaid
principal amount of the Outstanding Bonds and all unpaid interest thereon shall
become due and payable on the first to occur of the date which is 30 days from
the date of such demand or the date on which the Secretary pays the Guarantees.
If no demand for payment of the Guarantees shall have been made by the Indenture
Trustee on or before the 30th day following an Indenture Default, the Holder of
any Outstanding Bond may, in the manner provided in the Indenture, make such
demand in place of the Indenture Trustee. In the event of an Indenture Default
of which the Secretary has actual knowledge, the Secretary, as provided in the
Authorization Agreement, will publish notice in the Authorized Newspapers, which
shall include The Wall Street Journal (all editions) and The Journal of
Commerce, of the occurrence of such Indenture Default within 30 days from the
date of such Indenture Default, unless demand for payment under the Guarantees
shall previously have been made by the Indenture Trustee, but any failure to
publish such notice or any defect therein shall not affect in any way any rights
of the Indenture Trustee or any Holder of a Bond with respect to such Indenture
Default.
Within 30 days from the date of any demand for payment of the
Guarantees, the Secretary shall pay to the Indenture Trustee, as agent and
attorney-in-fact for the Holders of the Outstanding Bonds (including this Bond),
all the unpaid interest to the date of such payment on, and the unpaid balance
of the principal of such Bonds in full, in cash; provided that, in the case of a
demand made as a result of a Payment Default, the Secretary shall not be
required to make any such payment if within such 30-day period (and prior to any
payment of the Guarantees by the Secretary), the Secretary finds either that
there was no Payment Default, or that such Payment Default was remedied prior to
the demand for payment of the Guarantees, in which event the Guarantees shall
continue in full force and effect.
The Holder of this Bond, by the purchase and acceptance hereof, hereby
irrevocably appoints the Indenture Trustee and each other Holder of any
Outstanding Bond as agent and attorney-in-fact for the purpose of making any
demand for payment of the Guarantees, and (in the case of the Indenture Trustee)
of receiving and distributing such payment; provided that, no action or failure
to act by the Indenture Trustee shall affect the right of the Holder of this
Bond to take any action whatsoever permitted by law and not in violation of the
terms of this Bond or of the Indenture.
In the event of (a) a default, continued for 25 days, in the payment of
the principal of or interest on the Bonds (including this Bond) when due, or (b)
any default under the security agreement, the mortgage or any loan agreement
relating to the Obligations between the Secretary, the Shipowner and any other
parties, the Secretary shall have the right to and may, in its sole discretion
by written notice given to the Indenture Trustee on or after said 25-day period
or after such default but prior to receipt by the Secretary of a demand in
accordance with the Indenture for payment under the Guarantees, assume all of
the rights and obligations of the Shipowner under the Indenture and the Bonds,
and if such default relates to the payment of the principal of and interest on
the Bonds, make all payments then in default under the Bonds.
Any amount payable by the Secretary under the Guarantees shall not be
subject to any claim or defense of the United States of America, the Secretary,
or others, whether by way of counterclaim, set-off, reduction or otherwise.
Further, the Holder of this Bond shall have no right, title or interest in any
collateral or security given by the Shipowner to the Secretary.
3
<PAGE>
After payment of the Guarantees by the Secretary to the Indenture
Trustee, this Bond (1) if it has not then been surrendered for cancellation or
canceled, shall represent only the right to receive payment in cash of an amount
(less the amount, if any, required to be withheld with respect to transfer or
other taxes on payments to the Holder of this Bond) equal to the unpaid
principal amount hereof and the unpaid interest accrued hereon to the date on
which the Secretary shall have paid the Guarantees in full in cash to the
Indenture Trustee, (2) shall otherwise no longer constitute or represent an
obligation of the Shipowner, and (3) shall not be entitled to any other rights
or benefits provided in the Indenture, subject to Section 6.08 of the Indenture.
The Bonds (including this Bond) may be redeemed upon the terms and
conditions provided in the Indenture, in whole (but not in part), at the option
of the Shipowner, at any time upon at least 30 and not more than 60 days prior
notice given as provided in the Indenture, at a Redemption Price equal to 100%
of the principal amount thereof plus the Redemption Premium plus interest
accrued thereon to the date of redemption; provided that, no such redemption
shall be made prior to September 30, 2008, directly or indirectly, with the
proceeds of, or in anticipation of, borrowing by or for the account of the
Shipowner if such borrowing has an effective interest cost (calculated in
accordance with generally accepted financial practice) of less than the rate
borne by the Bonds.
"Redemption Premium" applicable in respect of any redemption of the
Bonds pursuant to Article Third (c) of the Indenture shall mean the greater of
(a) zero and (b) the excess of:
(i) the sum of the respective present values as of the date such Redemption
Premium becomes due and payable of: (A) the pro rata portion of each
payment of a scheduled installment of principal that would have been
required to be made with respect to the principal amount of the Bonds
being redeemed (the "Prepaid Principal") during the remaining term to
maturity of the Bonds, (B) without duplication, the pro rata portion of
the payment of the principal balance that would have been required to
be made at final maturity of the Bonds with respect to such Prepaid
Principal, and (C) each payment of interest that would have been
required to be paid during the remaining term to maturity of the Bonds
with respect to such Prepaid Principal determined, in the case of each
such required principal payment prior to maturity, principal payment at
final maturity and interest payment, by discounting the amount thereof
(on a semiannual basis) from the date fixed therefor back to the date
such Redemption Premium becomes due and payable at the Reference Rate
(as hereinafter defined) (assuming for such purpose that all such
payments were made when due pursuant to the terms of the Bonds and the
Indenture, and that no other payment with respect to such Prepaid
Principal was made) over
(ii) the amount of such Prepaid Principal.
4
<PAGE>
"Reference Rate" applicable in respect of any Bond shall mean a per
annum rate equal to the annual yield for United States Treasury
securities having a term to maturity equal to the remaining weighted
average life to maturity (calculated in accordance with customary
United States investment banking practices) of the Bonds as such annual
yield is determined by reference to Federal Reserve Statistical Release
H.15 (519) ("Release H.15") published most recently prior to the third
Business Day preceding the date such amount becomes due and payable, or
if Release H.15 is no longer published, such annual yield as
determined, at the expense of the Shipowner, by such other publication
or source of information selected by the Shipowner and acceptable to
the Indenture Trustee and all Holders, provided that, if there shall be
no actual United States Treasury security having a term to maturity
equal to the remaining weighted average life to maturity of the Bonds,
the annual yield for a United States Treasury security deemed to have
such a term to maturity shall be linearly interpolated on a basis
consistent with the actual yields of other United States Treasury
securities as determined by reference to Release H.15, or (if Release
H.15 is no longer published) as determined at the expense of the
Shipowner by such other publication or source of information.
The Bonds (including this Bond) are also subject to redemption, upon
the terms and conditions provided in the Indenture and upon like notice, through
the operation of a mandatory sinking fund providing for the redemption on
September 30, 1998, and on each March 30 and September 30 thereafter to and
including March 30, 2023, at 100% of the principal amount thereof plus interest
accrued thereon to such date, of a principal amount of such Bonds equal to
$338,360 and on March 30, 2023, the entire unpaid principal amount of the
Outstanding Bonds shall be paid in full, together with all interest accrued
thereon to such date, provided that, notwithstanding the foregoing provisions of
this paragraph, in case the principal amount of Outstanding Bonds shall be
reduced by reason of any redemption described in the next succeeding paragraph,
the principal amount of Bonds to be redeemed through the operation of the
mandatory sinking fund on each subsequent mandatory sinking fund redemption date
shall be subject to reduction as provided in the Indenture. In lieu of making
all or any part of any such mandatory sinking fund redemption, the Shipowner
may, at its option, receive credit for Bonds (not previously so credited or
applied to reduce the amount of Bonds outstanding) (i) redeemed pursuant to the
optional redemption at a premium referred to above, or (ii) purchased or
acquired by the Shipowner other than by redemption. Bonds so credited shall be
credited by the Indenture Trustee at 100% of the principal amount thereof.
5
<PAGE>
The Bonds (including this Bond) are also subject to redemption, upon
the terms and conditions provided in the Indenture, in whole or in part, at 100%
of the principal amount thereof, plus interest accrued thereon to the date of
redemption, upon at least 30 and not more than 60 days prior notice (a) in the
event that Bonds must be redeemed so that the principal amount of all
Obligations Outstanding after such redemption will not exceed 87 1/2% of the
Depreciated Actual Cost or Actual Cost, as the case may be, of the Vessels, as
determined by the Secretary, (b) in the event of an actual, constructive, agreed
or compromised total loss of, or requisition of title to, or seizure or
forfeiture of, a Vessel or Vessels, (c) in the event of termination of a
contract relating to the construction of a Vessel, or (d) in the event that,
after an assumption by the Secretary of the Bonds, a purchaser of a Vessel or
Vessels from the Secretary does not assume all the rights and obligations of the
Shipowner under the Indenture relating to such Vessel or Vessels.
The Bonds (including this Bond) may also be redeemed upon the terms and
conditions provided in the Indenture, in whole or in part, at the option of the
Secretary, at any time following an assumption of the Bonds and the Indenture by
the Secretary and prior to any sale of a Vessel or Vessels to a purchaser which
assumes the Shipowner's rights and obligations under the Bonds and the
Indenture, upon at least 30 and not more than 60 days prior notice given as
provided in the Indenture, at a Redemption Price equal to 100% of the principal
amount to be redeemed, plus interest accrued to the date fixed for redemption.
Any optional redemption shall be subject to the receipt of the
redemption moneys by the Indenture Trustee or any Paying Agent. Bonds called for
redemption shall (unless the Shipowner shall default in the payment of such
Bonds at the applicable Redemption Price plus accrued interest) cease to bear
interest on and after the date fixed for redemption.
As provided in the Indenture and to the extent permitted thereby,
compliance by the Shipowner with any of the terms of the Indenture may be
waived, and the Indenture and the rights and obligations of the Shipowner, and
the rights of the Holders of the Bonds (including this Bond) thereunder may be
modified, at any time with the prior consent of the Secretary, and except as
otherwise expressly provided in the Indenture, the consent of the Holders of at
least 60% in principal amount of the Outstanding Bonds affected thereby in the
manner and subject to the limitations set forth in the Indenture; provided that,
no such waiver or modification shall (1) without the consent of the Holder of
each Bond affected thereby: (a) change the Stated Maturity or reduce the
principal amount of any Bond, (b) extend the time of payment of, or reduce the
rate of, interest thereon, (c) change the due date of or reduce the amount of
any sinking fund payment, (d) reduce any premium payable upon the redemption
thereof, or (e) change the coin or currency in which any Bond or the interest
thereon is payable; or (2) without the consent of all Holders of Bonds: (a)
terminate or modify any of the Guarantees or the obligations of the United
States of America thereunder, (b) reduce the amount of any of the Guarantees,
(c) eliminate, modify or condition the duties of the Indenture Trustee to demand
payment of the Guarantees, (d) eliminate or reduce the eligibility requirements
of the Indenture Trustee, or (e) reduce the percentage of principal amount of
Bonds the consent of whose Holders is required for any such modification or
waiver.
6
<PAGE>
The Indenture provides that the Bonds (including this Bond) shall no
longer be entitled to any benefit provided therein if the Bonds shall have
become due and payable at Maturity (whether by redemption or otherwise) and
funds sufficient for the payment thereof (including interest to the date fixed
for such payment, together with any premium thereon) and available for such
payment (1) shall be held by the Indenture Trustee or any Paying Agent, or (2)
shall have been so held and shall thereafter have been paid to the Shipowner
after having been unclaimed for 6 years after the date of maturity thereof
(whether by redemption or otherwise) or the date of payment of the Guarantees,
except for the right (if any), of the Holder to receive payment from the
Shipowner of any amounts paid to the Shipowner as provided in (2) above with
respect to this Bond, all subject to the provisions of Section 6.08 of Exhibit 1
to the Indenture.
The transfer of this Bond may be registered by the registered Holder or
by his duly authorized attorney, at the Corporate Trust Office of the Indenture
Trustee, upon surrender or cancellation of this Bond, accompanied by an
instrument of transfer in form satisfactory to the Shipowner and the Indenture
Trustee, duly executed by the registered Holder hereof or his attorney duly
authorized in writing, and thereupon a new, fully registered Bond or Bonds of
like series and maturity for the same aggregate principal amount will be issued
to the transferee in exchange therefor, each in the principal amount of $1,000
or any integral multiple thereof, subject to the provisions of the Indenture.
The Indenture provides that the Shipowner shall not be required to make
transfers or exchanges of (1) Bonds for a period of 15 days immediately prior to
an Interest Payment Date, (2) Bonds after demand for payment of the Guarantees
and prior to payment thereof or rescission of such demand as provided in Section
6.02(a) of Exhibit 1 to the Indenture, or (3) any Bond which has been selected
for redemption in whole or in part.
The Shipowner, the Secretary, the Indenture Trustee and any office or
agency for the payment of Bonds may deem and treat the person in whose name this
Bond is registered as the absolute owner thereof for all purposes, and neither
the Shipowner, the Secretary, the Indenture Trustee, nor any such office or
agency shall be affected by any notice to the contrary, whether this Bond shall
be past due or not.
No recourse shall be had for the payment of principal of, or the
interest or premium (if any) on, this Bond, or for any claim based hereon or on
the Indenture, against any incorporator or any past, present or future
subscriber to the capital stock, stockholder, officer or director of the
Shipowner or of any successor corporation, as such, either directly or through
the Shipowner or any such successor corporation, under any constitution, statute
or rule of law or by the enforcement of any assessment, or otherwise, all such
liability being expressly waived and released by the acceptance of this Bond and
by the terms of the Indenture.
Neither this Bond nor the Guarantee endorsed hereon shall be valid or
become obligatory for any purpose until the Indenture Trustee shall have fully
signed the authentication certificate endorsed hereon.
7
<PAGE>
IN WITNESS WHEREOF, the Shipowner has caused this Bond to be duly
executed by the manual or facsimile signatures of its duly authorized officers
under its corporate seal or facsimile thereof.
Dated as of December 4, 1997 TRAILER BRIDGE, INC.
(SEAL)
BY: John D. McCown
Chairman
Attest:
William G. Gotimer, Jr.
8
<PAGE>
GUARANTEE OF THE UNITED STATES OF AMERICA
The United States of America, represented by the Secretary of
Transportation, acting by and through the Maritime Administrator, pursuant to
Title XI of the Merchant Marine Act, 1936, as amended, hereby guarantees to the
holder of the within Bond, upon demand of the holder or his agent, payment of
the unpaid interest on, and the unpaid balance of principal of, such Bond,
including interest accruing between the date of default under such Bond and the
payment in full of this Guarantee. The full faith and credit of the United
States is pledged to the payment of this Guarantee. The validity of this
Guarantee is incontestable in the hands of any holder of such Bond. Payment of
this Guarantee will be made in accordance with the provisions of such Bond.
UNITED STATES OF AMERICA
SECRETARY OF TRANSPORTATION
(SEAL OF THE DEPARTMENT
OF TRANSPORTATION)
BY: /s/ John E. Graykowski
----------------------
John E. Graykowski
Maritime Administrator
TRUSTEE'S AUTHENTICATION CERTIFICATE
This is one of the Bonds described in the Indenture and the foregoing
Guarantee is one of the Guarantees described in the Authorization Agreement.
STATE STREET BANK AND
TRUST COMPANY, Indenture
Trustee
By: /s/ Gerald R. Wheeler
---------------------
Authorized Officer
9
<PAGE>
PAYMENTS ON ACCOUNT OF PRINCIPAL
Amount of Balance of Authorized
Payment Date Principal Paid Principal Unpaid Signature
Exhibit 10.8.7
---------------------------------------------------------------------------
Contract No. MA-13309
AMENDED AND RESTATED
TITLE XI RESERVE FUND AND
FINANCIAL AGREEMENT
Between
TRAILER BRIDGE, INC.
and
THE UNITED STATES OF AMERICA
Dated as of June 23, 1997,
Restated as of December 4, 1997
----------------------------------------------------------------
<PAGE>
AMENDED AND RESTATED
TITLE XI RESERVE FUND
AND FINANCIAL AGREEMENT
TABLE OF CONTENTS TO
SPECIAL PROVISIONS
Page
Recitals................................................................... 1
Granting Clause............................................................ 2
ARTICLE FIRST
Definitions................................................................ 2
ARTICLE SECOND
Incorporation of General Provisions........................................ 3
ARTICLE THIRD
Additions, Deletions and Amendments to Exhibit............................. 3
(a) Concerning Subsection 2(a) of Exhibit 1............................ 3
(b) Concerning Subsection 2(b)(2)(D) of Exhibit 1...................... 3
(c) Concerning Subsection 13(a) of Exhibit 1........................... 5
(d) Concerning Subsection 13(b) of Exhibit 1........................... 6
(e) Concerning Subsection 13(b)(7)of Exhibit 1......................... 6
(f) Concerning Subsection 13(b)(3) of Exhibit 1........................ 7
(g) Concerning Subsection 13(b)(9) of Exhibit 1........................ 7
(h) Concerning Section 15 of Exhibit 1................................. 7
(i) Concerning Eligible Investments.................................... 7
ARTICLE FOURTH
Vessel Application......................................................... 7
Signatures................................................................. 8
i
<PAGE>
Contract No. MA-13309
AMENDED AND RESTATED
TITLE XI RESERVE FUND
AND FINANCIAL AGREEMENT
THIS TITLE XI RESERVE FUND AND FINANCIAL AGREEMENT, originally dated as
of June 23, 1997 and amended and restated as of December 4, 1997 between TRAILER
BRIDGE INC., a Delaware corporation (the "Company"), and THE UNITED STATES OF
AMERICA (the "United States"), represented by the Secretary of Transportation,
acting by and through the Maritime Administrator (the "Secretary"), pursuant to
the provisions of Title XI of the Merchant Marine Act, 1936, as amended.
R E C I T A L S:
A. The Company has authorized the issuance of bonds designated "United
States Government Guaranteed Ship Financing Bonds, 1997 Series" in an aggregate
principal amount not to exceed $10,515,000 (individually, a "June Obligation,"
and collectively, the "June Obligations") to finance the cost of construction of
two 408'9" x 100' container deck barges which it expects to be named CHICAGO
BRIDGE and CHARLOTTE BRIDGE (the "June Vessels");
B. Under the provisions of an Authorization Agreement (the "June
Authorization Agreement"), Contract No. MA-13305, dated as of June 23, 1997,
entered into between the Secretary and the Indenture Trustee, the Secretary has
authorized a guarantee to be endorsed upon each of the June Obligations,
pursuant to which the Secretary has guaranteed the payment in full of all of the
unpaid interest to the date of payment on, and all of the unpaid principal
balance of, each June Obligation (individually, a "June Guarantee," and
collectively, the "June Guarantees");
C. In consideration of the execution of the June Authorization
Agreement and of the June Guarantees, and as security to the United States for
the payment to the United States of the principal of and the interest due or to
become due on the promissory note, dated June 23, 1997 to be executed and
delivered by the Company to the Secretary with respect to the Obligations (the
"June Secretary's Note"), in accordance with the terms thereof, the Company has
made and entered into a Security Agreement, dated as of June 23, 1997, between
the Company and the Secretary (the "Security Agreement"), pursuant to which the
Company has assigned to the Secretary, among other things, all insurance
policies, any future charter hire from the June Vessels, and all of the
Company's right, title and interest in and to the Construction Contract relating
to the June Vessels;
D. The Company, on the respective delivery date of each of the June
Vessels, will execute and deliver a first preferred fleet mortgage (the "June
Mortgage") thereon in favor of the Secretary; and
1
<PAGE>
E. The Company, the Secretary and State Street Bank and Trust Company,
a Massachusetts trust company ("Depository-Bailee" or the "Depository") entered
into the Depository Agreement, Contract No. MA-13308, dated as of June 23, 1997
(the "June Depository Agreement"), providing, among other things, for the
creation of the Title XI Reserve Fund in respect of the June Vessels;
F. The Company has authorized the issuance of bonds designated "United
States Government Guaranteed Ship Financing Bonds, 1997 Series II" in an
aggregate principal amount not to exceed $16,918,000 (individually each a
"December Obligation" and collectively the "December Obligations") to finance
the cost of construction of three 408'9" x 100" container deck barges which it
expects to be named _______________,_____________ and __________. (the "December
Vessels");
G. Under the provisions of an Authorization Agreement (the "December
Authorization Agreement"), Contract No. MA-13345, dated as of the date of the
restatement hereof, entered into between the Secretary and the Indenture
Trustee, the Secretary has authorized a guarantee to be endorsed upon each of
the December Obligations, pursuant to which the Secretary has guaranteed the
payment in full of all of the unpaid interest to the date of payment on, and all
of the unpaid principal balance of, each December Obligation (individually each
a "December Guarantee", and collectively the "December Guarantees");
H. In consideration of the execution of the December Authorization
Agreement and of the December Guarantees, and as security to the United States
for the payment to the United States of the principal of and the interest due or
to become due on the promissory note, dated the date of the restatement hereof,
to be executed and delivered by the Company to the Secretary with respect to the
December Obligations (the "December Secretary's Note"), in accordance with the
terms thereof, the Company has made and entered into a Security Agreement, dated
as of the date of the restatement hereof, between the Company and the Secretary
(the "December Security Agreement"), pursuant to which the Company has assigned
to the Secretary, among other things, all insurance policies, any future charter
hire from the December Vessels, and all of the Company's right, title and
interest in and to the Construction Contract relating to the December Vessels;
I. The Company, on the respective delivery date of each of the December
Vessels, will execute and deliver a first preferred fleet mortgage (the
"December Mortgage") thereon in favor of the Secretary;
J. The Company, the Secretary and the Depository on the date of the
restatement hereof entered into an amendment and restatement of the June
Depository Agreement, Contract No. MA 13308, (as so amended and restated the
"Depository Agreement") providing additionally, among other things, for the
creation of a Title XI Reserve Fund in respect of the December Vessels; and
2
<PAGE>
K. The June Obligations and December Obligations are collectively
referred to herein as the "Obligations" (and each as an "Obligation"), the June
Vessels and the December Vessels are herein collectively referred to as the
"Vessels" (and each as a "Vessel"), the June Authorization Agreement and the
December Authorization Agreement are herein collectively and individually
referred to as the "Authorization Agreement", the June Guarantees and the
December Guarantees are herein collectively referred to as the Guarantees (and
each individually as a "Guarantee"), and the June Mortgage and the December
Mortgage are herein collectively, and each individually, referred to as the
"Mortgage".
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and of other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereby agree as follows:
GRANTING CLAUSE
The Company hereby sells, grants, conveys, mortgages, assigns,
transfers, pledges, confirms and sets over unto the Secretary a continuing
security interest in all of its right, title and interest in and to (a) the
Title XI Reserve Fund, and (b) all sums, instruments, moneys, negotiable
documents, chattel paper and proceeds thereof currently on deposit, or hereafter
deposited in the Title XI Reserve Fund, all of which foregoing collateral shall
be held by the Depository-Bailee as bailee in accounts in the name of "Trailer
Bridge, Inc. entirely as collateral for the United States of America, as
represented by the Secretary of Transportation, acting by and through the
Maritime Administrator (the "Secretary") and held by the Depository-Bailee
solely and exclusively as bailee for the Secretary."
ARTICLE FIRST
DEFINITIONS
For all purposes of this Title XI Reserve Fund and Financial Agreement,
unless otherwise expressly provided or unless the context otherwise requires:
(1) All references to Sections or other subdivisions, unless otherwise
specified, refer to the corresponding Sections and other subdivisions of the
Title XI Reserve Fund and Financial Agreement;
(2) The terms "hereof," "herein," "hereto," "hereunder" and "herewith"
refer to this Title XI Reserve Fund and Financial Agreement;
(3) The capitalized terms used herein are defined in Schedule X to the
Security Agreement; and
3
<PAGE>
(4) Capitalized terms used herein which are defined in the General
Provisions attached hereto as Exhibit 1 shall have the respective meanings
stated in said General Provisions unless otherwise defined pursuant to
subparagraph 3 of this Article First.
ARTICLE SECOND
INCORPORATION OF GENERAL PROVISIONS
This Title XI Reserve Fund and Financial Agreement shall consist of two
parts: the Special Provisions and the General Provisions attached hereto as
Exhibit 1, made a part of the Title XI Reserve Fund and Financial Agreement, and
incorporated herein by reference. Where a provision of the General Provisions
has been modified or superseded by a provision of the Special Provisions, all
references in the General Provisions to the modified or superseded sections
shall be deemed to refer to such sections as so modified or superseded.
ARTICLE THIRD
ADDITIONS, DELETIONS AND AMENDMENTS TO EXHIBIT 1
The following additions, deletions and amendments are hereby made to
Exhibit 1 hereto:
(a) Concerning Subsection 2(a) of Exhibit 1: Subsection 2(a) of Exhibit
1 hereto is amended by adding the following sentence at the end thereof:
"Wherever reference is made in this Exhibit 1 to Title XI Reserve Fund
and Financial Agreement to the Title XI Reserve Fund special joint
depository account, such reference shall be changed to a separate
depository account held by the Title XI Reserve Fund Depository-Bailee,
as bailee, in the name of "Trailer Bridge, Inc. entirely as collateral
for the United States of America, represented by the Secretary of
Transportation, acting by and through the Maritime Administrator (the
"Secretary") and held by the Depository- Bailee solely and exclusively
as bailee for the Secretary."
(b) Concerning Subsection 2(b)(2)(D) of Exhibit 1: Subsection
2(b)(2)(D) of Exhibit 1 hereto is deleted in its entirety and the following
substituted in lieu thereof:
"(D) Irrespective of the Company's deposit requirements into the Title
XI Reserve Fund as herein stated, the Company shall not be required to
make any deposits into the Title XI Reserve Fund if (i) the Title XI
Obligations and the related Secretary's Note with respect to the
Vessels shall have been satisfied and discharged and if the Company
shall have paid or caused to be paid all other sums secured under the
Security Agreement and/or the Mortgage, (ii) all of the Guarantees on
4
<PAGE>
the Outstanding Obligations shall have been terminated pursuant to the
provisions of the Security Agreement, or (iii) the amount (including
any securities at current market value) in the Title XI Reserve Fund is
equal to, or in excess of 50% of the principal amount of the
outstanding Title XI obligations related to the Vessels; provided that,
if at any time after the date hereof, (w) the Company's Working Capital
is equal to (i) $3,000,000 at June 30, 1997 and (ii) at least $1 plus
one-half of all annual charter hire and lease obligations (having a
term of more than six months) due and payable within the succeeding
fiscal year, other than charter hire and other lease obligations
already included as a current liability on the Company's balance sheet
for every period semi-annual thereafter, (x) the Company's Direct
Obligations are less than twice Net Worth, (y) the Company's Inclusive
Obligations are less than 3.5 times Net Worth at June 30, 1997, 3.0
times at December 31, 1997 and June 30, 1998 and 2.0 times at December
31, 1998 and every semi-annual period thereafter, and (z) the Company's
Cash Flow is at least 1.3 times Debt Service, the Company may by
written notice to the Secretary elect in accordance with paragraph (a)
of Section 13 to be governed by the terms and conditions set forth in
paragraphs (b) and (c) of Section 13 hereof and from and after the date
of such election, the Company shall not be required to make any
deposits into the Title XI Reserve Fund if the income of the Vessels
(which would cause such deposit under subparagraph (2) above) is Non
Deposit Year Income. The term "Non Deposit Year Income" as used herein
shall mean any income derived from operation of the Vessels earned
during any fiscal year of the Company at the end of which:
(w) the Company's Working Capital is equal to (i) $3,000,000 at
June 30, 1997 and (ii) at least $1 plus one-half of all annual
charter hire and lease obligations (having a term of more than
six months) due and payable within the succeeding fiscal year,
other than charter hire and other lease obligations already
included as a current liability on the Company's balance sheet
for every semi-annual period thereafter,
(x) the Company's Direct Obligations are less than twice Net
Worth,
(y) the Company's Inclusive Obligations are less than 3.5 times
Net Worth at June 30, 1997, 3.0 times at December 31, 1997 and
June 30, 1998 and 2.0 times at December 31, 1998 and every
semi-annual period thereafter, and
(z) the Company's Cash Flow is at least 1.3 times Debt Service.
As used in this Subsection D and as used in Article THIRD subsections
(d) and (h) of this Title XI Reserve Fund and Financial Agreement, the following
terms shall have the following meanings:
"Cash Flow" for any twelve month period shall mean for such period the
sum of the Company's (a) pre-tax income, (b) interest expense, and (c)
depreciation and
5
<PAGE>
amortization expense (but for the year ending December 31, 1997 without
deducting from income non-recurring non-cash items recorded prior to June 30,
1997) less (d) any dividends paid during such period pursuant to the authority
given to the Company to pay dividends under Article THIRD subsection (f) of this
Title XI Reserve Fund and Financial Agreement.
"Debt Service" shall mean interest on debt plus principal payment on
debt during the preceding year.
"Direct Obligations" shall mean long term debt of the Company, provided
that in calculating such long term debt or in calculating the net worth of the
Company amounts (hereinafter "Subordinated Debt") due to affiliates which are
subordinated to the repayment of the Company's Title XI Obligations pursuant to
a subordination agreement approved by the Secretary shall be adjusted in the
calculation of long term debt or net worth, as the case may be.
"Inclusive Obligations" shall mean the Company's Direct Obligations
plus deferred lease hire, guarantees and other contingent obligations of the
Company.
"Subordinated Debt" shall have the meaning given to such term above in
the definition of Direct Obligations.
(c) Concerning Subsection 13(a) of Exhibit 1. Pursuant to Subsection
(13)(a) the Company, with the consent of the Secretary, hereby elects to be
governed by subsections 13(b) and (c) of Exhibit 1 hereto, as amended herein.
From the date hereof, the covenants set forth in Section 12 of Exhibit 1 hereto
shall not apply to the Company.
(d) Concerning Subsection 13(b) of Exhibit 1. Notwithstanding anything
contained in subsection 13(b) of Exhibit 1 hereto, the Company shall be entitled
to do or perform any acts specified in subsection 13(b), clause (1) through
(13), inclusive of Exhibit 1 hereto at any time when it shall be able to meet
all the following financial tests:
(1) Long-term Debt of the Company shall be less than 2.5 times
Net Worth of the Company at December 31, 1997 and June 30,
1998, and shall be less than 2.0 times at December 31,
1998 and thereafter;
(2) Net Worth of the company shall be equal to at least
$29,457,397; and
(3) The Company shall have Debt Service Coverage
of at least 1.3 times Debt Service. For
purposes of this test, Debt Service Coverage
will be defined as the ratio of earnings
before Interest, taxes, depreciation and
amortization to interest plus scheduled
principal payments. Earnings for the year
ending December 31,
6
<PAGE>
1997 will exclude non-recurring non-cash items recorded
prior to June 30, 1997.
(e) Concerning Subsection 13(b)(7)of Exhibit 1. Subsection 13(b)(7) of
Exhibit 1 hereto is hereby amended by deleting the numbers "$75,000" and
"$50,000" wherever they appear and substituting therefor the numbers $150,000
and $100,000," respectively.
(f) Concerning Subsection 13(b)(3) of Exhibit 1. Notwithstanding
anything contained in Subsection 13 (b)(3) of Exhibit 1 hereto, the Company may
pay dividends or distributions in an amount equal to the Company shareholders'
income tax liability attributed to the earnings of the Company provided that the
Company is not in default with respect to its Title XI obligations. Payment of
the dividends or distributions are subject to verification by a corporate
officer of the Company as to the tax liability and the Secretary's prior written
consent. This section (f) is only applicable for periods in which the Company is
treated as an S Corporation under the Internal Revenue Code.
(g) Concerning Subsection 13(b)(9) of Exhibit 1. In connection with
Subsection 13(b)(9) of Exhibit 1 hereto aggregate annual payments of charter
hire and rent for which the Company may become liable (directly or indirectly)
under charters and leases (having a term of six months or more), for which the
prior written consent of the Secretary shall not be required, shall not exceed
$1,000,000.
(h) Concerning Section 15 of Exhibit 1. The standard qualifying
requirements of Section 15 of Exhibit 1 are hereby waived provided that on June
23, 1997 a responsible officer of the Company shall certify that the Company
meets with the following four financial covenants established by the Secretary:
(i) Working Capital shall be no less than three million
dollars ($3,000,000).
(ii) The Company's Direct Obligations shall be less than 2.00
times its Net Worth. Long-term debt and Net Worth shall be
calculated in accordance with generally accepted accounting
principals and shall be adjusted by any amounts due to affiliates
which constitute Subordinated Debt.
(iii) The Company's Inclusive Obligations shall be less than 3.5
times the Company's Net Worth.
(iv) Cash Flow coverage of at least 1.5 times Debt Service.
and that on December 4, 1997 a responsible officer of the Company shall certify
that the Company meets with the following three financial covenants established
by the Secretary:
(x) Working Capital shall be equal to three million dollars
($3,000,000);
7
<PAGE>
(y) Long-Term Debt shall be less than 2.0 times net worth. For
the purposes of this clause (y), Long-Term Debt will be the sum of
TBI's GAAP balance sheet debt plus the long term portion of debt
incurred by Kadampanattu Corp. and secured by vessels under charter
by the Company plus any amounts guaranteed by the Company; and
(z) Net Worth shall be equal to at least $29,457,397.
8
<PAGE>
(i) Concerning Eligible Investments. Notwithstanding anything in the
General Provisions hereof to the contrary, wherever herein the Company is
entitled to invest in "Eligible Investments", such investments shall be
restricted to "Securities" as such term is defined in the Depository Agreement.
ARTICLE FOURTH
VESSEL APPLICATION
This Title XI Reserve Fund and Financial Agreement shall apply to the
Vessels listed in Attachment A to Exhibit 1 attached hereto. Any allocable
financial requirements or other specific requirements relating to a particular
Vessel or Vessels shall be so indicated in Attachment A. It is the intention of
this Title XI Reserve Fund and Financial Agreement that it remain in effect so
long as the Company owns the Vessels with Title XI guaranteed obligations
outstanding.
9
<PAGE>
IN WITNESS WHEREOF, this Amended and Restated Title XI Reserve Fund and
Financial Agreement has been executed by the parties hereto as of the day and
year first above written.
TRAILER BRIDGE, INC.
(SEAL)
By:_______________________
Chairman
Attest:
UNITED STATES OF AMERICA
SECRETARY OF TRANSPORTATION
By: MARITIME ADMINISTRATOR
By: ___________________________
Secretary
Maritime Administration
Attest:
Assistant Secretary
Maritime Administration
10
<PAGE>
ATTACHMENT A TO EXHIBIT 1
-------------------------
TITLE XI RESERVE FUND AND FINANCIAL AGREEMENT
---------------------------------------------
(Contract No. MA-13309)
Section 16. The Parties.
- - -----------------------
Company: TRAILER BRIDGE, INC.
10405 New Berlin Road E
Jacksonville, Florida 32226
Depository: STATE STREET BANK AND TRUST COMPANY
Corporate Trust Department
Two International Place
Boston, Massachusetts 02110
ARTICLE FOURTH Requirements:
---------------------------
For the purpose of ARTICLE FOURTH, this Title XI Reserve Fund and
Financial Agreement shall apply to the Company's five 408'9" X 100' container
deck barges being built in the Pearlington, Mississippi shipyard of Halter
Marine, Inc. for the Company pursuant to (i) the Vessel Construction Contract
For Two Vessels between the Company and said Halter Marine, Inc., as amended,
and designated hull numbers 287 and 288, respectively and (ii) the Vessel
Construction Contract for Three Vessels between the Company and said Halter
Marine, Inc., as amended, and designated Hull Numbers 289, 290 and 291,
respectively.
Exhibit 10.13
REVOLVING CREDIT
AND
TERM LOAN AGREEMENT
Dated as of August 28, 1998
among
TRAILER BRIDGE, INC.
BANKBOSTON, N.A.
and the other lending institutions set forth on Schedule 1 hereto
and
BANKBOSTON, N.A.,
as Agent
<PAGE>
1. DEFINITIONS AND RULES OF INTERPRETATION............................... 6
1.1. Definitions................................................ 6
1.2. Rules of Interpretation.................................... 23
2. THE REVOLVING CREDIT FACILITY......................................... 24
2.1. Commitment to Lend......................................... 24
2.2. Commitment Fee............................................. 24
2.3. Reduction of Total Commitment.............................. 25
2.4. The Notes.................................................. 25
2.5. Interest on Revolving Credit Loans......................... 25
2.6. Requests for Revolving Credit Loans........................ 26
2.7. Conversion Options......................................... 26
2.7.1. Conversion to Different Type of Revolving
Credit Loan....................................... 26
2.7.2. Continuation of Type of Revolving Credit Loan..... 27
2.7.3. Eurodollar Rate Loans............................. 27
2.8. Funds for Revolving Credit Loans........................... 27
2.8.1. Funding Procedures................................ 27
2.8.2. Advances by Agent................................. 28
2.9. Change in Borrowing Base................................... 29
2.10. Extension of Term Out Date................................. 29
2.11. BkB Existing Debt.......................................... 29
2.11.1. BkB Existing Debt Documents Superseded........... 29
2.11.2. Return and Cancellation of Notes................. 29
2.11.3. Interest and Fees Under BkB Existing Debt
Documents........................................ 30
3. REPAYMENT OF THE REVOLVING CREDIT LOANS; CONVERSION INTO TERM LOAN.... 30
3.1. Mandatory Repayments of Revolving Credit Loans............. 30
3.2. Optional Repayments of Revolving Credit Loans.............. 30
3.3. Term Out Date.............................................. 31
4. THE TERM LOAN......................................................... 31
4.1. Conversion of Revolving Credit Loans into Term Loan........ 31
4.2. The Notes.................................................. 31
4.3. Mandatory Payments of Principal of Term Loan............... 31
4.4. Optional Prepayment of Term Loan........................... 32
4.5. Interest on Term Loan...................................... 33
4.5.1. Interest Rates.................................... 33
4.5.2. Conversion Options................................ 33
4.5.3. Amounts, etc...................................... 33
4.5.4. Eurodollar Rate Loans............................. 34
i
<PAGE>
5. CERTAIN GENERAL PROVISIONS............................................ 34
5.1. Fee........................................................ 34
5.2. Funds for Payments......................................... 34
5.2.1. Payments to Agent................................. 34
5.2.2. No Offset, etc.................................... 34
5.3. Computations............................................... 35
5.4. Inability to Determine Eurodollar Rate..................... 35
5.5. Illegality................................................. 36
5.6. Additional Costs, etc...................................... 36
5.7. Capital Adequacy........................................... 37
5.8. Certificate................................................ 38
5.9. Indemnity.................................................. 38
5.10. Interest After Default..................................... 39
5.10.1. Overdue Amounts.................................. 39
5.10.2. Amounts Not Overdue.............................. 39
6. COLLATERAL SECURITY................................................... 39
7. REPRESENTATIONS AND WARRANTIES........................................ 40
7.1. Corporate Authority........................................ 40
7.1.1. Incorporation; Good Standing...................... 40
7.1.2. Authorization..................................... 41
7.1.3. Enforceability.................................... 41
7.2. Governmental Approvals..................................... 41
7.3. Title to Properties; Leases................................ 42
7.4. Financial Statements and Forecasts......................... 42
7.4.1. Financial Statements.............................. 42
7.4.2. Forecasts......................................... 42
7.5. No Material Changes, etc................................... 43
7.6. Franchises, Patents, Copyrights, etc....................... 43
7.7. Litigation................................................. 43
7.8. No Materially Adverse Contracts, etc....................... 44
7.9. Compliance With Other Instruments, Laws, etc............... 44
7.10. Tax Status................................................. 44
7.11. No Event of Default........................................ 44
7.12. Holding Company and Investment Company Acts................ 44
7.13. Absence of Financing Statements, etc....................... 45
7.14. Perfection of Security Interest............................ 45
7.15. Certain Transactions....................................... 45
7.16. Employee Benefit Plans..................................... 45
7.16.1. In General....................................... 45
7.16.2. Terminability of Welfare Plans................... 46
7.16.3. Guaranteed Pension Plans......................... 46
7.16.4. Multiemployer Plans.............................. 46
7.17. Regulations U and X........................................ 47
ii
<PAGE>
7.18. Environmental Compliance................................... 47
7.19. Subsidiaries, etc.......................................... 49
7.20. Bank Accounts.............................................. 49
7.21. RealProperty............................................... 49
7.22. Principal Place of Business................................ 49
7.23. Disclosure................................................. 49
7.24. Fiscal Year................................................ 50
7.25. Insurance.................................................. 51
7.26. Concerning the Vessels..................................... 51
7.27. MARAD Financing Documents.................................. 51
7.28. Year 2000 Problem.......................................... 52
8. AFFIRMATIVE COVENANTS OF THE BORROWER................................. 52
8.1. Punctual Payment........................................... 52
8.2. Maintenance of Office...................................... 52
8.3. Records and Accounts....................................... 52
8.4. Financial Statements, Certificates and Information......... 53
8.5. Notices.................................................... 54
8.5.1. Defaults.......................................... 54
8.5.2. Environmental Events.............................. 55
8.5.3. Notification of Claims Against Collateral......... 55
8.5.4. Notice of Litigation and Judgments................ 55
8.6. Corporate Existence; Maintenance of Properties............. 56
8.7. Title and Registration..................................... 56
8.8. Insurance.................................................. 56
8.9. Taxes...................................................... 57
8.10. Inspection of Properties and Books, etc.................... 57
8.10.1. General.......................................... 57
8.10.2. Collateral Reports............................... 57
8.10.3. Communication with Accountants................... 58
8.11. Compliance with Laws, Contracts, Licenses, and Permits..... 58
8.12. Employee Benefit Plans..................................... 58
8.13. Use of Proceeds............................................ 59
8.14. Concerning the Vessels..................................... 59
8.15. Further Assurances......................................... 59
9. CERTAIN NEGATIVE COVENANTS OF THE BORROWER............................ 59
9.1. Restrictions on Indebtedness............................... 60
9.2. Restrictions on Liens...................................... 61
9.3. Restrictions on Investments................................ 62
9.4. Distributions.............................................. 63
9.5. Merger, Consolidation...................................... 63
9.5.1. Mergers and Acquisitions.......................... 63
9.5.2. Disposition of Assets............................. 63
iii
<PAGE>
9.6. Sale and Leaseback......................................... 64
9.7. Compliance with Environmental Laws......................... 64
9.8. Negative Pledge............................................ 64
9.9. Employee Benefit Plans..................................... 64
9.10. Change of Principal Place of Businessor Corporate Name..... 65
9.11. Fiscal Year................................................ 65
9.12. Modification of Certain Documents.......................... 65
9.13. Transactions with Affiliates............................... 66
9.14. Business Activities........................................ 66
9.15. TB Coastwise............................................... 66
10. FINANCIAL COVENANTS OF THE BORROWER................................... 67
10.1. Leverage Ratio............................................. 67
10.2. Interest Coverage Ratio.................................... 67
10.3. Debt Service Coverage Ratio................................ 67
10.4. Consolidated Tangible Net Worth............................ 67
11. CLOSING CONDITIONS.................................................... 68
11.1. Loan Documents, etc........................................ 68
11.1.1. Loan Documents................................... 68
11.1.2. MARAD Financing Documents........................ 68
11.2. Certified Copies of Charter Documents...................... 68
11.3. Corporate Action........................................... 68
11.4. Incumbency Certificate..................................... 69
11.5. Validity of Liens.......................................... 69
11.6. Perfection Certificates and UCC Search Results............. 69
11.7. Certificates of Insurance.................................. 69
11.8. Borrowing Base Report...................................... 69
11.9. Solvency Certificate....................................... 70
11.10. Opinions of Counsel........................................ 70
11.11. Payment of Fees............................................ 70
11.12. Disbursement Instructions.................................. 70
11.13. BkB Existing Debt.......................................... 70
11.14. Financial Condition........................................ 70
12. CONDITIONS TO ALL BORROWINGS.......................................... 70
12.1. Representations True; No Event of Default.................. 71
12.2. No Legal Impediment........................................ 71
12.3. Governmental Regulation.................................... 71
12.4. Proceedings and Documents.................................. 71
12.5. Borrowing Base Report...................................... 72
13. EVENTS OF DEFAULT; ACCELERATION; ETC.................................. 72
13.1. Events of Default and Acceleration......................... 72
13.2. Termination of Commitments................................. 75
13.3. Remedies................................................... 76
13.4. Distribution of Collateral Proceeds........................ 76
14. SETOFF................................................................ 77
iv
<PAGE>
15. THE AGENT............................................................. 78
15.1. Authorization.............................................. 78
15.2. Employees and Agents....................................... 79
15.3. No Liability............................................... 79
15.4. No Representations......................................... 79
15.5. Payments................................................... 80
15.5.1. Payments to Agent................................ 80
15.5.2. Distribution by Agent............................ 80
15.5.3. Delinquent Banks................................. 80
15.6. Holders of Notes........................................... 81
15.7. Indemnity.................................................. 81
15.8. Agent as Bank.............................................. 81
15.9. Resignation................................................ 81
15.10. Notification of Defaults and Events of Default............. 82
16. EXPENSES.............................................................. 82
17. INDEMNIFICATION....................................................... 83
18. SURVIVAL OF COVENANTS, ETC............................................ 83
19. ASSIGNMENT AND PARTICIPATION.......................................... 84
19.1 Conditions to Assignment by Banks.......................... 84
19.2 Certain Representations and Warranties; Limitations;
Covenants.................................................. 85
19.3 Register................................................... 86
19.4 New Notes.................................................. 86
19.5 Participations............................................. 87
19.6 Disclosure................................................. 87
19.7 Assignee or Participant Affiliated with the Borrower....... 87
19.8 Miscellaneous Assignment Provisions........................ 88
19.9 Assignment by Borrower..................................... 88
20. NOTICES, ETC.......................................................... 88
21. GOVERNING LAW......................................................... 89
22. HEADINGS.............................................................. 90
23. COUNTERPARTS.......................................................... 90
24. ENTIRE AGREEMENT, ETC................................................. 90
25. WAIVER OF JURY TRIAL.................................................. 90
26. CONSENTS, AMENDMENTS, WAIVERS, ETC.................................... 91
27. SEVERABILITY.......................................................... 91
v
<PAGE>
REVOLVING CREDIT
AND
TERM LOAN AGREEMENT
This REVOLVING CREDIT AND TERM LOAN AGREEMENT is made as of August 28,
1998, by and among (a) TRAILER BRIDGE, INC. (the "Borrower"), a Delaware
corporation having its principal place of business at 10405 New Berlin Road
East, Jacksonville, Florida 32226; (b) BANKBOSTON, N.A., a national banking
association, and the other lending institutions listed on Schedule 1 attached
hereto; and (c) BANKBOSTON, N.A., as agent for itself and such other lending
institutions.
1. DEFINITIONS AND RULES OF INTERPRETATION.
---------------------------------------
1.1. Definitions. The following terms shall have the meanings set forth in this
Section 1 or elsewhere in the provisions of this Credit Agreement referred to
below:
Accounts Receivable. All rights of the Borrower or any of its
Subsidiaries to payment for goods sold, leased or otherwise marketed in the
ordinary course of business and all rights of the Borrower or any of its
Subsidiaries to payment for services rendered in the ordinary course of business
and all sums of money or other proceeds due thereon pursuant to transactions
with account debtors, except for that portion of the sum of money or other
proceeds due thereon that relate to sales, use or property taxes in conjunction
with such transactions, recorded on books of account in accordance with
generally accepted accounting principles, provided that any amounts owing to the
Borrower consisting of demurrage charges in respect of Motor Vehicle Equipment,
Containers or other equipment of the Borrower and its Subsidiaries shall not be
included in the definition of Accounts Receivable.
Adjustment Date. The first day of the month immediately following the
month in which a Compliance Certificate is to be delivered by the Borrower
pursuant to Section 8.4(d) hereof.
Affiliate. Any Person that would be considered to be an affiliate of
the Borrower under Rule 144(a) of the Rules and Regulations of the Securities
and Exchange Commission, as in effect on the date hereof, if the Borrower were
issuing securities.
Agent. BankBoston, N.A. acting as agent for the Banks.
Agent's Head Office. The Agent's head office located at 100 Federal
Street, Boston, Massachusetts 02110, or at such other location as the Agent may
designate from time to time.
1
<PAGE>
Agent's Special Counsel. Bingham Dana LLP or such other counsel as may
be approved by the Agent.
Applicable Margin. For each period commencing on an Adjustment Date
through the date immediately preceding the next Adjustment Date (each a "Rate
Adjustment Period"), the Applicable Margin shall be the applicable margin set
forth below with respect to the Leverage Ratio, as determined for the period
ending on the fiscal quarter ended immediately preceding the applicable Rate
Adjustment Period.
<TABLE>
<CAPTION>
Leverage Base Rate Loans Eurodollar Rate Loans Commitment Fee
Level Ratio Applicable Margin Applicable Margin Rate
----- -------- ----------------- --------------------- --------------
<S> <C> <C> <C> <C>
I > 2.75:1.00 0.50% 1.75% 0.500%
II > 2.25:1.00 and 0.25% 1.50% 0.500%
<2.75:1.00
III > 1.75:1.00 and 0.00% 1.25% 0.375%
<2.25:1.00
IV < 1.75:1.00 0.00% 1.00% 0.250%
</TABLE>
For the purposes of this definition of Applicable Margin, the symbol "<" shall
mean "less than" and the symbol ">" shall mean "greater than or equal to".
Notwithstanding the foregoing, (a) the Applicable Margin shall not be
lower than the percentages corresponding to Level II in the table above during
the period commencing on the Closing Date through the date immediately preceding
the first Adjustment Date to occur after September 30, 1998, (b) if the Borrower
fails to deliver any Compliance Certificate in accordance with Section 8.4(d)
hereof, then, for the period commencing on the next Adjustment Date to occur
subsequent to such failure through the date immediately following the date on
which such Compliance Certificate is delivered, the Applicable Margin shall be
the highest Applicable Margin set forth above and (c) during the period
beginning on the Term Out Date and ending on the Maturity Date, the Applicable
Margin shall be increased by 0.25% above the amounts set forth in the table
above.
2
<PAGE>
Appraised Fair Market Value. With respect to any Eligible Vessel, the
value of such Eligible Vessel as determined in an appraisal performed by Jacques
Pierot Jr. & Sons, Inc., or another qualified independent appraiser approved by
the Agent, less any material decline in value since the date of the most recent
appraisal of such Eligible Vessel as a result of market conditions or other
factors, such decline in value to be determined by the Borrower in its
reasonable judgment.
Assignment and Acceptance. See Section 19.1.
Assignment of Contracts. The collateral assignment of contracts,
permits, licenses and approvals, dated as of a date subsequent to the Closing
Date, executed and delivered by the Borrower to the Agent and substantially in
the form of Exhibit F attached hereto.
Assignment of Insurance. The collateral assignment of insurance
policies, dated as of the date hereof, executed and delivered by the Borrower to
the Agent and substantially in the form of Exhibit G attached hereto.
Balance Sheet Date. December 31, 1997.
Banks. BankBoston and the other lending institutions listed on Schedule
1 hereto and any other Person who becomes an assignee of any rights and
obligations of a Bank pursuant to Section 19.
Base Rate. The higher of (a) the annual rate of interest announced from
time to time by BankBoston at its head office in Boston, Massachusetts, as its
"base rate" and (b) one-half of one percent (0.50%) above the Federal Funds
Effective Rate. For the purposes of this definition, "Federal Funds Effective
Rate" shall mean, for any day, the rate per annum 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, as published for such day (or
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three funds brokers of recognized
standing selected by the Agent.
Base Rate Loans. Revolving Credit Loans and all or any portion of the
Term Loan bearing interest calculated by reference to the Base Rate.
BkB. BankBoston, N.A. in its individual capacity.
BkB Existing Debt. The Indebtedness for borrowed money of the Borrower
to BkB under the committed Chattel Mortgage Line of Credit extended by BkB to
the Borrower existing immediately prior to the Closing Date as evidenced by the
BkB Existing Debt Documents.
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BkB Existing Debt Documents. Collectively, the letter agreement, dated
as of February 27, 1997, between the Borrower and BkB, as amended by the letter
agreement, dated as of March 20, 1998, between the Borrower and BkB, as further
amended by the letter agreement, dated as of April 10, 1998, between the
Borrower and BkB, and the several promissory notes issued by the Borrower in
favor of BkB in connection therewith.
Borrower. As defined in the preamble hereto.
Borrowing Base. At the relevant time of reference thereto, an amount
determined by the Agent by reference to the most recent Borrowing Base Report
delivered to the Banks and the Agent pursuant to Section 8.4(e) or Section 12.5,
which is equal to the sum of:
(a) 80% of Eligible Accounts Receivable for which invoices
have been issued and are payable; plus
(b) 90% of the Net Book Value of Eligible Motor Vehicle
Equipment; plus
(c) 80% of the Net Book Value of Eligible Containers; plus
(d) 80% of the Net Book Value of Eligible Chassis; plus
(e) 70% of the Appraised Fair Market Value of Eligible
Vessels.
Borrowing Base Report. A Borrowing Base Report signed by the chief
financial officer of the Borrower and in substantially the form of Exhibit A
hereto.
Business Day. Any day on which banking institutions in Boston,
Massachusetts are open for the transaction of banking business and, in the case
of Eurodollar Rate Loans, also a day which is a Eurodollar Business Day.
Capital Assets. Fixed assets, both tangible (such as land, buildings,
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and good will); provided that Capital Assets shall not
include any item customarily charged directly to expense or depreciated over a
useful life of twelve (12) months or less in accordance with generally accepted
accounting principles.
Capital Expenditures. Amounts paid or indebtedness incurred by the
Borrower or any of its Subsidiaries in connection with the purchase or lease by
the Borrower or any of its Subsidiaries of Capital Assets that would be required
to be capitalized and shown on the balance sheet of such Person in accordance
with generally accepted accounting principles.
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Capitalized Leases. Leases under which the Borrower or any of its
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in accordance with generally accepted accounting
principles.
CERCLA. See Section 7.18.
Charter. The charter of the RoRo Barges from K-Corp to the Borrower
to operate the RoRo Barges exclusively between the mainland U.S. and Puerto
Rico, in the form delivered to the Agent and the Banks on or prior to the date
hereof.
Charter Assignment. The collateral assignment of the Charter, dated as
of the date hereof, executed and delivered by the Borrower to the Agent and in
substantially the form of Exhibit H attached hereto.
Chassis. All chassis that are used or usable by the Borrower and its
Subsidiaries in the conduct of their business.
Closing Date. The first date on which the conditions set forth in
Section 11 have been satisfied and the initial Revolving Credit Loans are to be
made.
Code. The Internal Revenue Code of 1986, as amended.
Collateral. All of the property, rights and interests of the Borrower
and its Subsidiaries that are or are intended to be subject to the security
interests and mortgages created by the Security Documents.
Commitment. With respect to each Bank, the amount set forth on Schedule
1 hereto as the amount of such Bank's commitment to make Loans to the Borrower,
as the same may be reduced from time to time; or if such commitment is
terminated pursuant to the provisions hereof, zero.
Commitment Fee Rate. The applicable rate per annum set forth in the
chart contained in the definition of Applicable Margin under the heading
"Commitment Fee Rate."
Commitment Percentage. With respect to each Bank, the percentage set
forth on Schedule 1 hereto as such Bank's percentage of the aggregate
Commitments of all of the Banks.
Compliance Certificate. See Section 8.4(d).
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Consolidated or consolidated. With reference to any term defined
herein, shall mean that term as applied to the accounts of the Borrower and its
Subsidiaries, consolidated in accordance with generally accepted accounting
principles.
Consolidated Net Income. The consolidated net income (or deficit) of
the Borrower and its Subsidiaries, after deduction of all expenses, taxes, and
other proper charges, determined in accordance with generally accepted
accounting principles.
Consolidated Operating Cash Flow. For any period, an amount equal to
(a) the sum of (i) Earnings Before Interest and Taxes for such period, plus (ii)
depreciation, and amortization and all other noncash charges for such period,
less (b) the sum of (i) cash payments for all income taxes paid during such
period, plus (ii) ten percent (10%) of Capital Expenditures made during such
period after deducting from Capital Expenditures an amount equal to the
reduction (if any) in restricted cash and investments as shown on the Borrower's
balance sheet at the end of such period from the amount of restricted cash and
investments shown on the Borrower's balance sheet at the end of the prior
period, to the extent that restricted cash and investments represents funds
readily available for Capital Expenditures.
Consolidated Rental Obligations. All obligations of the Borrower and
its Subsidiaries in respect to operating leases regarding revenue equipment,
including, without limitation, Motor Vehicle Equipment, Containers, Chassis and
bareboat charters of Vessels, having a term of twelve (12) months or more where
the Borrower or any of its Subsidiaries is a lessee, calculated as the net
present value (calculated at a discount rate of eight percent (8%)) of the
minimum future rentals due over the term of all such leases, provided that
bareboat charters of Vessels between the Borrower and K-Corp shall be deemed to
have a term of six (6) years for purposes of this calculation.
Consolidated Tangible Net Worth. The excess of Consolidated Total
Assets over Consolidated Total Liabilities, and less the sum of:
(a) the total book value of all assets of the Borrower and its
Subsidiaries properly classified as intangible assets under generally
accepted accounting principles, including such items as good will, the
purchase price of acquired assets in excess of the fair market value
thereof, trademarks, trade names, service marks, brand names,
copyrights, patents and licenses, and rights with respect to the
foregoing; plus
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(b) all amounts representing any write-up in the book value of
any assets of the Borrower or its Subsidiaries resulting from a
revaluation thereof subsequent to the Balance Sheet Date; plus
(c) Investments in and advances to non-Consolidated
Affiliates; plus
(d) to the extent otherwise includable in the computation of
Consolidated Tangible Net Worth, any subscriptions receivable.
Consolidated Total Assets. All assets of the Borrower and its Sub-
sidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles.
Consolidated Total Debt. With respect to the Borrower and its
Subsidiaries on a consolidated basis as at any date of determination, an amount
(without duplication) equal to the aggregate amount of all Indebtedness of the
Borrower and its Subsidiaries on a consolidated basis at such date pursuant to
any agreement or instrument to which the Borrower or any of its Subsidiaries is
a party relating to the borrowing of money or the obtaining of credit or in
respect of Capitalized Leases.
Consolidated Total Debt Service. For any fiscal period with respect to
the Borrower and its Subsidiaries, the sum of (a) Consolidated Total Interest
Expense for such period, plus (b) any and all scheduled payments of principal in
respect of Indebtedness of the Borrower and its Subsidiaries made or required to
be made in such period.
Consolidated Total Interest Expense. For any period, the aggregate
amount of interest required to be paid in cash by the Borrower and its
Subsidiaries during such period on all Indebtedness of the Borrower and its
Subsidiaries outstanding during all or any part of such period, including
payments consisting of interest in respect of Capitalized Leases and including
commitment fees, agency fees, facility fees, balance deficiency fees and similar
fees or expenses in connection with the borrowing of money.
Consolidated Total Liabilities. All liabilities of the Borrower and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles and all Indebtedness of the Borrower and its
Subsidiaries, whether or not so classified.
Containers. Collectively, all cargo containers and all related equip-
ment and accessions that are used or usable by the Borrower and its Subsidiaries
in the conduct of their business.
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Conversion Request. A notice given by the Borrower to the Agent of the
Borrower's election to convert or continue a Loan in accordance with Section
2.7.
Credit Agreement. This Revolving Credit and Term Loan Agreement,
including the Schedules and Exhibits hereto, all as amended and in effect from
time to time.
Debt Service Coverage Ratio. As at the end of any fiscal quarter, the
ratio of (a) Consolidated Operating Cash Flow for the period of four (4) fiscal
quarters then ended to (b) Consolidated Total Debt Service of the Borrower and
its Subsidiaries for such period.
Default. See Section 13.
Distribution. The declaration or payment of any dividend on or in
respect of any shares of any class of capital stock of a Person, other than
dividends payable solely in shares of common stock of such Person; the purchase,
redemption, or other retirement of any shares of any class of capital stock of a
Person, directly or indirectly through a Subsidiary of such Person or otherwise;
the return of capital by a Person to its shareholders as such; or any other
distribution on or in respect of any shares of any class of capital stock of a
Person.
Dollars or $. Dollars in lawful currency of the United States of
America.
Domestic Lending Office. Initially, the office of each Bank designated
as such in Schedule 1 hereto; thereafter, such other office of such Bank, if
any, located within the United States that will be making or maintaining Base
Rate Loans.
Drawdown Date. The date on which any Revolving Credit Loan or the Term
Loan is made or is to be made, and the date on which any Revolving Credit Loan
is converted or continued in accordance with Section 2.7 or all or any portion
of the Term Loan is converted or continued in accordance with Section 4.5.
Earnings Before Interest and Taxes. The consolidated operating income
of the Borrower and its Subsidiaries for any period as shown on the Borrower's
statement of operations, calculated in accordance with generally accepted
accounting principles and in a manner consistent with the calculation of
consolidated operating income in the Borrower's statement of operations for the
fiscal year ended on the Balance Sheet Date.
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Eligible Accounts Receivable. The aggregate of the unpaid portions of
Accounts Receivable (net of any credits, rebates, offsets, holdbacks or other
adjustments or commissions payable to third parties that are adjustments to such
Accounts Receivable) (a) that the Borrower reasonably and in good faith
determines to be collectible; (b) that are with account debtors that (i) are not
Affiliates of the Borrower, (ii) purchased the goods or services giving rise to
the relevant Account Receivable in an arm's length transaction, (iii) are not
insolvent or involved, whether voluntary or involuntary, in any case or
proceeding under any bankruptcy, reorganization, arrangement, insolvency,
adjustment of debt, dissolution, liquidation or similar law of any jurisdiction
and (iv) are creditworthy; (c) that are in payment of obligations that have been
fully performed and are not subject to dispute or any other similar claims that
would reduce the cash amount payable therefor; (d) that are not subject to any
pledge, restriction, security interest or other lien or encumbrance other than
those created by the Loan Documents; (e) in which the Agent has a valid and
perfected first priority security interest for the benefit of the Banks and the
Agent; (f) that are not outstanding for more than ninety (90) days past the
earlier to occur of (i) the date of the respective invoices therefor and (ii)
the date of shipment thereof in the case of goods or the end of the calendar
month following the provision thereof in the case of services; (g) that are not
due from an account debtor located in Minnesota unless the Borrower (i) has
received a certificate of authority to do business and is in good standing in
such state or (ii) has filed a notice of business activities report with the
appropriate office or agency of such state for the current year; (h) that are
not due from any single account debtor if any of the Accounts Receivable owing
from such account debtor would otherwise not be Eligible Accounts Receivable;
(i) that are payable in Dollars; (j) that are not payable from an office outside
of the United States or Puerto Rico; and (k) that are not secured by a letter of
credit unless the Agent has a prior, perfected security interest in such letter
of credit.
Eligible Assignee. Any of (a) a commercial bank or finance company
organized under the laws of the United States, or any State thereof or the
District of Columbia, and having total assets in excess of $1,000,000,000; (b) a
savings and loan association or savings bank organized under the laws of the
United States, or any State thereof or the District of Columbia, and having a
net worth of at least $100,000,000, calculated in accordance with generally
accepted accounting principles; (c) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having total assets in excess of $1,000,000,000, provided that such
bank is acting through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; (d) the central
bank of any country which is a member of the OECD; and (e) if, but only if, an
Event of Default has occurred and is continuing, any other bank, insurance
company, commercial finance company or other financial institution or other
Person approved by the Agent, such approval not to be unreasonably withheld.
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Eligible Chassis. Chassis in which the Borrower or any of its
Subsidiaries has title and that (a) are subject to a first priority perfected
security interest in favor of the Agent for the benefit of the Banks and the
Agent, (b) are subject to no other liens, security interests or other
encumbrances of any sort except for Permitted Liens under Section 9.2(e),
(c) are in a serviceable condition and used in the normal course of the
Borrower's intermodal transportation business, (d) have Net Book Value greater
than zero and (e) have not suffered an Event of Loss.
Eligible Containers. Containers owned by the Borrower or any of its
Subsidiaries that (a) are subject to a first priority perfected security
interest in favor of the Agent for the benefit of the Banks and the Agent, (b)
are subject to no other liens, security interests or other encumbrances of any
sort except for Permitted Liens under Section 9.2(e), (c) are in a serviceable
condition and used in the normal course of the Borrower's intermodal
transportation business, (d) have Net Book Value greater than zero and (e) have
not suffered an Event of Loss.
Eligible Motor Vehicle Equipment. Motor Vehicle Equipment in which the
Borrower or any of its Subsidiaries has title and in which the Agent, for the
benefit of the Banks and the Agent, has a first priority perfected lien and
security interest.
Eligible Vessels. Vessels owned by the Borrower or any of its
Subsidiaries that are subject to a perfected first preferred mortgage lien and
security interest in favor of the Agent for the benefit of the Banks and the
Agent and that are used by the Borrower and its Subsidiaries in the conduct of
their intermodal transportation business.
Employee Benefit Plan. Any employee benefit plan within the meaning of
Section 3(2) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate, other than a Multiemployer Plan.
Environmental Laws. See Section 7.18(a).
ERISA. The Employee Retirement Income Security Act of 1974, as
amended.
ERISA Affiliate. Any Person which is treated as a single employer with
the Borrower under Section 414 of the Code.
ERISA Reportable Event. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of Section 4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of notice has not been
waived.
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Eurocurrency Reserve Rate. For any day with respect to a Eurodollar
Rate Loan, the maximum rate (expressed as a decimal) at which any lender subject
thereto would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D), if such liabilities were
outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on
and as of the effective date of any change in the Eurocurrency Reserve Rate.
Eurodollar Business Day. Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in London or such
other eurodollar interbank market as may be selected by the Agent in its sole
discretion acting in good faith.
Eurodollar Lending Office. Initially, the office of each Bank
designated as such in Schedule 1 hereto; thereafter, such other office of such
Bank, if any, that shall be making or maintaining Eurodollar Rate Loans.
Eurodollar Rate. For any Interest Period with respect to a Eurodollar
Rate Loan, the rate of interest equal to (i) the arithmetic average of the rates
per annum for the Agent (rounded upwards to the nearest 1/16 of one percent) of
the rate at which the Agent's Eurodollar Lending Office is offered Dollar
deposits two Eurodollar Business Days prior to the beginning of such Interest
Period in the interbank eurodollar market where the eurodollar and foreign
currency and exchange operations of such Eurodollar Lending Office are
customarily conducted at or about 10:00 a.m., Boston time, for delivery on the
first day of such Interest Period for the number of days comprised therein and
in an amount comparable to the amount of the Eurodollar Rate Loan of the Agent
to which such Interest Period applies, divided by (ii) a number equal to 1.00
minus the Eurocurrency Reserve Rate, if applicable.
Eurodollar Rate Loans. Revolving Credit Loans and all or any portion
of the Term Loan bearing interest calculated by reference to the Eurodollar
Rate.
Event of Default. See Section 13.
Event of Loss. With respect to any Container or Chassis, any of the
following:
(a) total loss or destruction thereof;
(b) theft or disappearance thereof without recovery within thirty (30)
days after such theft or disappearance becomes known to the Borrower or any of
its Subsidiaries;
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(c) damage rendering such Container or Chassis, as the case may be,
unfit for normal use and, in the judgment of the Borrower, beyond repair at
reasonable cost; and
(d) any condemnation, seizure, forced sale or other taking of title to
or use of any such Container or Chassis, as the case may be.
Fee Letter. The fee letter, dated as of the Closing Date, between the
Borrower and the Agent, as the same may be amended, modified or supplemented
from time to time.
First Preferred Vessel Mortgages. Collectively, the First Preferred
Vessel Mortgages from the Borrower or any of its Subsidiaries to the Agent from
time to time in form and substance satisfactory to the Banks and the Agent.
generally accepted accounting principles. (a) When used in Section 10,
whether directly or indirectly through reference to a capitalized term used
therein, means (i) principles that are consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors, in effect for the fiscal year ended on the Balance Sheet Date, and
(ii) to the extent consistent with such principles, the accounting practice of
the Borrower reflected in its financial statements for the year ended on the
Balance Sheet Date, and (b) when used in general, other than as provided above,
means principles that are (i) consistent with the principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors, as in
effect from time to time and (ii) consistently applied with past financial
statements of the Borrower adopting the same principles, provided that in each
case referred to in this definition of "generally accepted accounting
principles" a certified public accountant would, insofar as the use of such
accounting principles is pertinent, be in a position to deliver an unqualified
opinion (other than a qualification regarding changes in generally accepted
accounting principles) as to financial statements in which such principles have
been properly applied.
Guaranteed Pension Plan. Any employee pension benefit plan within the
meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower or
any ERISA Affiliate the benefits of which are guaranteed on termination in full
or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
Guaranty. The Guaranty made by each Subsidiary of the Borrower in favor
of the Banks and the Agent pursuant to which each Subsidiary of the Borrower
guaranties to the Banks and the Agent the payment and performance of the
Obligations and in form and substance satisfactory to the Banks and the Agent.
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Hazardous Substances. See Section 7.18(b).
Indebtedness. All obligations, contingent and otherwise, that in
accordance with generally accepted accounting principles should be classified
upon the obligor's balance sheet as liabilities, or to which reference should be
made by footnotes thereto, including in any event and whether or not so
classified: (i) all debt and similar monetary obligations, whether direct or
indirect; (ii) all liabilities secured by any mortgage, pledge, security
interest, lien, charge, or other encumbrance existing on property owned or
acquired subject thereto, whether or not the liability secured thereby shall
have been assumed; and (iii) all guarantees, endorsements and other contingent
obligations whether direct or indirect in respect of indebtedness of others,
including any obligation to supply funds to or in any manner to invest in,
directly or indirectly, the debtor, to purchase indebtedness, or to assure the
owner of indebtedness against loss, through an agreement to purchase goods,
supplies, or services for the purpose of enabling the debtor to make payment of
the indebtedness held by such owner or otherwise, the obligations to reimburse
the issuer in respect of any letters of credit and all obligations in respect of
currency hedging or interest rate protection agreements.
Interest Coverage Ratio. As at the end of any fiscal quarter, the ratio
of (a) Earnings Before Interest and Taxes for the period of four (4) fiscal
quarters then ended to (b) Consolidated Total Interest Expense of the Borrower
and its Subsidiaries payable in cash for such period.
Interest Payment Date. (a) As to any Base Rate Loan, the last day of
the calendar quarter which includes the Drawdown Date thereof and (b) as to any
Eurodollar Rate Loan in respect of which the Interest Period is (i) 3 months or
less, the last day of such Interest Period and (ii) more than 3 months, the date
that is 3 months from the first day of such Interest Period and, in addition,
the last day of such Interest Period.
Interest Period. With respect to each Loan, (a) initially, the period
commencing on the Drawdown Date of such Loan and ending on the last day of one
of the periods set forth below, as selected by the Borrower in a Loan Request
(i) for any Base Rate Loan, the last day of the calendar quarter; and (ii) for
any Eurodollar Rate Loan, 1, 2, 3 or 6 months; and (b) thereafter, each period
commencing on the last day of the next preceding Interest Period applicable to
such Loan and ending on the last day of one of the periods set forth above, as
selected by the Borrower in a Conversion Request; provided that all of the
foregoing provisions relating to Interest Periods are subject to the following:
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(a) if any Interest Period with respect to a Eurodollar Rate
Loan would otherwise end on a day that is not a Eurodollar Business
Day, that Interest Period shall be extended to the next succeeding
Eurodollar Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month, in which event
such Interest Period shall end on the immediately preceding Eurodollar
Business Day;
(b) if any Interest Period with respect to a Base Rate Loan
would end on a day that is not a Business Day, that Interest Period
shall end on the next succeeding Business Day;
(c) if the Borrower shall fail to give notice as provided in
Section 2.7, the Borrower shall be deemed to have requested a conver-
sion of the affected Eurodollar Rate Loan to a Base Rate Loan and the
continuance of all Base Rate Loans as Base Rate Loans on the last day
of the then current Interest Period with respect thereto;
(d) any Interest Period that begins on the last Eurodollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Eurodollar Business Day of a
calendar month; and
(e) any Interest Period relating to any Eurodollar Rate Loan
that would otherwise extend beyond the Maturity Date shall end on the
Maturity Date.
Investments. All expenditures made and all liabilities incurred
(contingently or otherwise) for the acquisition of stock or Indebtedness of, or
for loans, advances, capital contributions or transfers of property to, or in
respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person. In determining the aggregate
amount of Investments outstanding at any particular time: (i) the amount of any
Investment represented by a guaranty shall be taken at not less than the
principal amount of the obligations guaranteed and still outstanding; (ii) there
shall be included as an Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and until such interest is paid;
(iii) there shall be deducted in respect of each such Investment any amount
received as a return of capital (but only by repurchase, redemption, retirement,
repayment, liquidating dividend or liquidating distribution); (iv) there shall
not be deducted in respect of any Investment any amounts received as earnings on
such Investment, whether as dividends, interest or otherwise, except that
accrued interest included as provided in the foregoing clause (ii) may be
deducted when paid; and (v) there shall not be deducted from the aggregate
amount of Investments any decrease in the value thereof.
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K-Corp. Kadampanattu Corp., a Delaware corporation.
Leverage Ratio. As at any date of determination, the ratio of (a)
Consolidated Total Debt of the Borrower and its Subsidiaries outstanding on such
date, plus Consolidated Rental Obligations outstanding on such date, to (b)
Consolidated Tangible Net Worth of the Borrower and its Subsidiaries at such
time.
Loan Documents. This Credit Agreement, the Notes, the Security
Documents, the Fee Letter and any interest rate protection agreements or
currency hedging agreements between the Borrower and any of its Subsidiaries and
any of the Banks.
Loan Request. See Section 2.6.
Loans. The Revolving Credit Loans and the Term Loan.
Majority Banks. As of any date, the Banks holding at least sixty-six
and two-thirds percent (66 2/3%) of the outstanding principal amount of the
Notes on such date; and if no such principal is outstanding, the Banks whose
aggregate Commitments constitutes at least sixty-six and two-thirds percent (66
2/3%) of the Total Commitment.
MARAD Financing. The financing arrangements for the construction of the
TBC Barges evidenced by the MARAD Financing Documents.
MARAD Financing Documents. The ship-financing bonds and notes in the
original aggregate principal amount of $27,433,000 guaranteed by the Maritime
Administration, United States Department of Transportation, under the Title XI
Federal Ship Financing Program, and all of the documents related thereto.
Maturity Date. The date which is the fourth anniversary of the Term
Out Date.
Motor Vehicle Equipment. Collectively, all trucks, trailers, tractors,
service vehicles, automobiles, and all related equipment and accessions that are
used or usable by the Borrower and its Subsidiaries in the conduct of their
business.
Multiemployer Plan. Any multiemployer plan within the meaning of
Section 3(37) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate.
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Net Book Value. With respect to Eligible Motor Vehicle Equipment,
Eligible Containers and Eligible Chassis, the Original Cost to the Borrower or
any of its Subsidiaries of such Motor Vehicle Equipment, Container or Chassis,
as the case may be, adjusted to reflect depreciation in accordance with the
applicable depreciation method set forth on Schedule 1.2 attached hereto.
Notes. See Section 2.4.
Obligations. All indebtedness, obligations and liabilities of any of
the Borrower and its Subsidiaries to any of the Banks and the Agent,
individually or collectively, existing on the date of this Credit Agreement or
arising thereafter, direct or indirect, joint or several, absolute or
contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law or otherwise, arising or
incurred under this Credit Agreement or any of the other Loan Documents or in
respect of any of the Loans or any of the Notes or other instruments at any time
evidencing any thereof.
Original Cost. With respect to any Motor Vehicle Equipment, Container
or Chassis, the purchase price therefor expressed in Dollars, as determined in
accordance with generally accepted accounting principles, consistently applied.
outstanding. With respect to the Loans, the aggregate unpaid principal
thereof as of any date of determination.
PBGC. The Pension Benefit Guaranty Corporation created by Section 4002
of ERISA and any successor entity or entities having similar responsibilities.
Perfection Certificate. The Perfection Certificate as defined in the
Security Agreements.
Permitted Liens. Liens, security interests and other encumbrances
permitted by Section 9.2.
Person. Any individual, corporation, partnership, limited liability
company, trust, unincorporated association, business, or other legal entity, and
any government or any governmental agency or political subdivision thereof.
Rate Adjustment Period. See the definition of Applicable Margin.
Real Estate. All real property at any time owned or leased (as lessee
or sublessee) by the Borrower or any of its Subsidiaries.
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Record. The grid attached to a Note, or the continuation of such grid,
or any other similar record, including computer records, maintained by any Bank
with respect to any Loan referred to in such Note.
Revolving Credit Loans. Revolving credit loans made or to be made by
the Banks to the Borrower pursuant to Section 2.
RoRo Barges. The two roll-on roll-off barges known as the Jax-San Juan
Bridge, Official No. 667879 and the San Juan-Jax Bridge, Official No. 667317,
respectively, each configured to carry 416 48-foot over-the-road trailers,
operated as U.S. flag barges.
Security Agreements. The several Security Agreements between the
Borrower and its Subsidiaries and the Agent from time to time in form and
substance satisfactory to the Banks and the Agent.
Security Documents. The Assignment of Contracts, the Assignment of
Insurance, the Charter Assignment, the Security Agreements, the First Preferred
Vessel Mortgages, and the Guarantees.
Subsidiary. Any corporation, association, trust, or other business
entity of which the designated parent shall at any time own directly or
indirectly through a Subsidiary or Subsidiaries at least a majority (by number
of votes) of the outstanding Voting Stock.
TB Coastwise. TB Coastwise, Inc., a Delaware corporation.
TBC Barges. Collectively, the three (3) Triplestack Box Carrier barges
known as the Chicago Bridge, the Charleston Bridge, and the Atlanta Bridge and
the two (2) Triplestack Box Carrier Barges currently under construction, each
configured to carry 213 53-foot containers stacked three (3) high on a single
deck, each of which is or will be operated as U.S. flag barges.
Term Loan. The principal amount of Revolving Credit Loans outstanding
on the Term Out Date which have been converted into a term loan pursuant to
Section 3.3 and Section 4.1.
Term Out Date. August 28, 2000, subject to extension in accordance
with Section 2.10 hereof.
Total Commitment. The sum of the Commitments of the Banks, as in
effect from time to time.
Type. As to any Revolving Credit Loan or all or any portion of the
Term Loan, its nature as a Base Rate Loan or a Eurodollar Rate Loan.
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Vessels. Collectively, the RoRo Barges, the TBC Barges and any other
vessels now owned or bareboat chartered or hereafter acquired or bareboat
chartered by the Borrower or any of its Subsidiaries.
Voting Stock. Stock or similar interests, of any class or classes
(however designated), the holders of which are at the time entitled, as such
holders, to vote for the election of a majority of the directors (or persons
performing similar functions) of the corporation, association, trust or other
business entity involved, whether or not the right so to vote exists by reason
of the happening of a contingency.
1.2. Rules of Interpretation.
(a) A reference to any document or agreement shall include
such document or agreement as amended, modified or supplemented from
time to time in accordance with its terms and the terms of this Credit
Agreement.
(b) The singular includes the plural and the plural includes
the singular.
(c) A reference to any law includes any amendment or
modification to such law.
(d) A reference to any Person includes its permitted
successors and permitted assigns.
(e) Accounting terms not otherwise defined herein have the
meanings assigned to them by generally accepted accounting principles
applied on a consistent basis by the accounting entity to which they
refer.
(f) The words "include", "includes" and "including" are not
limiting.
(g) All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in effect in the Commonwealth of Massachusetts, have
the meanings assigned to them therein, with the term "instrument" being
that defined under Article 9 of the Uniform Commercial Code.
(h) Reference to a particular "Section" refers to that section
of this Credit Agreement unless otherwise indicated.
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(i) The words "herein", "hereof", "hereunder" and words of like
import shall refer to this Credit Agreement as a whole and not to any
particular section or subdivision of this Credit Agreement.
2. THE REVOLVING CREDIT FACILITY.
-----------------------------
2.1. Commitment to Lend. Subject to the terms and conditions set forth in this
Credit Agreement, each of the Banks severally agrees to lend to the Borrower and
the Borrower may borrow, repay, and reborrow from time to time between the
Closing Date and the Term Out Date upon notice by the Borrower to the Agent
given in accordance with Section 2.6, such sums as are requested by the Borrower
up to a maximum aggregate principal amount outstanding (after giving effect to
all amounts requested) at any one time equal to such Bank's Commitment, provided
that the sum of the outstanding amount of the Revolving Credit Loans (after
giving effect to all amounts requested) shall not at any time exceed the lesser
of (a) the Total Commitment and (b) the Borrowing Base. The Revolving Credit
Loans shall be made pro rata in accordance with each Bank's Commitment
Percentage. Each request for a Revolving Credit Loan hereunder shall constitute
a representation and warranty by the Borrower that the conditions set forth in
Section 11 and Section 12, in the case of the initial Revolving Credit Loans to
be made on the Closing Date, and Section 12, in the case of all other Revolving
Credit Loans, have been satisfied on the date of such request.
2.2. Commitment Fee. The Borrower agrees to pay to the Agent for the accounts of
the Banks in accordance with their respective Commitment Percentages a
commitment fee calculated at the rate of the Commitment Fee Rate per annum on
the average daily amount during each calendar quarter or portion thereof from
the Closing Date to the Term Out Date by which the Total Commitment exceeds the
outstanding amount of Revolving Credit Loans during such calendar quarter. The
commitment fee shall be payable quarterly in arrears on the first day of each
calendar quarter for the immediately preceding calendar quarter commencing on
the first such date following the date hereof, with a final payment on the Term
Out Date or any earlier date on which the Commitments shall terminate.
2.3. Reduction of Total Commitment. The Borrower shall have the right at any
time and from time to time on or before the Term Out Date upon five (5) Business
Days prior written notice to the Agent to reduce by $3,000,000 or an integral
multiple of $1,000,000 in excess thereof or terminate entirely the unborrowed
portion of the Total Commitment, whereupon the Commitments of the Banks shall be
reduced pro rata in accordance with their respective Commitment Percentages of
the amount specified in such notice or, as the case may be, terminated. Promptly
after receiving any notice of the Borrower delivered pursuant to this Section
2.3, the Agent will notify the Banks of the substance thereof. Upon the
effective date of any such reduction or termination, the Borrower shall pay to
the Agent for the respective accounts of the Banks the full amount of any
commitment fee then accrued on the amount of the reduction. No reduction of the
Commitments may be reinstated.
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2.4. The Notes. The Revolving Credit Loans shall be evidenced by separate
promissory notes of the Borrower in substantially the form of Exhibit B hereto
(each a "Note"), dated as of the Closing Date and completed with appropriate
insertions. One Note shall be payable to the order of each Bank in a principal
amount equal to such Bank's Commitment or, if less, the outstanding amount of
all Revolving Credit Loans made by such Bank, plus interest accrued thereon, as
set forth below. The Borrower irrevocably authorizes each Bank to make or cause
to be made, at or about the time of the Drawdown Date of any Revolving Credit
Loan or at the time of receipt of any payment of principal on such Bank's Note,
an appropriate notation on such Bank's Note Record reflecting the making of such
Revolving Credit Loan or (as the case may be) the receipt of such payment. The
outstanding amount of the Revolving Credit Loans set forth on such Bank's Note
Record shall be prima facie evidence of the principal amount thereof owing and
unpaid to such Bank, but the failure to record, or any error in so recording,
any such amount on such Bank's Note Record shall not limit or otherwise affect
the obligations of the Borrower hereunder or under any Note to make payments of
principal of or interest on any Note when due.
2.5. Interest on Revolving Credit Loans. Until the Term Out Date, except as
otherwise provided in Section 2.11 or Section 5.10,
(a) Each Base Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of
the Interest Period with respect thereto at the rate per annum equal to
the Base Rate plus the Applicable Margin then applicable to Base Rate
Loans.
(b) Each Eurodollar Rate Loan shall bear interest for the
period commencing with the Drawdown Date thereof and ending on the last
day of the Interest Period with respect thereto at the rate per annum
equal to the Eurodollar Rate determined for such Interest Period plus
the Applicable Margin then applicable to Eurodollar Rate Loans.
(c) The Borrower promises to pay interest on each Revolving
Credit Loan in arrears on each Interest Payment Date with respect
thereto.
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(d) Upon the occurrence of the Term Out Date, the interest
rate applicable to the Loans shall be determined pursuant to Section
4.5 hereof.
2.6. Requests for Revolving Credit Loans. The Borrower shall give to the Agent
written notice in the form of Exhibit C hereto (or telephonic notice confirmed
in a writing in the form of Exhibit C hereto) of each Revolving Credit Loan
requested hereunder (a "Loan Request") no less than (a) two (2) Business Days
prior to the proposed Drawdown Date of any Base Rate Loan and (b) three (3)
Eurodollar Business Days prior to the proposed Drawdown Date of any Eurodollar
Rate Loan. Each such notice shall specify (i) the principal amount of the
Revolving Credit Loan requested, (ii) the proposed Drawdown Date of such
Revolving Credit Loan, (iii) the Interest Period for such Revolving Credit Loan
and (iv) the Type of such Revolving Credit Loan. Promptly upon receipt of any
such notice, the Agent shall notify each of the Banks thereof. Each such notice
shall be irrevocable and binding on the Borrower and shall obligate the Borrower
to accept the Revolving Credit Loan requested from the Banks on the proposed
Drawdown Date. Each Loan Request shall be in a minimum aggregate amount of
$250,000.
2.7. Conversion Options.
2.7.1. Conversion to Different Type of Revolving Credit Loan. The
Borrower may elect from time to time to convert any outstanding Revolving
Credit Loan to a Revolving Credit Loan of another Type, provided that (a)
with respect to any such conversion of a Revolving Credit Loan to a Base
Rate Loan, the Borrower shall give the Agent at least one (1) Business
Days prior written notice of such election; (b) with respect to any such
conversion of a Eurodollar Rate Loan into a Revolving Credit Loan of
another Type, such conversion shall only be made on the last day of the
Interest Period with respect thereto; (c) with respect to any such
conversion of a Base Rate Loan to a Eurodollar Rate Loan, the Borrower
shall give the Agent at least three (3) Eurodollar Business Days prior
written notice of such election and (d) no Loan may be converted into a
Eurodollar Rate Loan when any Default or Event of Default has occurred and
is continuing. On the date on which such conversion is being made each
Bank shall take such action as is necessary to transfer its Commitment
Percentage of such Revolving Credit Loans to its Domestic Lending Office
or its Eurodollar Lending Office, as the case may be. All or any part of
outstanding Revolving Credit Loans of any Type may be converted as
provided herein, provided that partial conversions shall be in an
aggregate principal amount of $1,000,000. Each Conversion Request relating
to the conversion of a Revolving Credit Loan to a Eurodollar Rate Loan
shall be irrevocable by the Borrower.
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2.7.2. Continuation of Type of Revolving Credit Loan. Any Revolving
Credit Loans of any Type may be continued as such upon the expiration of
an Interest Period with respect thereto by compliance by the Borrower with
the notice provisions contained in Section 2.7.1; provided that no
Eurodollar Rate Loan may be continued as such when any Default or Event of
Default has occurred and is continuing, but shall be automatically
converted to a Base Rate Loan on the last day of the first Interest Period
relating thereto ending during the continuance of any Default or Event of
Default of which the officers of the Agent active upon the Borrower's
account have actual knowledge. In the event that the Borrower fails to
provide any such notice with respect to the continuation of any Eurodollar
Rate Loan as such, then such Eurodollar Rate Loan shall be automatically
converted to a Base Rate Loan on the last day of the first Interest Period
relating thereto. The Agent shall notify the Banks promptly when any such
automatic conversion contemplated by this Section 2.7 is scheduled to
occur.
2.7.3. Eurodollar Rate Loans. Any conversion to or from Eurodollar Rate
Loans shall be in such amounts and be made pursuant to such elections so
that, after giving effect thereto, the aggregate principal amount of all
Eurodollar Rate Loans having the same Interest Period shall not be less
than $1,000,000.
2.8. Funds for Revolving Credit Loans.
2.8.1. Funding Procedures. Not later than 11:00 a.m. (Boston time) on
the proposed Drawdown Date of any Revolving Credit Loans, each of the
Banks will make available to the Agent, at its Head Office, in immediately
available funds, the amount of such Bank's Commitment Percentage of the
amount of the requested Revolving Credit Loans. Upon receipt from each
Bank of such amount, and upon receipt of the documents required by
Sections 11 and 12 and the satisfaction of the other conditions set forth
therein, to the extent applicable, the Agent will make available to the
Borrower the aggregate amount of such Revolving Credit Loans made
available to the Agent by the Banks. The failure or refusal of any Bank to
make available to the Agent at the aforesaid time and place on any
Drawdown Date the amount of its Commitment Percentage of the requested
Revolving Credit Loans shall not relieve any other Bank from its several
obligation hereunder to make available to the Agent the amount of such
other Bank's Commitment Percentage of any requested Revolving Credit
Loans.
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2.8.2. Advances by Agent. The Agent may, unless notified to the
contrary by any Bank prior to a Drawdown Date, assume that such Bank has
made available to the Agent on such Drawdown Date the amount of such
Bank's Commitment Percentage of the Revolving Credit Loans to be made on
such Drawdown Date, and the Agent may (but it shall not be required to),
in reliance upon such assumption, make available to the Borrower a
corresponding amount. If any Bank makes available to the Agent such amount
on a date after such Drawdown Date, such Bank shall pay to the Agent on
demand an amount equal to the product of (i) the average computed for the
period referred to in clause (iii) below, of the weighted average interest
rate paid by the Agent for federal funds acquired by the Agent during each
day included in such period, times (ii) the amount of such Bank's
Commitment Percentage of such Revolving Credit Loans, times (iii) a
fraction, the numerator of which is the number of days that elapse from
and including such Drawdown Date to the date on which the amount of such
Bank's Commitment Percentage of such Revolving Credit Loans shall become
immediately available to the Agent, and the denominator of which is 365. A
statement of the Agent submitted to such Bank with respect to any amounts
owing under this paragraph shall be prima facie evidence of the amount due
and owing to the Agent by such Bank. If the amount of such Bank's
Commitment Percentage of such Revolving Credit Loans is not made available
to the Agent by such Bank within three (3) Business Days following such
Drawdown Date, the Agent shall be entitled to recover such amount from the
Borrower on demand, with interest thereon at the rate per annum applicable
to the Revolving Credit Loans made on such Drawdown Date.
2.9. Change in Borrowing Base. The Borrowing Base shall be determined monthly
(or at such other interval as may be specified pursuant to Section 8.4(e)) or on
a Drawdown Date by the Agent by reference to the Borrowing Base Report delivered
to the Banks and the Agent pursuant to Section 8.4(e), or with respect to such
Drawdown Date, the Borrowing Base Report delivered to the Banks and the Agent
pursuant to Section 12.5.
2.10. Extension of Term Out Date. The Term Out Date shall initially be August
28, 2000. The Borrower may request in writing to the Agent, no earlier than one
hundred twenty (120) days and no later than ninety (90) days prior to the date
which is one (1) year prior to the Term Out Date then in effect, a one-year
extension of the Term Out Date. If the Borrower delivers to the Agent such a
request within the period provided above for any Term Out Date, no Default or
Event of Default has occurred and is continuing and the Agent and each of the
Banks consent, in their sole discretion, to such extension of the Term Out Date
not later than the 30th day prior to the date which is one (1) year prior to the
then effective Term Out Date, then the Term Out Date shall be extended by one
(1) year provided that no extension of the Term Out Date pursuant to this
Section 2.10 shall constitute a waiver of, or shall otherwise affect any rights
or remedies of the Banks in respect of, any Default or Event of Default that may
be continuing at the time of such extension.
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2.11. BkB Existing Debt.
2.11.1. BkB Existing Debt Documents Superseded. This Agreement shall on
the Closing Date supersede the BkB Existing Debt Documents in their
entirety, except as provided in Section 2.11.3. On the Closing Date, the
rights and obligations of the parties evidenced by the BkB Existing Debt
Documents shall be evidenced by this Agreement and the other Loan
Documents.
2.11.2. Return and Cancellation of Notes. As soon as reasonably
practicable after BkB's receipt of its Note hereunder on the Closing Date,
BkB will promptly return to the Borrower, marked "Cancelled", any notes of
the Borrower held by BkB in respect of the BkB Existing Debt.
2.11.3. Interest and Fees Under BkB Existing Debt Documents.
Notwithstanding any provisions to the contrary elsewhere contained in this
Agreement, the portion of Revolving Credit Loans which evidence and
replace the BkB Existing Debt in accordance with Section 11.14 hereof
shall continue to bear interest and be payable to the Agent at the same
rates and times provided in the BkB Existing Debt Documents as if the
underlying documents relating to such BkB Existing Debt were still in full
force and effect. Schedule 2.11 attached hereto sets forth the outstanding
principal balance and the amortization of the BkB Existing Debt and the
interest rates applicable thereto. The Borrower hereby promises to pay
principal of the BkB Existing Debt in accordance with the amortization
schedules set forth on Schedule 2.11 and interest thereon at the rates
specified therein monthly in arrears on the first Business Day of each
month.
3. REPAYMENT OF THE REVOLVING CREDIT LOANS; CONVERSION INTO TERM LOAN.
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3.1. Mandatory Repayments of Revolving Credit Loans. If at any time the sum of
the outstanding amount of the Revolving Credit Loans exceeds the lesser of (a)
the Total Commitment and (b) the Borrowing Base, then the Borrower shall
immediately pay the amount of such excess to the Agent for application to the
Revolving Credit Loans.
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3.2. Optional Repayments of Revolving Credit Loans. The Borrower shall have the
right, at its election, to repay the outstanding amount of the Revolving Credit
Loans, as a whole or in part, subject to Section 5.9, at any time without
penalty or premium, provided that the full or partial prepayment of the
outstanding amount of any Eurodollar Rate Loans pursuant to this Section 3.3 may
be made only on the last day of the Interest Period relating thereto. The
Borrower shall give the Agent, no later than 10:00 a.m., Boston time, at least
three (3) Business Days prior written notice, of any proposed repayment pursuant
to this Section 3.3 of Base Rate Loans, and four (4) Eurodollar Business Days
notice of any proposed repayment pursuant to this Section 3.3 of Eurodollar Rate
Loans, in each case, specifying the proposed date of payment of Revolving Credit
Loans and the principal amount to be paid. Each such partial prepayment of the
Loans shall be in a minimum amount of $1,000,000, shall be accompanied by the
payment of accrued interest on the principal repaid to the date of payment and
shall be applied first to the principal of Base Rate Loans and then to the
principal of Eurodollar Rate Loans. Each partial prepayment shall be allocated
among the Banks, in proportion, as nearly as practicable, to the respective
unpaid principal amount of each Bank's Note, with adjustments to the extent
practicable to equalize any prior repayments not exactly in proportion.
3.3. Term Out Date. On the Term Out Date, no Bank shall have any further
Commitment to make Revolving Credit Loans to the Borrower and the outstanding
Revolving Credit Loans shall convert into the Term Loan in accordance with
Section 4.1 hereof.
4. THE TERM LOAN.
-------------
4.1. Conversion of Revolving Credit Loans into Term Loan. Upon the occurrence of
the Term Out Date, subject to the terms and conditions contained herein, the
outstanding Revolving Credit Loans shall automatically convert into the Term
Loan. The portion of the Term Loan owed to each Bank shall be equal to the
portion of the then outstanding Revolving Credit Loans owing to such Bank.
4.2. The Notes. The Term Loan shall be evidenced by the Notes. The Borrower
irrevocably authorizes each Bank to make or cause to be made a notation on such
Bank's Note Record reflecting the original principal amount of such Bank's
Commitment Percentage of the Term Loan and, at or about the time of such Bank's
receipt of any principal payment on such Bank's Note, an appropriate notation on
such Bank's Note Record reflecting such payment. The aggregate unpaid amount set
forth on such Bank's Note Record shall be prima facie evidence of the principal
amount thereof owing and unpaid to such Bank, but the failure to record, or any
error in so recording, any such amount on such Bank's Note Record shall not
affect the obligations of the Borrower hereunder or under any Note to make
payments of principal of and interest on any Note when due.
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4.3. Mandatory Payments of Principal of Term Loan. The Borrower promises to pay
to the Agent for the account of the Banks the principal amount of the Term Loan
in sixteen (16) consecutive quarterly payments, payable on the last day of each
calendar quarter commencing on the first such date after the Term Out Date, with
a final payment on the Maturity Date in an amount equal to the unpaid balance of
the Term Loan. Additionally, if at any time the aggregate principal amount of
the Term Loan exceeds the Borrowing Base, the Borrower shall immediately pay the
amount of such excess to the Agent for the respective accounts of the Banks for
application to the remaining installments of principal of the Term Loan in the
inverse order of maturity.
4.4. Optional Prepayment of Term Loan. The Borrower shall have the right at any
time to prepay the Term Loan on or before the Maturity Date, as a whole, or in
part, subject to Section 5.9, upon not less than five (5) Business Days prior
written notice to the Agent, without premium or penalty, provided that (a) each
partial prepayment shall be in a minimum amount of $1,000,000, (b) no portion of
the Term Loan bearing interest at the Eurodollar Rate may be prepaid pursuant to
this Section 4.4 on the last day of the Interest Period relating thereto, and
(c) each partial prepayment shall be allocated among the Banks, in proportion,
as nearly as practicable, to the respective outstanding amount of each Bank's
Note, with adjustments to the extent practicable to equalize any prior
prepayments not exactly in proportion. Any prepayment of principal of the Term
Loan shall include all interest accrued to the date of prepayment and shall be
applied against the scheduled installments of principal due on the Term Loan in
the inverse order of maturity. No amount repaid with respect to the Term Loan
may be reborrowed.
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4.5. Interest on Term Loan.
4.5.1. Interest Rates. Except as otherwise provided in Section 5.10,
from and after the Term Out Date, the Term Loan shall bear interest during
each Interest Period relating to all or any portion of the Term Loan at
the following rates:
(a) To the extent that all or any portion of the Term Loan is a
Base Rate Loan, the Term Loan or such portion shall bear interest
during such Interest Period at the rate per annum equal to the Base
Rate plus the Applicable Margin then applicable to Base Rate Loans.
(b) To the extent that all or any portion of the Term Loan is a
Eurodollar Rate Loan, the Term Loan or such portion shall bear interest
during such Interest Period at the rate of per annum equal to the
Eurodollar Rate determined for such Interest Period plus the Applicable
Margin then applicable to Eurodollar Rate Loans.
The Borrower promises to pay interest on the Term Loan or any portion
thereof outstanding during each Interest Period in arrears on each
Interest Payment Date applicable to such Interest Period.
4.5.2. Conversion Options. After the Revolving Credit Loans shall have
been converted into the Term Loan, the provisions of Section 2.7 shall
apply mutatis mutandis with respect to all or any portion of the Term Loan
so that the Borrower may have the same interest rate options with respect
to all or any portion of the Term Loan as it would be entitled to with
respect to the Revolving Credit Loans.
4.5.3. Amounts, etc. Any portion of the Term Loan bearing interest at
the Eurodollar Rate relating to any Interest Period shall be in the amount
of $1,000,000. No Interest Period relating to the Term Loan or any portion
thereof bearing interest at the Eurodollar Rate shall extend beyond the
date on which a regularly scheduled installment payment of the principal
of the Term Loan is to be made unless a portion of the Term Loan at least
equal to such installment payment has an Interest Period ending on such
date or is then bearing interest at a rate calculated by reference to the
Base Rate.
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4.5.4. Eurodollar Rate Loans. In the case of any Revolving Credit
Loans which bore interest with reference to the Eurodollar Rate on the
Term Out Date, the portions of the Term Loan into which such Revolving
Credit Loans were converted shall continue to bear interest with
reference to such rates for the applicable Interest Periods elected
with respect thereto and the Borrower shall pay interest on the
applicable Interest Payment Dates with respect thereto, provided that,
any change in the interest rate spreads over the Base Rate, or
Eurodollar Rate applicable to any of the Base Rate Loans, or Eurodollar
Rate Loans, respectively, resulting from the conversion of the
Revolving Credit Loans into the Term Loan shall be effective as of the
Term Out Date.
5. CERTAIN GENERAL PROVISIONS.
--------------------------
5.1. Fee. The Borrower agrees to pay to the Agent the fees set forth in the
Fee Letter.
5.2. Funds for Payments.
5.2.1. Payments to Agent. All payments of principal, interest, commit-
ment fees and any other amounts due hereunder or under any of the other
Loan Documents shall be made to the Agent, for the respective accounts of
the Banks and the Agent, at the Agent's Head Office or at such other
location in the Boston, Massachusetts, area that the Agent may from
time to time designate, in each case in immediately available funds.
5.2.2. No Offset, etc. All payments by the Borrower hereunder and under
any of the other Loan Documents shall be made without setoff or
counterclaim and free and clear of and without deduction for any taxes,
levies, imposts, duties, charges, fees, deductions, withholdings,
compulsory loans, restrictions or conditions of any nature now or
hereafter imposed or levied by any jurisdiction or any political
subdivision thereof or taxing or other authority therein unless the
Borrower is compelled by law to make such deduction or withholding. If
any such obligation is imposed upon the Borrower with respect to any
amount payable by it hereunder or under any of the other Loan
Documents, the Borrower will pay to the Agent, for the account of the
Banks or (as the case may be) the Agent, on the date on which such
amount is due and payable hereunder or under such other Loan Document,
such additional amount in Dollars as shall be necessary to enable the
Banks or the Agent to receive the same net amount which the Banks or
the Agent would have received on such due date had no such obligation
been imposed upon the Borrower. The Borrower will deliver promptly to
the Agent certificates or other valid vouchers for all taxes or other
charges deducted from or paid with respect to payments made by the
Borrower hereunder or under such other Loan Document.
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5.3. Computations. All computations of interest on Eurodollar Rate Loans and of
commitment or other fees shall be based on a 360-day year and paid for the
actual number of days elapsed. All computations of interest on Base Rate Loans
shall be based on a 365-day year and paid for the actual number of days elapsed.
Except as otherwise provided in the definition of the term "Interest Period"
with respect to Eurodollar Rate Loans, whenever a payment hereunder or under any
of the other Loan Documents becomes due on a day that is not a Business Day, the
due date for such payment shall be extended to the next succeeding Business Day,
and interest shall accrue during such extension. The outstanding amount of the
Loans as reflected on the Note Records from time to time shall be considered
correct and binding on the Borrower unless within five (5) Business Days after
receipt of any notice by the Agent or any of the Banks of such outstanding
amount, the Agent or such Bank shall notify the Borrower to the contrary.
5.4. Inability to Determine Eurodollar Rate. In the event, prior to the
commencement of any Interest Period relating to any Eurodollar Rate Loan, the
Agent shall determine or be notified by the Majority Banks that adequate and
reasonable methods do not exist for ascertaining the Eurodollar Rate that would
otherwise determine the rate of interest to be applicable to any Eurodollar Rate
Loan during any Interest Period, the Agent shall forthwith give notice of such
determination (which shall be conclusive and binding on the Borrower and the
Banks) to the Borrower and the Banks. In such event (a) any Loan Request or
Conversion Request with respect to Eurodollar Rate Loans shall be automatically
withdrawn and shall be deemed a request for Base Rate Loans, (b) each Eurodollar
Rate Loan will automatically, on the last day of the then current Interest
Period thereof, become a Base Rate Loan, and (c) the obligations of the Banks to
make Eurodollar Rate Loans shall be suspended until the Agent or the Majority
Banks determines that the circumstances giving rise to such suspension no longer
exist, whereupon the Agent or, as the case may be, the Agent upon the
instruction of the Majority Banks, shall so notify the Borrower and the Banks.
5.5. Illegality. Notwithstanding any other provisions herein, if any present
or future law, regulation, treaty or directive or in the interpretation or
application thereof shall make it unlawful for any Bank to make or maintain
Eurodollar Rate Loans, such Bank shall forthwith give notice of such
circumstances to the Borrower and the other Banks and thereupon (a) the
commitment of such Bank to make Eurodollar Rate Loans or convert Loans of
another Type to Eurodollar Rate Loans shall forthwith be suspended and (b) such
Bank's Revolving Credit Loans then outstanding as Eurodollar Rate Loans, if any,
shall be converted automatically to Base Rate Loans on the last day of each
Interest Period applicable to such Eurodollar Rate Loans or within such earlier
period as may be required by law. The Borrower hereby agrees promptly to pay the
Agent for the account of such Bank, upon demand by such Bank, any additional
amounts necessary to compensate such Bank for any costs incurred by such Bank in
making any conversion in accordance with this Section 5.5, including any
interest or fees payable by such Bank to lenders of funds obtained by it in
order to make or maintain its Eurodollar Rate Loans hereunder.
5.6. Additional Costs, etc. If any present or future applicable law, which
expression, as used herein, includes statutes, rules and regulations thereunder
and interpretations thereof by any competent court or by any governmental or
other regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and notices at any
time or from time to time hereafter made upon or otherwise issued to any Bank
or the Agent by any central bank or other fiscal, monetary or other authority
(whether or not having the force of law), shall:
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(a) subject any Bank or the Agent to any tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature with respect
to this Credit Agreement, the other Loan Documents, such Bank's
Commitment or the Loans (other than taxes based upon or measured by the
income or profits of such Bank or the Agent), or
(b) materially change the basis of taxation (except for
changes in taxes on income or profits) of payments to any Bank of the
principal of or the interest on any Loans or any other amounts payable
to any Bank or the Agent under this Credit Agreement or the other Loan
Documents, or
(c) impose or increase or render applicable (other than to the
extent specifically provided for elsewhere in this Credit Agreement)
any special deposit, reserve, assessment, liquidity, capital adequacy
or other similar requirements (whether or not having the force of law)
against assets held by, or deposits in or for the account of, or loans
by, or commitments of an office of any Bank, or
(d) impose on any Bank or the Agent any other conditions or
requirements with respect to this Credit Agreement, the other Loan
Documents, the Loans, such Bank's Commitment, or any class of loans or
commitments of which any of the Loans or such Bank's Commitment forms a
part, and the result of any of the foregoing is
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(i) to increase the cost to any Bank of making,
funding, issuing, renewing, extending or maintaining any of
the Loans or such Bank's Commitment, or
(ii) to reduce the amount of principal, interest or
other amount payable to such Bank or the Agent hereunder on
account of such Bank's Commitment or any of the Loans, or
(iii) to require such Bank or the Agent to make any
payment or to forego any interest or other sum payable
hereunder, the amount of which payment or foregone interest or
other sum is calculated by reference to the gross amount of
any sum receivable or deemed received by such Bank or the
Agent from the Borrower hereunder,
then, and in each such case, the Borrower will, upon demand made by such Bank or
(as the case may be) the Agent at any time and from time to time and as often as
the occasion therefor may arise, pay to such Bank or the Agent such additional
amounts as will be sufficient to compensate such Bank or the Agent for such
additional cost, reduction, payment or foregone interest or other sum.
5.7. Capital Adequacy. If after the date hereof any Bank or the Agent
determines that (a) the adoption of or change in any law, governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law) regarding capital requirements for banks or bank holding companies or any
change in the interpretation or application thereof by a court or governmental
authority with appropriate jurisdiction, or (b) compliance by such Bank or the
Agent or any corporation controlling such Bank or the Agent with any law,
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) of any such entity regarding capital adequacy, has the
effect of reducing the return on such Bank's or the Agent's commitment with
respect to any Loans to a level below that which such Bank or the Agent could
have achieved but for such adoption, change or compliance (taking into
consideration such Bank's or the Agent's then existing policies with respect to
capital adequacy and assuming full utilization of such entity's capital) by any
amount deemed by such Bank or (as the case may be) the Agent to be material,
then such Bank or the Agent may notify the Borrower of such fact. To the extent
that the amount of such reduction in the return on capital is not reflected in
the Base Rate, the Borrower agrees to pay such Bank or (as the case may be) the
Agent for the amount of such reduction in the return on capital as and when such
reduction is determined upon presentation by such Bank or (as the case may be)
the Agent of a certificate in accordance with Section 5.8 hereof. Each Bank
shall allocate such cost increases among its customers in good faith and on an
equitable basis.
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5.8. Certificate. A certificate setting forth any additional amounts payable
pursuant to Section 5.6 or 5.7 and a brief explanation of such amounts which are
due, submitted by any Bank or the Agent to the Borrower, shall be conclusive,
absent manifest error, that such amounts are due and owing.
5.9. Indemnity. The Borrower agrees to indemnify each Bank and to hold each
Bank harmless from and against any loss, cost or expense (including loss of
anticipated profits) that such Bank may sustain or incur as a consequence of
(a) default by the Borrower in payment of the principal amount of or any
interest on any Eurodollar Rate Loans as and when due and payable, including any
such loss or expense arising from interest or fees payable by such Bank to
lenders of funds obtained by it in order to maintain its Eurodollar Rate Loans,
(b) default by the Borrower in making a borrowing after the Borrower has given
(or is deemed to have given) a Loan Request or a Conversion Request relating
thereto in accordance with Section 2.6 or Section 2.7 or (c) the making of any
payment of a Eurodollar Rate Loan or the making of any conversion of any such
Loan to a Base Rate Loan on a day that is not the last day of the applicable
Interest Period with respect thereto, including interest or fees payable by such
Bank to lenders of funds obtained by it in order to maintain any such Loans.
5.10. Interest After Default.
5.10.1. Overdue Amounts. Overdue principal and (to the extent permitted
by applicable law) interest on the Loans and all other overdue amounts
payable hereunder or under any of the other Loan Documents shall bear
interest compounded monthly and payable on demand at a rate per annum
equal to two percent (2%) above the Base Rate until such amount shall
be paid in full (after as well as before judgment).
5.10.2. Amounts Not Overdue. During the continuance of a Default or an
Event of Default the principal of the Loans not overdue shall, until
such Default or Event of Default has been cured or remedied or such
Default or Event of Default has been waived by the Majority Banks
pursuant to Section 26, bear interest at a rate per annum equal to the
greater of (a) two percent (2%) above the rate of interest otherwise
applicable to such Loans pursuant to Section 2.5 or Section 4.5, as the
case may be, and (b) the rate of interest applicable to overdue principal
pursuant to Section 5.10.1.
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6. COLLATERAL SECURITY.
-------------------
The Obligations shall be secured by a perfected first priority security
interest (subject only to Permitted Liens entitled to priority under applicable
law) in all of the assets of the Borrower and its Subsidiaries, whether now
owned or hereafter acquired, pursuant to the terms of the Security Documents to
which the Borrower or any of its Subsidiaries is a party. Without limiting the
generality of the foregoing, the Obligations shall be secured by the following:
(a) a perfected first priority lien and security interest in
substantially all assets of the Borrower and its Subsidiaries (other
than TB Coastwise) pursuant to the terms of the Security Agreements
provided, that the Borrower shall not be required to secure the
Obligations with a second lien on tangible assets subject to first
priority Permitted Liens;
(b) a perfected first priority security interest in and
assignment of all the Borrower's right, title, and interest in and to
any insurance and/or insurance policies with respect to each of the
Eligible Vessels, such security interest to be granted pursuant to the
Assignment of Insurance;
(c) a perfected first priority security interest in and
assignment of all the Borrower's right, title and interest in and to
all contracts, permits and licenses relating to each Eligible Vessel,
such security interest to be granted pursuant to the Assignment of
Contracts;
(d) a perfected first priority security interest in and
assignment to all of the Borrower's right, title and interest in and to
the Charter, such security interest to be granted pursuant to the
Charter Assignment; and
(e) a perfected first preferred mortgage lien and security
interest in each Eligible Vessel pursuant to the terms of the First
Preferred Vessel Mortgages.
As further security for the Obligations, the Borrower hereby agrees,
that in the event the Borrower acquires or establishes any new Subsidiaries, the
Borrower shall within thirty (30) days after such date cause such Subsidiary to
enter into a guaranty, in form and substance satisfactory to the Agent, in favor
of the Banks pursuant to which such Subsidiary shall guaranty the payment and
performance of the Obligations and to cause the obligations of each Subsidiary
under such Guaranty to be secured by a perfected first priority security
interest (subject only to Permitted Liens) on all of the assets of such
Subsidiary pursuant to the terms of security documents satisfactory to the
Agent.
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7. REPRESENTATIONS AND WARRANTIES.
------------------------------
The Borrower represents and warrants to the Banks and the Agent as
follows:
7.1. Corporate Authority.
7.1.1. Incorporation; Good Standing. Each of the Borrower and its
Subsidiaries (a) is a corporation duly organized, validly existing and
in good standing under the laws of its state of incorporation, (b) has
all requisite corporate power to own its property and conduct its
business as now conducted and as presently contemplated, and (c) is in
good standing as a foreign corporation and is duly authorized to do
business in each jurisdiction where such qualification is necessary
except where a failure to be so qualified would not have a materially
adverse effect on the business, assets or financial condition of the
Borrower or its Subsidiaries.
7.1.2. Authorization. The execution, delivery and performance of this
Credit Agreement and the other Loan Documents to which the Borrower or
any of its Subsidiaries is or is to become a party and the transactions
contemplated hereby and thereby (a) are within the corporate authority of
such Person, (b) have been duly authorized by all necessary corporate
proceedings, (c) do not conflict with or result in any breach or
contravention of any provision of law, statute, rule or regulation to
which the Borrower or any of its Subsidiaries is subject or any judgment,
order, writ, injunction, license or permit applicable to the Borrower or
any of its Subsidiaries and (d) do not conflict with any provision of the
corporate charter or bylaws of, or any agreement or other instrument
binding upon, the Borrower or any of its Subsidiaries.
7.1.3. Enforceability. The execution and delivery of this Credit
Agreement and the other Loan Documents to which the Borrower or any of its
Subsidiaries is or is to become a party will result in valid and legally
binding obligations of such Person enforceable against it in accordance
with the respective terms and provisions hereof and thereof, except as
enforceability is limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting generally the enforce-
ment of creditors' rights and except to the extent that availability of
the remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding therefor may be
brought.
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7.2. Governmental Approvals. The execution, delivery and performance by the
Borrower and any of its Subsidiaries of this Credit Agreement and the other Loan
Documents to which the Borrower or any of its Subsidiaries is or is to become a
party and the transactions contemplated hereby and thereby do not require the
approval or consent of, or filing with, any governmental agency or authority
other than those already obtained.
7.3. Title to Properties; Leases. Except as indicated on Schedule 7.3 hereto,
the Borrower and its Subsidiaries own all of the assets reflected in the
consolidated balance sheet of the Borrower and its Subsidiaries as at the
Balance Sheet Date or acquired since that date (except property and assets sold
or otherwise disposed of in the ordinary course of business since that date),
subject to no rights of others, including any mortgages, leases, conditional
sales agreements, title retention agreements, liens or other encumbrances except
Permitted Liens.
7.4. Financial Statements and Forecasts.
7.4.1. Financial Statements. There has been furnished to the Agent a
consolidated balance sheet of the Borrower and its Subsidiaries as at the
Balance Sheet Date, and a consolidated statement of income and a
consolidated statement of cash flows for the fiscal year then ended,
certified by the Borrower's independent certified public accountants.
Such balance sheet and statement of income have been prepared in
accordance with generally accepted accounting principles and fairly
present the financial condition of the Borrower as at the close of
business on the date thereof and the results of operations for the fiscal
year then ended. There are no contingent liabilities of the Borrower or
any of its Subsidiaries as of such date involving material amounts, known
to the officers of the Borrower not disclosed in said balance sheet and
the related notes thereto.
7.4.2. Forecasts. The forecasts of key financial information of the
Borrower and its Subsidiaries for the 1998 and 1999 fiscal years, copies
of which have been delivered to each Bank, disclose all assumptions made
with respect to general economic, financial and market conditions used in
formulating such forecasts. To the knowledge of the Borrower or any of
its Subsidiaries, no facts exist that (individually or in the aggregate)
would result in any material change in any of such forecasts. The
forecasts are based upon reasonable estimates and assumptions, have been
prepared on the basis of the assumptions stated therein and reflect the
reasonable estimates of the Borrower and its Subsidiaries of the results
of operations and other information projected therein.
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7.5. No Material Changes, etc. (a) Since the Balance Sheet Date there has
occurred no materially adverse change in the financial condition or business of
the Borrower and its Subsidiaries as shown on or reflected in the consolidated
balance sheet of the Borrower and its Subsidiaries as at the Balance Sheet Date,
or the consolidated statement of income for the fiscal year then ended, other
than changes in the ordinary course of business that have not had any materially
adverse effect either individually or in the aggregate on the business or
financial condition of the Borrower or its Subsidiaries. Since the Balance Sheet
Date, the Borrower has not made any Distributions. (b) Each of the Borrower and
its Subsidiaries, both before and after giving effect to the transactions
contemplated by this Agreement and the other Loan Documents, (i) is solvent,
(ii) has assets having a fair value in excess of its liabilities, (iii) has
assets having a fair value in excess of the amount required to pay its
liabilities on existing debts as they become absolute and matured, and (iv) has,
and expects to continue to have, access to adequate capital for the conduct of
its business and the ability to pay its debts from time to time incurred in
connection with the operation of its business as such debts mature.
7.6. Franchises, Patents, Copyrights, etc. Each of the Borrower and its Sub-
sidiaries possesses all franchises, patents, copyrights, trademarks, trade
names, licenses and permits, and rights in respect of the foregoing, adequate
for the conduct of its business substantially as now conducted without known
conflict with any rights of others.
7.7. Litigation. There are no actions, suits, proceedings or investigations of
any kind pending or threatened against the Borrower or any of its Subsidiaries
before any court, tribunal or administrative agency or board that, if adversely
determined, might, either in any case or in the aggregate, materially adversely
affect the properties, assets, financial condition or business of the Borrower
and its Subsidiaries or materially impair the right of the Borrower and its
Subsidiaries, considered as a whole, to carry on business substantially as now
conducted by them, or result in any substantial liability not adequately covered
by insurance, or for which adequate reserves are not maintained on the
consolidated balance sheet of the Borrower, or which question the validity of
this Credit Agreement or any of the other Loan Documents, or any action taken or
to be taken pursuant hereto or thereto.
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7.8. No Materially Adverse Contracts, etc. Neither the Borrower nor any of its
Subsidiaries is subject to any charter, corporate or other legal restriction, or
any judgment, decree, order, rule or regulation that has or is expected in the
future to have a materially adverse effect on the business, assets or financial
condition of the Borrower or any of its Subsidiaries. Neither the Borrower nor
any of its Subsidiaries is a party to any contract or agreement that has or is
expected, in the judgment of the Borrower's officers, to have any materially
adverse effect on the business of the Borrower or any of its Subsidiaries.
7.9. Compliance With Other Instruments, Laws, etc. Neither the Borrower nor any
of its Subsidiaries is in violation of any provision of its charter documents,
bylaws, or any agreement or instrument to which it may be subject or by which it
or any of its properties may be bound or any decree, order, judgment, statute,
license, rule or regulation, in any of the foregoing cases in a manner that
could result in the imposition of substantial penalties or materially and
adversely affect the financial condition, properties or business of the Borrower
or any of its Subsidiaries.
7.10. Tax Status. The Borrower and its Subsidiaries (a) have made or filed all
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which any of them is subject, (b) have paid all
taxes and other governmental assessments and charges shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and by appropriate proceedings and (c) have set aside on their books
provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Borrower know of no basis
for any such claim.
7.11. No Event of Default. No Default or Event of Default has occurred and is
continuing.
7.12. Holding Company and Investment Company Acts. Neither the Borrower nor any
of its Subsidiaries is a "holding company", or a "subsidiary company" of a
"holding company", or an affiliate" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935; nor is it an "invest-
ment company", or an "affiliated company" or a "principal underwriter" of an
"investment company", as such terms are defined in the Investment Company Act of
1940.
7.13. Absence of Financing Statements, etc. Except with respect to Permitted
Liens, there is no financing statement, security agreement, chattel mortgage,
real estate mortgage or other document filed or recorded with any filing
records, registry, or other public office, that purports to cover, affect
or give notice of any present or possible future lien on, or security interest
in, any assets or property of the Borrower or any of its Subsidiaries or rights
thereunder.
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7.14. Perfection of Security Interest. All filings, assignments, pledges and
deposits of documents or instruments have been made and all other actions have
been taken that are necessary or advisable, under applicable law, to establish
and perfect the Agent's security interest in the Collateral. The Collateral and
the Agent's rights with respect to the Collateral are not subject to any setoff,
claims, withholdings or other defenses. The Borrower is the owner of the
Collateral free from any lien, security interest, encumbrance and any other
claim or demand, except for Permitted Liens.
7.15. Certain Transactions. None of the officers, directors, or employees of the
Borrower or any of its Subsidiaries is presently a party to any transaction with
the Borrower or any of its Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Borrower, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner.
7.16. Employee Benefit Plans.
7.16.1. In General. Each Employee Benefit Plan has been maintained and
operated in compliance in all material respects with the provisions of
ERISA and, to the extent applicable, the Code, including but not
limited to the provisions thereunder respecting prohibited
transactions. The Borrower has heretofore delivered to the Agent the
most recently completed annual report, Form 5500, with all required
attachments, and actuarial statement required to be submitted under
Section 103(d) of ERISA, with respect to each Guaranteed Pension Plan.
7.16.2. Terminability of Welfare Plans. Under each Employee Benefit
Plan which is an employee welfare benefit plan within the meaning of
Section 3(1) or Section 3(2)(B) of ERISA, no benefits are due unless the
event giving rise to the benefit entitlement occurs prior to plan termina-
tion (except as required by Title I, Part 6 of ERISA). The Borrower or an
ERISA Affiliate, as appropriate, may terminate each such Plan at any
time (or at any time subsequent to the expiration of any applicable
bargaining agreement) in the discretion of the Borrower or such ERISA
Affiliate without liability to any Person.
7.16.3. Guaranteed Pension Plans. Each contribution required to be
made to a Guaranteed Pension Plan, whether required to be made to avoid
the incurrence of an accumulated funding deficiency, the notice or lien
provisions of Section 302(f)of ERISA, or otherwise, has been timely made.
No waiver of an accumulated funding deficiency or extension of amortiza-
tion periods has been received with respect to any Guaranteed Pension
Plan. No liability to the PBGC (other than required insurance premiums,
all of which have been paid) has been incurred by the Borrower or any
ERISA Affiliate with respect to any Guaranteed Pension Plan and there has
not been any ERISA Reportable Event, or any other event or condition which
presents a material risk of termination of any Guaranteed Pension Plan by
the PBGC. Based on the latest valuation of each Guaranteed Pension Plan
(which in each case occurred within twelve months of the date of this
representation), and on the actuarial methods and assumptions employed for
that valuation, the aggregate benefit liabilities of all such Guaranteed
Pension Plans within the meaning of Section 4001 of ERISA did not exceed
the aggregate value of the assets of all such Guaranteed Pension Plans,
disregarding for this purpose the benefit liabilities and assets of any
Guaranteed Pension Plan with assets in excess of benefit liabilities.
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7.16.4. Multiemployer Plans. Neither the Borrower nor any ERISA
Affiliate has incurred any material liability (including secondary
liability) to any Multiemployer Plan as a result of a complete or
partial withdrawal from such Multiemployer Plan under Section 4201 of
ERISA or as a result of a sale of assets described in Section 4204 of
ERISA. Neither the Borrower nor any ERISA Affiliate has been notified
that any Multiemployer Plan is in reorganization or insolvent under and
within the meaning of Section 4241 or Section 4245 of ERISA or that any
Multiemployer Plan intends to terminate or has been terminated under
Section 4041A of ERISA.
7.17. Regulations U and X. The proceeds of the Loans shall be used (a) to
refinance existing Indebtedness, (b) to finance the acquisition of Vessels and
equipment and (c) for working capital and general corporate purposes. No portion
of any Loan is to be used for the purpose of purchasing or carrying any "margin
security" or "margin stock" as such terms are used in Regulations U and X of the
Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
7.18. Environmental Compliance. The Borrower has taken all necessary steps to
investigate the past and present condition and usage of the Real Estate and the
operations conducted thereon and, based upon such diligent investigation, has
determined that:
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(a) none of the Borrower, its Subsidiaries or any operator of
the Real Estate or the Vessels or any operations thereon is in
violation, or alleged violation, of any judgment, decree, order, law,
license, rule or regulation pertaining to environmental matters,
including without limitation, those arising under the Resource
Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 as amended ("CERCLA"),
the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the
Federal Clean Water Act, the Federal Clean Air Act, the Toxic
Substances Control Act, the Oil Pollution Act of 1990, or any state or
local statute, regulation, ordinance, order or decree relating to
health, safety or the environment (hereinafter "Environmental Laws"),
which violation would have a material adverse effect on the environment
or the business, assets or financial condition of the Borrower or any
of its Subsidiaries;
(b) neither the Borrower nor any of its Subsidiaries has
received notice from any third party including, without limitation, any
federal, state or local governmental authority, (i) that any one of
them has been identified by the United States Environmental Protection
Agency ("EPA) as a potentially responsible party under CERCLA with
respect to a site listed on the National Priorities List, 40 C.F.R.
Part 300 Appendix B; (ii) that any hazardous waste, as defined by 42
U.S.C. Section 6903(5), any hazardous substances as defined by 42
U.S.C. Section 9601(14), any pollutant or contaminant as defined by 42
U.S.C. Section 9601(33) and any toxic substances, oil or hazardous
materials or other chemicals or substances regulated by any Environ-
mental Laws ("Hazardous Substances") which any one of them has
generated, transported or disposed of has been found at any site at
which a federal, state or local agency or other third party has
conducted or has ordered that the Borrower or any of its Subsidiaries
conduct a remedial investigation, removal or other response action
pursuant to any Environmental Law; or (iii) that it is or shall be a
named party to any claim, action, cause of action, complaint, or legal
or administrative proceeding (in each case, contingent or otherwise)
arising out of any third party's incurrence of costs, expenses, losses
or damages of any kind whatsoever in connection with the release of
Hazardous Substances;
(c) except as set forth on Schedule 7.18 attached hereto: (i)
no portion of the Real Estate or any Vessel has been used for the
handling, processing, storage or disposal of Hazardous Substances
except in accordance with applicable Environmental Laws; and no
underground tank or other underground storage receptacle for Hazardous
Substances is located on any portion of the Real Estate; (ii) in the
course of any activities conducted by the Borrower, its Subsidiaries or
operators of its properties, no Hazardous Substances have been
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generated or are being used on the Real Estate or the Vessels except in
accordance with applicable Environmental Laws; (iii) there have been no
releases (i.e. any past or present releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
disposing or dumping) or threatened releases of Hazardous Substances
on, upon, into or from the properties of the Borrower or its
Subsidiaries, which releases would have a material adverse effect on
the value of any of the Vessels, the Real Estate or adjacent properties
or the environment; (iv) to the best of the Borrower's knowledge, there
have been no releases on, upon, from or into any real property in the
vicinity of any of the Real Estate which, through soil or groundwater
contamination, may have come to be located on, and which would have a
material adverse effect on the value of, the Real Estate; and (v) in
addition, any Hazardous Substances that have been generated on any of
the Real Estate have been transported offsite only by carriers having
an identification number issued by the EPA, treated or disposed of only
by treatment or disposal facilities maintaining valid permits as
required under applicable Environmental Laws, which transporters and
facilities have been and are, to the best of the Borrower's knowledge,
operating in compliance with such permits and applicable Environmental
Laws; and
(d) None of the Borrower and its Subsidiaries, any of the Real
Estate or any Vessel is subject to any applicable environmental law
requiring the performance of Hazardous Substances site assessments, or
the removal or remediation of Hazardous Substances, or the giving of
notice to any governmental agency or the recording or delivery to other
Persons of an environmental disclosure document or statement by virtue
of the transactions set forth herein and contemplated hereby, or as a
condition to the recording of any First Preferred Vessel Mortgage or to
the effectiveness of any other transactions contemplated hereby.
7.19. Subsidiaries, etc. TB Coastwise is the only Subsidiary of the Borrower.
Except as set forth on Schedule 7.19 hereto, neither the Borrower nor any
Subsidiary of the Borrower is engaged in any joint venture or partnership with
any other person.
7.20. Bank Accounts. Schedule 7.20 sets forth the account numbers and location
of all bank accounts of the Borrower and its Subsidiaries.
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7.21. Real Property. Other than sales offices consisting of leases of shared
office space and except as set forth on Schedule 7.21, neither the Borrower nor
any Subsidiary of the Borrower owns or leases (as lessee or sublessee) any Real
Estate.
7.22. Principal Place of Business. The Borrower's principal place of
business is 10405 New Berlin Road East, Jacksonville, Florida 32226. The
principal place of business of each Subsidiary of the Borrower is as set forth
in the Security Agreement to which such Subsidiary is a party.
7.23. Disclosure. None of this Credit Agreement nor any of the other Loan
Documents contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements herein or therein not
misleading. There is no fact known to the Borrower or any of its Subsidiaries
which materially adversely affects, or which is reasonably likely in the future
to materially adversely affect, exclusive of effects resulting from changes in
general economic conditions, its business, assets, financial condition or
prospects.
7.24. Fiscal Year. The Borrower and each of its Subsidiaries has a fiscal year
that is the twelve months ending December 31 of each year.
7.25. Insurance. Schedule 7.25 attached hereto lists the policies and types and
amounts of coverage (including deductibles) of theft, fire, liability, life,
property and casualty and other insurance owned or held by the Borrower and its
Subsidiaries on the date hereof. Such policies of insurance are maintained with
financially sound and reputable insurance companies, funds, underwriters or
mutual indemnification associations and are of the kinds, cover such risks and
are in such amounts, with such deductibles and exclusions, as are required under
Section 8.8 hereof and under the Security Documents. All such policies are in
full force and effect; are sufficient for compliance by the Borrower and its
Subsidiaries with all requirements of law and all agreements to which the
Borrower or such Subsidiary is a party; are valid and enforceable policies and
will remain in full force and effect through the respective dates set forth in
such schedule; and coverage thereunder will not be reduced by, or terminate or
lapse by reason of, the transactions contemplated by this Credit Agreement.
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7.26. Concerning the Vessels. (a) The Borrower's ownership and operation of each
Vessel complies with all applicable requirements of the Shipping Act, 1916, as
amended and in effect, and all applicable regulations thereunder. The Borrower
is a citizen of the United States for purposes of operating each of the Vessels
in the registry of coastwise trade in accordance with Section 2 of the Shipping
Act of 1916, as amended and in effect, and the regulations thereunder. Each
Vessel is (a) covered by hull and machinery, protection and indemnity and excess
liability insurance, and (b) operated and maintained as a vessel in the registry
of coastwise trade in accordance with the Shipping Act, 1916, as amended and in
effect, and the regulations thereunder.
(b) Neither of the RoRo Barges is subject to any charter other than the
Charter.
7.27. MARAD Financing Documents. The Borrower has furnished to the Banks true,
correct and complete copies of the MARAD Financing Documents. None of the MARAD
Financing Documents has been amended, modified or supplemented as of the date
hereof. Each of the representations and warranties of the Borrower and its
Subsidiaries contained in the MARAD Financing Documents is true and correct in
all materials respects as of the Closing Date.
7.28. Year 2000 Problem. The Borrower and its Subsidiaries have reviewed the
areas within their businesses and operations which could be adversely affected
by the "Year 2000 Problem" (i.e. the risk that computer applications used by the
Borrower or any of its Subsidiaries may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any date
after December 31, 1999). Based upon such review, the Borrower reasonably
believes that the "Year 2000 Problem" will not have any materially adverse
effect on the business or financial condition of the Borrower or any of its
Subsidiaries.
8. AFFIRMATIVE COVENANTS OF THE BORROWER.
-------------------------------------
The Borrower covenants and agrees that, so long as any Loan or Note is
outstanding or any Bank has any obligation to make any Loans:
8.1. Punctual Payment. The Borrower will duly and punctually pay or cause to be
paid the principal and interest on the Loans, the commitment fees and all other
amounts provided in this Credit Agreement and the other Loan Documents to which
the Borrower or any of its Subsidiaries is a party, all in accordance with the
terms of this Credit Agreement and the such other Loan Documents.
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8.2. Maintenance of Office. The Borrower will maintain its chief executive
office in Jacksonville, Florida, or at such other place in the United States of
America as the Borrower shall designate upon written notice to the Agent, where
notices, presentations and demands to or upon the Borrower in respect of the
Loan Documents may be given or made.
8.3. Records and Accounts. The Borrower will (i) keep, and cause each of its
Subsidiaries to keep, true and accurate records and books of account in which
full, true and correct entries will be made in accordance with generally
accepted accounting principles and (ii) maintain adequate accounts and reserves
for all taxes (including income taxes), depreciation, depletion, obsolescence
and amortization of its properties and the properties of its Subsidiaries,
contingencies, and other reserves.
8.4. Financial Statements, Certificates and Information. The Borrower will
deliver to each of the Banks:
(a) as soon as practicable, but in any event not later than
ninety (90) days after the end of each fiscal year of the Borrower, the
consolidated balance sheet of the Borrower and its Subsidiaries as at
the end of such year, and the related consolidated statement of income
and consolidated statement of cash flow for such year, each setting
forth in comparative form the figures for the previous fiscal year and
all such consolidated statements to be in reasonable detail, prepared
in accordance with generally accepted accounting principles, and
certified without qualification by Deloitte & Touche LLP or by other
independent certified public accountants satisfactory to the Agent,
together with a written statement from such accountants to the effect
that they have read a copy of this Credit Agreement, and that, in
making the examination necessary to said certification, they have
obtained no knowledge of any Default or Event of Default during the
period covered by such certification, or, if such accountants shall
have obtained knowledge of any then existing Default or Event of
Default they shall disclose in such statement any such Default or Event
of Default; provided that such accountants shall not be liable to the
Banks for failure to obtain knowledge of any Default or Event of
Default;
(b) as soon as practicable, but in any event not later than
forty-five (45) days after the end of each of the fiscal quarters of
the Borrower, copies of the unaudited consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of such quarter, and the
related consolidated statement of income and consolidated statement of
cash flow for the portion of the Borrower's fiscal year then elapsed,
all in reasonable detail and prepared in accordance with generally
accepted accounting principles, together with a certification by the
principal financial or accounting officer of the Borrower that the
information contained in such financial statements fairly presents the
financial position of the Borrower and its Subsidiaries on the date
thereof (subject to year-end adjustments);
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(c) as soon as practicable, but in any event not later than
ninety (90) days after the end of each fiscal year, the annual budget
for the Borrower for the next succeeding fiscal year, such annual
budget to be set forth in reasonable detail on a quarter-to-quarter
basis;
(d) simultaneously with the delivery of the financial
statements referred to in subsections (a) and (b) above, a statement
certified by the principal financial or accounting officer of the
Borrower in substantially the form of Exhibit D hereto and setting
forth in reasonable detail computations evidencing compliance with the
covenants contained in Section 10 and (if applicable) reconciliations
to reflect changes in generally accepted accounting principles since
the Balance Sheet Date;
(e) within fifteen (15) days after the end of each calendar
month or at such earlier time as the Agent may reasonably request, a
Borrowing Base Report setting forth the Borrowing Base as at the end of
such calendar month;
(f) simultaneously with the delivery of the financial
statements referred to in subsection (b) above, an Accounts Receivable
aging report;
(g) simultaneously with the delivery of the financial
statements referred to in subsection (a) above, projections covering
five-year periods of the Borrower and its Subsidiaries updating those
forecasts delivered to the Banks and referred to in Section 7.4.2 and
in form and substance reasonably acceptable to the Agent or, if
applicable, updating any later such projections delivered in response
to a request pursuant to this Section 8.4(i);
(h) contemporaneously with the filing or mailing thereof,
copies of all material of a financial nature filed with the Securities
and Exchange Commission or sent to the stockholders of the Borrower;
(i) from time to time such other financial data and
information (including accountants' management letters) as the Agent or
any Bank may reasonably request;
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(j) once each calendar year, or more frequently as determined
by the Agent or the Majority Banks upon the request of the Agent or the
Majority Banks, the Borrower will, at its own expense, obtain and
deliver to the Agent and the Banks appraisal reports in form and
substance and from appraisers satisfactory to the Agent, stating the
then current fair market values of all or any portion of the Eligible
Vessels. Such appraisal may include an inspection of each such Vessel
by marine engineers or other surveyors selected by the Agent in its
sole discretion.
8.5. Notices.
8.5.1. Defaults. The Borrower will promptly notify the Agent and each
of the Banks in writing of the occurrence of any Default or Event of
Default. If any Person shall give any notice or take any other action
in respect of a claimed default (whether or not constituting an Event
of Default) under this Credit Agreement or any other note, evidence of
indebtedness, indenture or other obligation to which or with respect to
which the Borrower or any of its Subsidiaries is a party or obligor,
whether as principal or surety, the Borrower shall forthwith give
written notice thereof to each of the Banks, describing the notice or
action and the nature of the claimed default.
8.5.2. Environmental Events. The Borrower will promptly give notice to
the Agent (i) of any violation of any Environmental Law that the Borrower
or any of its Subsidiaries reports in writing or is reportable by such
Person in writing (or for which any written report supplemental to any
oral report is made) to any federal, state or local environmental agency
and (ii) upon becoming aware thereof, of any inquiry, proceeding, investi-
gation, or other action, including a notice from any agency of potential
environmental liability, of any federal, state or local environmental
agency or board, that has the potential to materially affect the assets,
liabilities, financial conditions or operations of the Borrower or any of
its Subsidiaries, or the Agent's security interests pursuant to the
Security Documents.
8.5.3. Notification of Claims Against Collateral. The Borrower will,
immediately upon becoming aware thereof, notify the Agent in writing of
any setoff, claims (including, with respect to the Real Estate or
Vessels, environmental claims), withholdings or other defenses to which
any of the Collateral, or the Agent's rights with respect to the
Collateral, are subject.
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8.5.4. Notice of Litigation and Judgments. The Borrower will, and
will cause each of its Subsidiaries to, give notice to the Agent in
writing within fifteen (15) days of becoming aware of any litigation or
proceedings threatened in writing or any pending litigation and proceed-
ings affecting the Borrower or any of its Subsidiaries or to which the
Borrower or any of its Subsidiaries is or becomes a party involving an
uninsured claim against the Borrower or any of its Subsidiaries that could
reasonably be expected to have a materially adverse effect on the Borrower
or any of its Subsidiaries and stating the nature and status of such
litigation or proceedings. The Borrower will, and will cause each of its
Subsidiaries to, give notice to the Agent, in writing, in form and detail
satisfactory to the Agent, within ten (10) days of any judgment not
covered by insurance, final or otherwise, against the Borrower or any of
its Subsidiaries in an amount in excess of $500,000.
8.6. Corporate Existence; Maintenance of Properties. The Borrower will do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence, rights and franchises and those of its
Subsidiaries and will not, and will not cause or permit any of its Subsidiaries
to, convert to a limited liability company. The Borrower (a) will cause all of
its properties and those of its Subsidiaries used or useful in the conduct of
its business or the business of its Subsidiaries to be maintained and kept in
good condition, repair and working order and supplied with all necessary
equipment, (b) will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Borrower may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times, and (c)
will, and will cause each of its Subsidiaries to, continue to engage primarily
in the businesses now conducted by them and in related businesses; provided that
nothing in this Section 8.6 shall prevent the Borrower from discontinuing the
operation and maintenance of any of its properties or those of its Subsidiaries
if such discontinuance is, in the judgment of the Borrower, desirable in the
conduct of its or their business and that do not in the aggregate materially
adversely affect the business of the Borrower and its Subsidiaries on a
consolidated basis.
8.7. Title and Registration. The Borrower will, and will cause each of its
Subsidiaries to, maintain all Motor Vehicle Equipment and Chassis, now owned or
hereafter acquired by the Borrower or any of its Subsidiaries, which, under
applicable law, is required to be registered, to be properly registered in the
name of such Person and cause all Motor Vehicle Equipment and Chassis, now owned
or hereafter acquired by the Borrower or any of its Subsidiaries, the ownership
of which, under applicable law, is evidenced by a certificate of title, to be
properly titled in the name of such Person, with the Administrative Agent's lien
noted thereon.
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8.8. Insurance. The Borrower will, and will cause each of its Subsidiaries to,
maintain with financially sound and reputable insurers insurance with respect to
its properties and business against such casualties and contingencies as shall
be in accordance with the general practices of businesses engaged in similar
activities in similar geographic areas and in amounts, containing such terms, in
such forms and for such periods as may be reasonable and prudent and in
accordance with the terms of the Security Documents.
8.9. Taxes. The Borrower will, and will cause each of its Subsidiaries to, duly
pay and discharge, or cause to be paid and discharged, before the same shall
become overdue, all taxes, assessments and other governmental charges (other
than taxes, assessments and other governmental charges imposed by foreign
jurisdictions that in the aggregate are not material to the business or assets
of the Borrower on an individual basis or of the Borrower and its Subsidiaries
on a consolidated basis) imposed upon it and its real properties, sales and
activities, or any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies that if unpaid might by law
become a lien or charge upon any of its property; provided that any such tax,
assessment, charge, levy or claim need not be paid if the validity or amount
thereof shall currently be contested in good faith by appropriate proceedings
and if the Borrower or such Subsidiary shall have set aside on its books
adequate reserves with respect thereto; and provided further that the Borrower
and each Subsidiary of the Borrower will pay all such taxes, assessments,
charges, levies or claims forthwith upon the commencement of proceedings to
foreclose any lien that may have attached as security therefor.
8.10. Inspection of Properties and Books, etc.
8.10.1. General. The Borrower shall permit the Banks, accompanied by
the Agent or any of the Banks' other designated representatives, to
visit and inspect any of the properties of the Borrower or any of its
Subsidiaries to examine the books of account of the Borrower and its
Subsidiaries (and to make copies thereof and extracts therefrom), and
to discuss the affairs, finances and accounts of the Borrower and its
Subsidiaries with, and to be advised as to the same by, its and their
officers, all at such reasonable times and intervals as the Agent or
any Bank may reasonably request.
8.10.2. Collateral Reports. Upon the request of the Agent, the
Borrower will obtain and deliver to the Agent a report of an independent
collateral auditor satisfactory to the Agent (which may be affiliated with
one of the Banks) with respect to the Accounts Receivable and other assets
included in the Borrowing Base, which report shall indicate whether or not
the information set forth in the Borrowing Base Report most recently
delivered is accurate and complete in all material respects based upon a
review by such auditors of the Accounts Receivable (including verification
with respect to the amount, aging, identity and credit of the respective
account debtors and the billing practices of the Borrower or its
applicable Subsidiary) and other assets (including verification as to the
value, location and respective types). All such collateral value reports
shall be conducted and made at the expense of the Borrower.
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8.10.3. Communication with Accountants. The Borrower authorizes the
Agent and, if accompanied by the Agent, the Banks to communicate
directly with the Borrower's independent certified public accountants
and authorizes such accountants to disclose to the Agent and the Banks
any and all financial statements and other supporting financial
documents and schedules including copies of any management letter with
respect to the business, financial condition and other affairs of the
Borrower or any of its Subsidiaries. At the request of the Agent, the
Borrower shall deliver a letter addressed to such accountants
instructing them to comply with the provisions of this Section 8.10.3.
8.11. Compliance with Laws, Contracts, Licenses, and Permits. The Borrower
will, and will cause each of its Subsidiaries to, comply with (a) the applicable
laws and regulations wherever its business is conducted, including all
Environmental Laws, (b) the provisions of its charter documents and by-laws, (c)
all agreements and instruments by which it or any of its properties may be bound
and (d) all applicable decrees, orders, and judgments. If at any time while any
Loan or Note is outstanding or either Bank has any obligation to make Loans
hereunder, any authorization, consent, approval, permit or license from any
officer, agency or instrumentality of any government shall become necessary or
required in order that the Borrower may fulfill any of its obligations
hereunder, the Borrower will immediately take or cause to be taken all
reasonable steps within the power of the Borrower to obtain such authorization,
consent, approval, permit or license and furnish the Banks with evidence
thereof.
8.12. Employee Benefit Plans. The Borrower will (i) promptly upon request by the
Agent, furnish to the Agent a copy of the most recent actuarial statement
required to be submitted under Section 103(d) of ERISA and Annual Report, Form
5500, with all required attachments, in respect of each Guaranteed Pension Plan
and (ii) promptly upon request by the Agent, furnish to the Agent any notice,
report or demand sent or received in respect of a Guaranteed Pension Plan under
Sections 302, 4041, 4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in
respect of a Multiemployer Plan, under Sections 4041A, 4202, 4219, 4242, or 4245
of ERISA.
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8.13. Use of Proceeds. The Borrower will use the proceeds of the Loans solely
for the purposes set forth in Section 7.17.
8.14. Concerning the Vessels. The Borrower shall at all times operate each
Vessel in compliance in all respect with all applicable governmental rules,
regulations and requirements pertaining to such vessels (including, without
limitation, all requirements of the Shipping Act of 1916, as amended and in
effect, applicable to each such vessel) and in compliance in all respects with
all rules, regulations and requirements of the American Bureau of Shipping or
other applicable classification society. The Borrower shall at all times
maintain its citizenship in the United States for purposes of operating each of
the Vessels in the coastwise trade in accordance with Section 2 of the Shipping
Act of 1916, as amended and in effect, and the regulations thereunder. The
Borrower shall furnish to the Agent and the Bank the certificate of the American
Bureau of Shipping or other applicable classification society covering each of
the Vessels no later than thirty (30) days after the end of each fiscal year of
the Borrower. The Borrower shall keep each Vessel registered under the laws of
the United States with a certificate of vessel documentation endorsed to
evidence its ability to engage in coastwise trade.
8.15. Further Assurances. The Borrower will, and will cause each of its
Subsidiaries to, cooperate with the Banks and the Agent and execute such further
instruments and documents as the Banks or the Agent shall reasonably request to
carry out to their satisfaction the transactions contemplated by this Credit
Agreement and the other Loan Documents.
9. CERTAIN NEGATIVE COVENANTS OF THE BORROWER.
------------------------------------------
The Borrower covenants and agrees that, so long as any Loan or Note is
outstanding or any Bank has any obligation to make any Loans:
9.1. Restrictions on Indebtedness. The Borrower will not, and will not permit
any of its Subsidiaries to, create, incur, assume, guarantee or be or remain
liable, contingently or otherwise, with respect to any Indebtedness other than:
(a) Indebtedness to the Banks and the Agent arising under any of
the Loan Documents;
(b) current liabilities of the Borrower incurred in the
ordinary course of business not incurred through (i) the borrowing of
money, or (ii) 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;
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(c) 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 8.9;
(d) Indebtedness in respect of judgments or awards that have
been in force for less than the applicable period for taking an appeal
so long as execution is not levied thereunder or in respect of which
the Borrower shall at the time in good faith be prosecuting an appeal
or proceedings for review and in respect of which a stay of execution
shall have been obtained pending such appeal or review;
(e) endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the
ordinary course of business;
(f) Indebtedness under the MARAD Financing Documents, provided
that the principal amount of such Indebtedness shall not exceed the
amount thereof existing on the Closing Date;
(g) obligations under Capitalized Leases not exceeding
$10,000,000 in aggregate amount at any time outstanding;
(h) Indebtedness incurred in connection with the acquisition
after the date hereof of any real or personal property by the Borrower
or any Subsidiary of the Borrower, provided that the aggregate
principal amount of such Indebtedness of the Borrower and its
Subsidiaries shall not exceed the aggregate amount of $20,000,000 at
any one time;
(i) Indebtedness existing on the date of this Credit Agreement
and listed and described on Schedule 9.1 hereto; and
(j) other Indebtedness not exceeding $10,000,000.
9.2. Restrictions on Liens. The Borrower will not, and will not permit any of
its Subsidiaries to, (a) create or incur or suffer to be created or incurred or
to exist any lien, encumbrance, mortgage, pledge, charge, restriction or other
security interest of any kind upon any of its property or assets of any
character whether now owned or hereafter acquired, or upon the income or profits
therefrom; (b) transfer any of such property or assets or the income or profits
therefrom for the purpose of subjecting the same to the payment of Indebtedness
or performance of any other obligation in priority to payment of its general
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creditors; (c) acquire, or agree or have an option to acquire, any property or
assets upon conditional sale or other title retention or purchase money security
agreement, device or arrangement; (d) suffer to exist for a period of more than
thirty (30) days after the same shall have been incurred any Indebtedness or
claim or demand against it that if unpaid might by law or upon bankruptcy or
insolvency, or otherwise, be given any priority whatsoever over its general
creditors; or (e) sell, assign, pledge or otherwise transfer any accounts,
contract rights, general intangibles, chattel paper or instruments, with or
without recourse; provided that the Borrower and any Subsidiary of the Borrower
may create or incur or suffer to be created or incurred or to exist:
(a) liens in favor of the Borrower on all or part of the
assets of Subsidiaries of the Borrower securing Indebtedness owing by
Subsidiaries of the Borrower to the Borrower;
(b) liens to secure taxes, assessments and other government
charges in respect of obligations not overdue or liens on properties to
secure claims for labor, material or supplies in respect of obligations
not overdue;
(c) deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age
pensions or other social security obligations;
(d) liens on properties other than Eligible Accounts
Receivable, Eligible Motor Vehicle Equipment, Eligible Containers,
Eligible Chassis and Eligible Vessels in respect of judgments or
awards, the Indebtedness with respect to which is permitted by
Section 9.1(d);
(e) liens of carriers, warehousemen, mechanics and
materialmen, and other like liens on properties other than Eligible
Vessels, in existence less than 120 days from the date of creation
thereof in respect of obligations not overdue;
(f) encumbrances consisting of easements, rights of way,
zoning restrictions, restrictions on the use of real property and
defects and irregularities in the title thereto, landlord's or lessor's
liens under leases to which the Borrower or a Subsidiary of the
Borrower is a party, and other minor liens or encumbrances none of
which in the opinion of the Borrower interferes materially with the use
of the property affected in the ordinary conduct of the business of the
Borrower and its Subsidiaries, which defects do not individually or in
the aggregate have a materially adverse effect on the business of the
Borrower individually or of the Borrower and its Subsidiaries on a
consolidated basis;
(g) presently outstanding liens listed on Schedule 9.2 hereto;
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(h) purchase money security interests in or purchase money
mortgages on real or personal property acquired after the date hereof
to secure purchase money Indebtedness of the type and amount permitted
by Section 9.1(h), incurred in connection with the acquisition of such
property, which security interests or mortgages cover only the real or
personal property so acquired;
(i) liens on the TBC Barges with respect to the Indebtedness
permitted by Section 9.1(f); and
(j) liens in favor of the Agent for the benefit of the Banks
and the Agent under the Loan Documents.
9.3. Restrictions on Investments. The Borrower will not, and will not permit
any of its Subsidiaries to, make or permit to exist or to remain outstanding any
Investment except Investments in:
(a) marketable direct or guaranteed obligations of the United
States of America that mature within one (1) year from the date of
purchase by the Borrower;
(b) demand deposits, certificates of deposit, bankers
acceptances and time deposits of United States banks having total
assets in excess of $1,000,000,000;
(c) securities commonly known as "commercial paper" issued by
a corporation organized and existing under the laws of the United
States of America or any state thereof that at the time of purchase
have been rated and the ratings for which are not less than "P 1" if
rated by Moody's Investors Services, Inc., and not less than "A 1" if
rated by Standard and Poor's;
(d) Investments existing on the date hereof and listed on
Schedule 9.3 hereto;
(e) Investments consisting of promissory notes received as
proceeds of asset dispositions permitted by Section 9.5.2; and
(f) Investments consisting of loans and advances to employees
for moving, entertainment, travel and other similar expenses in the
ordinary course of business not to exceed $50,000 in the aggregate at
any time outstanding;
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provided, however, that, with the exception of demand deposits referred to in
Section 9.3(b) and loans and advances referred to in Section 9.3(f), such
Investments will be considered Investments permitted by this Section 9.3 only if
all actions have been taken to the satisfaction of the Agent to provide to the
Agent, for the benefit of the Banks and the Agent, a first priority perfected
security interest in all of such Investments free of all encumbrances other than
Permitted Liens.
9.4. Distributions. The Borrower will not make any Distributions other than, if
no Default or Event of Default has occurred and is continuing or would exist as
a result of making such Distribution, Distributions in any fiscal year not to
exceed in the aggregate fifty percent (50%) of positive Consolidated Net Income
for the preceding fiscal year.
9.5. Merger, Consolidation.
9.5.1. Mergers and Acquisitions. The Borrower will not, and will not
permit any of its Subsidiaries to, become a party to any merger or
consolidation, or agree to or effect any asset acquisition or stock
acquisition (other than the acquisition of assets in the ordinary
course of business) except the merger or consolidation of one or more
of the Subsidiaries of the Borrower with and into the Borrower, or the
merger or consolidation of two or more Subsidiaries of the Borrower.
9.5.2. Disposition of Assets. The Borrower will not, and will not
permit any of its Subsidiaries to, become a party to or agree to or
effect any disposition of assets, other than the disposition of assets
in the ordinary course of business, consistent with past practices,
provided that, if no Default or Event of Default has occurred and is
continuing, the Borrower may sell or transfer any trailers which do not
constitute Eligible Motor Vehicle Equipment.
9.6. Sale and Leaseback. The Borrower will not, and will not permit any of
its Subsidiaries to, enter into any arrangement, directly or indirectly, whereby
the Borrower or any Subsidiary of the Borrower shall sell or transfer any
property owned by it in order then or thereafter to lease such property or lease
other property that the Borrower or any Subsidiary of the Borrower intends to
use for substantially the same purpose as the property being sold or
transferred.
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9.7. Compliance with Environmental Laws. The Borrower will not, and will not
permit any of its Subsidiaries to, (a) use any of the Real Estate or any Vessel
or any portion thereof for the handling, processing, storage or disposal of
Hazardous Substances, (b) cause or permit to be located on any of the Real
Estate any underground tank or other underground storage receptacle for
Hazardous Substances, (c) generate any Hazardous Substances on any of the Real
Estate or any Vessel, (d) conduct any activity at any Real Estate or any Vessel
or use any Real Estate or Vessel in any manner so as to cause a release (i.e.
releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, disposing or dumping) or threatened release of
Hazardous Substances on, upon or into the Real Estate or Vessel or (e) otherwise
conduct any activity at any Real Estate or on any Vessel or use any Real Estate
or Vessel in any manner that would violate any Environmental Law or bring such
Real Estate or such Vessel in violation of any Environmental Law.
9.8. Negative Pledge. The Borrower will not, and will not permit any of its
Subsidiaries to, enter into any agreement limiting its right to grant to the
Agent and the Banks a lien or security interest in any of its assets (other than
in connection with the MARAD Financing and purchase money Indebtedness permitted
by Section 9.1(h), only with respect to assets pledged to secure such financ-
ing).
9.9. Employee Benefit Plans. Neither the Borrower nor any ERISA Affiliate will:
(a) engage in any "prohibited transaction" within the meaning
of Section 406 of ERISA or Section 4975 of the Code which could result
in a material liability for the Borrower or any of its Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an
"accumulated funding deficiency", as such term is defined in Section
302 of ERISA, whether or not such deficiency is or may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an
extent which, or terminate any Guaranteed Pension Plan in a manner
which, could result in the imposition of a lien or encumbrance on the
assets of the Borrower or any of its Subsidiaries pursuant to Section
302(f) or Section 4068 of ERISA; or
(d) permit or take any action which would result in the
aggregate benefit liabilities (with the meaning of Section 4001 of
ERISA) of all Guaranteed Pension Plans exceeding the value of the
aggregate assets of such Plans, disregarding for this purpose the
benefit liabilities and assets of any such Plan with assets in excess
of benefit liabilities.
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9.10. Change of Principal Place of Business or Corporate Name. Neither the
Borrower nor any of its Subsidiaries will change its principal place of business
or its corporate name unless it shall have (a) given the Agent at least thirty
(30) days' advance written notice of such change, and (b) filed in all necessary
jurisdictions such documents as may be necessary to continue without impairment
or interruption the perfection and priority of the liens on the Collateral in
favor of the Agent pursuant to the Security Documents.
9.11. Fiscal Year. Neither the Borrower nor any of its Subsidiaries will change
its fiscal year from that set forth in Section 7.24 hereof.
9.12. Modification of Certain Documents. The Borrower will not amend, supplement
or otherwise modify the terms of or terminate, the Charter or any of the MARAD
Financing Documents without the prior written consent of the Agent and the
Banks.
9.13. Transactions with Affiliates. The Borrower will not, nor will it permit
any of its Subsidiaries to, enter into, or cause, suffer or permit to exist
(a) any arrangement or contract with any of its other Affiliates of a nature
customarily entered into by Persons which are Affiliates of each other (includ-
ing management or similar contracts or arrangements relating to the allocation
of revenues, taxes and expenses or otherwise) requiring any payments to be made
by the Borrower or any of its Subsidiaries to any Affiliate unless such arrange-
ment is fair and equitable to the Borrower or such Subsidiary; or (b) any other
transaction, arrangement, contract with any of their other Affiliates which
would not be entered into by a prudent Person in the position of the Borrower or
such Subsidiary with, or which is on terms which are less favorable than are
obtainable from, any Person which is not one of its Affiliates, provided,
however, nothing contained in this Section 9.13 shall prohibit the Borrower from
making payments otherwise permitted by Section 9.4 hereof.
9.14. Business Activities. The Borrower will not, nor will it permit any of its
Subsidiaries to, engage in any business activity it is not otherwise engaged in
on the Closing Date, or engage in any business activity in any jurisdiction in
which it does not operate as of the Closing Date, other than the coastwise
freight service between New York and Florida scheduled to begin in October 1998
and other businesses related thereto.
9.15. TB Coastwise. The Borrower will not permit TB Coastwise to incur any
Indebtedness or any liens or other security interest of any kind upon any of its
property or engage in any business activity unless TB Coastwise shall enter into
a guaranty, in form and substance satisfactory to the Agent, in favor of the
Banks pursuant to which TB Coastwise shall guaranty the payment and performance
of the Obligations and the obligations of TB Coastwise under such Guaranty are
secured by a perfected first priority security interest (subject only to
Permitted Liens) on all of the assets of TB Coastwise pursuant to the terms of
security documents satisfactory to the Agent.
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10. FINANCIAL COVENANTS OF THE BORROWER.
-----------------------------------
10.1. Leverage Ratio. The Borrower will not permit the Leverage Ratio at any
time to be greater than 3.50:1.00.
10.2. Interest Coverage Ratio. The Borrower will not permit the Interest
Coverage Ratio as determined at the end of each fiscal quarter of the Borrower
ending during any period described in the table set forth below to be less than
the ratio set forth opposite such period in such table:
Period Minimum Ratio
------ -------------
Closing Date to June 29, 1999 2.00:1.00
Thereafter 2.50:1.00
10.3. Debt Service Coverage Ratio. The Borrower will not permit the Debt
Service Coverage Ratio as determined at the end of each fiscal quarter of the
Borrower ending during any period described in the table set forth below to be
less than the ratio set forth opposite such period in such table:
Period Minimum Ratio
------ -------------
Closing Date to March 30, 1999 1.00:1.00
March 31, 1999 to June 29, 1999 1.10:1.00
Thereafter 1.30:1.00
10.4. Consolidated Tangible Net Worth. The Borrower will not, at any time,
permit Consolidated Tangible Net Worth to be less than the sum of $30,252,000
plus, on a cumulative basis, 50% of positive Consolidated Net Income for each
fiscal year ending after the Closing Date and prior to such date of
determination (with no deduction for any year in which there is a net loss).
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11. CLOSING CONDITIONS.
------------------
The obligations of the Banks to make the initial Revolving Credit Loan
shall be subject to the satisfaction of the following conditions precedent on
or prior to September 30, 1998:
11.1. Loan Documents, etc.
11.1.1. Loan Documents. Each of the Loan Documents shall have been duly
executed and delivered by the respective parties thereto, shall be in
full force and effect and shall be in form and substance satisfactory
to each of the Banks. Each Bank shall have received a fully executed
copy of each such document.
11.1.2. MARAD Financing Documents. Each of the MARAD Financing
Documents shall have been duly executed and delivered by the respective
parties thereto and shall be in full force and effect. Each Bank shall
have received a fully executed copy of each such document.
11.2. Certified Copies of Charter Documents. Each of the Banks shall have
received from the Borrower and each of its Subsidiaries a copy, certified by a
duly authorized officer of such Person to be true and complete on the Closing
Date, of each of (a) its charter or other incorporation documents as in effect
on such date of certification, and (b) its by-laws as in effect on such date.
11.3. Corporate Action. All corporate action necessary for the valid execution,
delivery and performance by the Borrower and each of its Subsidiaries of this
Credit Agreement and the other Loan Documents to which it is or is to become a
party shall have been duly and effectively taken, and evidence thereof
satisfactory to the Banks shall have been provided to each of the Banks.
11.4. Incumbency Certificate. Each of the Banks shall have received from the
Borrower and each of its Subsidiaries an incumbency certificate, dated as of the
Closing Date, signed by a duly authorized officer of the Borrower or such
Subsidiary, and giving the name and bearing a specimen signature of each
individual who shall be authorized: (a) to sign, in the name and on behalf of
each of the Borrower of such Subsidiary, each of the Loan Documents to which the
Borrower or such Subsidiary is or is to become a party; (b) in the case of the
Borrower, to make Loan Requests and Conversion Requests; and (c) to give notices
and to take other action on its behalf under the Loan Documents.
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11.5. Validity of Liens. The Security Documents shall be effective to create in
favor of the Agent a legal, valid and enforceable first (except for Permitted
Liens entitled to priority under applicable law) security interest in the
Collateral. All filings, recordings, deliveries of instruments and other
actions necessary or desirable in the opinion of the Agent to protect and
preserve such security interests shall have been duly effected. The Agent shall
have received evidence thereof in form and substance satisfactory to the Agent.
11.6. Perfection Certificates and UCC Search Results. The Agent shall have
received from each of the Borrower and its Subsidiaries a completed and fully
executed Perfection Certificate and the results of UCC searches with respect to
its Collateral, indicating no liens other than Permitted Liens and otherwise in
form and substance satisfactory to the Agent.
11.7. Certificates of Insurance. The Agent shall have received (a) a certificate
of insurance from an independent insurance broker dated as of the Closing Date,
identifying insurers, types of insurance, insurance limits, and policy terms,
and otherwise describing the insurance obtained in accordance with the
provisions of the Security Agreements and (b) certified copies of all policies
evidencing such insurance (or certificates therefore signed by the insurer or an
agent authorized to bind the insurer).
11.8. Borrowing Base Report. The Agent shall have received from the Borrower the
initial Borrowing Base Report dated as of the end of the month most recently
ended prior to the Closing Date.
11.9. Solvency Certificate. Each of the Banks shall have received an officer's
certificate of the Borrower dated as of the Closing Date as to the solvency of
the Borrower and its Subsidiaries following the consummation of the transactions
contemplated herein and in form and substance satisfactory to the Banks.
11.10. Opinions of Counsel. Each of the Banks and the Agent shall have received
a favorable opinion addressed to the Banks and the Agent, dated as of the
Closing Date, in form and substance satisfactory to the Banks and the Agent,
from William G. Gotimer, Jr., Esq., counsel to the Borrower and its Sub-
sidiaries.
11.11. Payment of Fees. The Borrower shall have paid to the Banks or the Agent,
as appropriate, the fees contemplated by the Fee Letter.
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11.12. Disbursement Instructions. The Agent shall have received disbursement
instructions from the Borrower with respect to the proceeds of the initial
Revolving Credit Loan.
11.13. BkB Existing Debt. Simultaneously with the closing hereunder, the
Borrower shall convert the BkB Existing Debt, including all principal, interest,
fees and other amounts outstanding in connection therewith, to Revolving Credit
Loans hereunder pursuant to Section 2.11 and the Borrower shall take all actions
necessary to effect the assignment and transfer of the liens on the collateral
securing the BkB Existing Debt to the Agent for the benefit of the Banks and the
Agent.
11.14. Financial Condition. The Banks shall be satisfied that the financial
statements referred to in Section 7.4 fairly present the business and financial
condition of the Borrower and its Subsidiaries, in each case as of the
respective dates of such statements.
12. CONDITIONS TO ALL BORROWINGS.
----------------------------
The obligations of the Banks to make any Loan, including any Revolving
Credit Loan and the Term Loan, whether on or after the Closing Date, shall also
be subject to the satisfaction of the following conditions precedent:
12.1. Representations True; No Event of Default. Each of the representations and
warranties of any of the Borrower and its Subsidiaries contained in this Credit
Agreement, the other Loan Documents or in any document or instrument delivered
pursuant to or in connection with this Credit Agreement shall be true as of the
date as of which they were made and shall also be true at and as of the time of
the making of such Loan, with the same effect as if made at and as of that time
(except to the extent of changes resulting from transactions contemplated or
permitted by this Credit Agreement and the other Loan Documents and changes
occurring in the ordinary course of business that singly or in the aggregate are
not materially adverse, and to the extent that such representations and
warranties relate expressly to an earlier date) and no Default or Event of
Default shall have occurred and be continuing. The Agent shall have received a
certificate of the Borrower signed by an authorized officer of the Borrower to
such effect.
12.2. No Legal Impediment. No change shall have occurred in any law or regula-
tions thereunder or interpretations thereof that in the reasonable opinion of
any Bank would make it illegal for such Bank to make such Loan.
12.3. Governmental Regulation. Each Bank shall have received such statements in
substance and form reasonably satisfactory to such Bank as such Bank shall
require for the purpose of compliance with any applicable regulations of the
Comptroller of the Currency or the Board of Governors of the Federal Reserve
System.
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12.4. Proceedings and Documents. All proceedings in connection with the
transactions contemplated by this Credit Agreement, the other Loan Documents
and all other documents incident thereto shall be satisfactory in substance and
in form to the Banks and to the Agent and the Agent's Special Counsel, and the
Banks, the Agent and such counsel shall have received all information and such
counterpart originals or certified or other copies of such documents as the
Agent may reasonably request.
12.5. Borrowing Base Report. The Agent shall have received (a) the most recent
Borrowing Base Report required to be delivered to the Agent in accordance with
Section 8.4(e) and (b) a Borrowing Base Report dated as of the Drawdown Date of
the requested Loan and adjusted to reflect additions to and deletions from the
most recent Borrowing Base Report delivered under Section 8.4(e).
13. EVENTS OF DEFAULT; ACCELERATION; ETC.
------------------------------------
13.1. Events of Default and Acceleration. If any of the following events
("Events of Default" or, if the giving of notice or the lapse of time or both is
required, then, prior to such notice or lapse of time, "Defaults") shall occur:
(a) the Borrower shall fail to pay any principal of the Loans
when the same shall become due and payable, whether at the stated date
of maturity or any accelerated date of maturity or at any other date
fixed for payment;
(b) the Borrower shall fail to pay any interest on the Loans,
the commitment fee, the Agent's fee, or other sums due hereunder or
under any of the other Loan Documents, when the same shall become due
and payable, whether at the stated date of maturity or any accelerated
date of maturity or at any other date fixed for payment;
(c) the Borrower shall fail to comply with any of its covenants
contained in Sections 8, 9 or 10;
(d) the Borrower or any of its Subsidiaries shall fail to
perform any term, covenant or agreement contained herein or in any of
the other Loan Documents (other than those specified elsewhere in this
Section 13) for fifteen (15) days after the Borrower or any of its
Subsidiaries becomes aware of such failure;
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(e) any representation or warranty of the Borrower or any of
its Subsidiaries in this Credit Agreement or any of the other Loan
Documents or in any other document or instrument delivered pursuant to
or in connection with this Credit Agreement shall prove to have been
false in any material respect upon the date when made or deemed to have
been made or repeated;
(f) the Borrower or any of its Subsidiaries shall fail to pay
at maturity, or within any applicable period of grace, any obligation
for borrowed money or credit received or in respect of any Capitalized
Leases, or fail to observe or perform any material term, covenant or
agreement contained in any agreement by which it is bound, evidencing
or securing borrowed money or credit received or in respect of any
Capitalized Leases for such period of time as would permit (assuming
the giving of appropriate notice if required) the holder or holders
thereof or of any obligations issued thereunder to accelerate the
maturity thereof;
(g) the Borrower or any of its Subsidiaries shall make an
assignment for the benefit of creditors, or admit in writing its
inability to pay or generally fail to pay its debts as they mature or
become due, or shall petition or apply for the appointment of a trustee
or other custodian, liquidator or receiver of the Borrower or any of
its Subsidiaries or of any substantial part of the assets of the
Borrower or any of its Subsidiaries or shall commence any case or other
proceeding relating to the Borrower or any of its Subsidiaries under
any bankruptcy, reorganization, arrangement, insolvency, readjustment
of debt, dissolution or liquidation or similar law of any jurisdiction,
now or hereafter in effect, or shall take any action to authorize or in
furtherance of any of the foregoing, or if any such petition or
application shall be filed or any such case or other proceeding shall
be commenced against the Borrower or any of its Subsidiaries and the
Borrower or any of its Subsidiaries shall indicate its approval
thereof, consent thereto or acquiescence therein or such petition or
application shall not have been dismissed within forty-five (45) days
following the filing thereof;
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Borrower or any
of its Subsidiaries bankrupt or insolvent, or approving a petition in
any such case or other proceeding, or a decree or order for relief is
entered in respect of the Borrower or any Subsidiary of the Borrower in
an involuntary case under federal bankruptcy laws as now or hereafter
constituted;
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(i) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty days, whether or not consecutive, any
final judgment against the Borrower or any of its Subsidiaries that,
with other outstanding final judgments, undischarged, against the
Borrower or any of its Subsidiaries exceeds in the aggregate $500,000;
(j) if any of the loan documents shall be cancelled,
terminated, revoked or rescinded or the Agent's security interests,
mortgages or liens in a substantial portion of the Collateral shall
cease to be perfected, or shall cease to have the priority contemplated
by the Security Documents, in each case otherwise than in accordance
with the terms thereof or with the express prior written agreement,
consent or approval of the Banks, or any action at law, suit or in
equity or other legal proceeding to cancel, revoke or rescind any of
the loan documents shall be commenced by or on behalf of the Borrower
or any of its Subsidiaries party thereto or any of their respective
stockholders, or any court or any other governmental or regulatory
authority or agency of competent jurisdiction shall make a
determination that, or issue a judgment, order, decree or ruling to the
effect that, any one or more of the Loan Documents is illegal, invalid
or unenforceable in accordance with the terms thereof;
(k) with respect to any Guaranteed Pension Plan, an ERISA
Reportable Event shall have occurred and the Majority Banks shall have
determined in their reasonable discretion that such event reasonably
could be expected to result in liability of the Borrower or any of its
Subsidiaries to the PBGC or such Guaranteed Pension Plan in an
aggregate amount exceeding $500,000 and such event in the circumstances
occurring reasonably could constitute grounds for the termination of
such Guaranteed Pension Plan by the PBGC or for the appointment by the
appropriate United States District Court of a trustee to administer
such Guaranteed Pension Plan; or a trustee shall have been appointed by
the United States District Court to administer such Guaranteed Pension
Plan; or the PBGC shall have instituted proceedings to terminate such
Guaranteed Pension Plan;
(l) the Borrower or any of its Subsidiaries shall be enjoined,
restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting any material part
of its business and such order shall continue in effect for more than
thirty (30) days;
(m) there shall occur any material damage to, or loss, theft
or destruction of, any Collateral or any Vessel, whether or not
insured, or any strike, lockout, labor dispute, embargo, condemnation,
act of God or public enemy, or other casualty, which in any such case
causes, for more than thirty (30) consecutive days, the cessation or
substantial curtailment of revenue producing activities at any facility
of the Borrower or any of its Subsidiaries if such event or
circumstance is not covered by business interruption insurance and
would have a material adverse effect on the business or financial
condition of the Borrower or such Subsidiary;
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(n) there shall occur the loss, suspension or revocation of,
or failure to renew, any license or permit now held or hereafter
acquired by the Borrower or any of its Subsidiaries if such loss,
suspension, revocation or failure to renew would have a material
adverse effect on the business or financial condition of the Borrower
or such Subsidiary;
(o) the Borrower or any of its Subsidiaries shall be indicted
for a state or federal crime, or any civil or criminal action shall
otherwise have been brought or threatened against the Borrower or any
of its Subsidiaries, a punishment for which in any such case could
include the forfeiture of any assets of the Borrower or such Subsidiary
included in the Borrowing Base or any assets of the Borrower or such
Subsidiary not included in the Borrowing Base but having a fair market
value in excess of $100,000; or
(p) any person or group of persons (within the meaning of
Section 13 or 14 of the Securities Exchange Act of 1934, as amended)
shall have acquired beneficial ownership (within the meaning of Rule
13d-3 promulgated by the Securities and Exchange Commission under said
Act) of 25% or more of the outstanding shares of Common Stock; or,
during any period of twenty-four consecutive calendar months,
individuals who were directors of the Borrower on the first day of such
period shall cease to constitute a majority of the board of directors
of the Borrower and any new director is not approved by a majority of
the directors who were on the board of directors of the Borrower at the
beginning of such period;
then, and in any such event, so long as the same may be continuing, the Agent
may, and upon the request of the Majority Banks shall, by notice in writing to
the Borrower declare all amounts owing with respect to this Credit Agreement,
the Notes and the other Loan Documents to be, and they shall thereupon forthwith
become, immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived by the
Borrower; provided that in the event of any Event of Default specified in
Section 13.1(g) or 13.1(h), all such amounts shall become immediately due and
payable automatically and without any requirement of notice from the Agent or
any Bank.
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13.2. Termination of Commitments. If any one or more of the Events of Default
specified in Section 13.1(g) or Section 13.1(h) shall occur, any unused portion
of the credit hereunder shall forthwith terminate and each of the Banks shall be
relieved of all obligations to make Loans to the Borrower. If any other Event of
Default shall have occurred and be continuing, or if on any Drawdown Date the
conditions precedent to the making of the Loans to be made on such Drawdown Date
are not satisfied, the Agent may and, upon the request of the Majority Banks,
shall, by notice to the Borrower, terminate the unused portion of the credit
hereunder, and upon such notice being given such unused portion of the credit
hereunder shall terminate immediately and each of the Banks shall be relieved of
all further obligations to make Loans. If any such notice is given to the
Borrower the Agent will forthwith furnish a copy thereof to each of the Banks.
No termination of the credit hereunder shall relieve the Borrower of any of the
Obligations or any of its existing obligations to any of the Banks arising under
other agreements or instruments.
13.3. Remedies. In case any one or more of the Events of Default shall have
occurred and be continuing, and whether or not the Banks shall have accelerated
the maturity of the Loans pursuant to Section 13.1, each Bank, if owed any
amount with respect to the Loans, may, with the consent of the Majority Banks
but not otherwise, proceed to protect and enforce its rights by suit in equity,
action at law or other appropriate proceeding, whether for the specific
performance of any covenant or agreement contained in this Credit Agreement and
the other Loan Documents or any instrument pursuant to which the Obligations to
such Bank are evidenced, including as permitted by applicable law the obtaining
of the ex parte appointment of a receiver, and, if such amount shall have become
due, by declaration or otherwise, proceed to enforce the payment thereof or any
other legal or equitable right of such Bank. No remedy herein conferred upon
any Bank or the Agent or the holder of any Note is intended to be exclusive of
any other remedy and each and every remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute or any other provision of law.
13.4. Distribution of Collateral Proceeds. In the event that, following the
occurrence or during the continuance of any Default or Event of Default, the
Agent or any Bank, as the case may be, receives any monies in connection with
the enforcement of any the security documents, or otherwise with respect to the
realization upon any of the Collateral, such monies shall be distributed for
application as follows:
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(a) First, to the payment of, or (as the case may be) the
reimbursement of the Agent for or in respect of all reasonable costs,
expenses, disbursements and losses which shall have been incurred or
sustained by the Agent in connection with the collection of such monies
by the Agent, for the exercise, protection or enforcement by the Agent
of all or any of the rights, remedies, powers and privileges of the
Agent under this Credit Agreement or any of the other loan documents or
in respect of the collateral and supports the provision of adequate
indemnity to the Agent against all taxes or liens which by law shall
have, or may have, priority over the rights of the Agent to such
monies;
(b) Second, to all other Obligations in such order or
preference as the Majority Banks may determine; provided, however, that
distributions in respect of Obligations owing to the Banks with respect
to each type of Obligation such as interest, principal, fees and
expenses, shall be made among the Banks pro rata; and provided,
further, that the Agent may in its discretion make proper allowance to
take into account any Obligations not then due and payable;
(c) Third, upon payment and satisfaction in full or other
provisions for payment in full satisfactory to the Banks and the Agent
of all of the Obligations, to the payment of any obligations required
to be paid pursuant to Section 9-504(1)(c) of the Uniform Commercial
Code of the Commonwealth of Massachusetts; and
(d) Fourth, the excess, if any, shall be returned to the
Borrower or to such other Persons as are entitled thereto.
14. SETOFF.
------
Regardless of the adequacy of any collateral, during the continuance of
any Event of Default, any deposits or other sums credited by or due from any of
the Banks to the Borrower and any securities or other property of the Borrower
in the possession of such Bank may be applied to or set off by such Bank against
the payment of Obligations and any and all other liabilities, direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, of the Borrower to such Bank. Each of the Banks agrees with
each other Bank that (a) if an amount to be set off is to be applied to
Indebtedness of the Borrower to such Bank, other than Indebtedness evidenced by
the Notes held by such Bank, such amount shall be applied ratably to such other
Indebtedness and to the Indebtedness evidenced by all such Notes held by such
Bank, and (b) if such Bank shall receive from the Borrower, whether by voluntary
payment, exercise of the right of setoff, counterclaim, cross action,
enforcement of the claim evidenced by the Notes held by such Bank by proceedings
against the Borrower at law or in equity or by proof thereof in bankruptcy,
reorganization, liquidation, receivership or similar proceedings, or otherwise,
and shall retain and apply to the payment of the Note or Notes held by such Bank
any amount in excess of its ratable portion of the payments received by all of
the Banks with respect to the Notes held by all of the Banks, such Bank will
make such disposition and arrangements with the other Banks with respect to such
excess, either by way of distribution, pro tanto assignment of claims,
subrogation or otherwise as shall result in each Bank receiving in respect of
the Notes held by its proportionate payment as contemplated by this Credit
Agreement; provided that if all or any part of such excess payment is thereafter
recovered from such Bank, such disposition and arrangements shall be rescinded
and the amount restored to the extent of such recovery, but without interest.
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15. THE AGENT.
---------
15.1. Authorization.
(a) The Agent is authorized to take such action on behalf of
each of the Banks and to exercise all such powers as are hereunder and
under any of the other Loan Documents and any related documents
delegated to the Agent, together with such powers as are reasonably
incident thereto, provided that no duties or responsibilities not
expressly assumed herein or therein shall be implied to have been
assumed by the Agent.
(b) The relationship between the Agent and each of the Banks
is that of an independent contractor. The use of the term "Agent" is
for convenience only and is used to describe, as a form of convention,
the independent contractual relationship between the Agent and each of
the Banks. Nothing contained in this Credit Agreement nor the other
Loan Documents shall be construed to create an agency, trust or other
fiduciary relationship between the Agent and any of the Banks.
(c) As an independent contractor empowered by the Banks to
exercise certain rights and perform certain duties and responsibilities
hereunder and under the other Loan Documents, the Agent is nevertheless
a "representative" of the Banks, as that term is defined in Article 1
of the Uniform Commercial Code, for purposes of actions for the benefit
of the Banks and the Agent with respect to all collateral security and
guaranties contemplated by the Loan Documents. Such actions include the
designation of the Agent as "secured party", "mortgagee" or the like on
all financing statements and other documents and instruments, whether
recorded or otherwise, relating to the attachment, perfection, priority
or enforcement of any security interests, mortgages or deeds of trust
in collateral security intended to secure the payment or performance of
any of the Obligations, all for the benefit of the Banks and the Agent.
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15.2. Employees and Agents. The Agent may exercise its powers and execute its
duties by or through employees or agents and shall be entitled to take, and to
rely on, advice of counsel concerning all matters pertaining to its rights and
duties under this Credit Agreement and the other Loan Documents. The Agent may
utilize the services of such Persons as the Agent in its sole discretion may
reasonably determine, and all reasonable fees and expenses of any such Persons
shall be paid by the Borrower.
15.3. No Liability. Neither the Agent nor any of its shareholders, directors,
officers or employees nor any other Person assisting them in their duties nor
any agent or employee thereof, shall be liable for any waiver, consent or
approval given or any action taken, or omitted to be taken, in good faith by it
or them hereunder or under any of the other Loan Documents, or in connection
herewith or therewith, or be responsible for the consequences of any oversight
or error of judgment whatsoever, except that the Agent or such other Person, as
the case may be, may be liable for losses due to its willful misconduct or gross
negligence.
15.4. No Representations. The Agent shall not be responsible for the execution
or validity or enforceability of this Credit Agreement, the Notes, any of the
other Loan Documents or any instrument at anytime constituting, or intended to
constitute, collateral security for the Notes, or for the value of any such
collateral security or for the validity, enforceability or collectability of any
such amounts owing with respect to the Notes, or for any recitals or statements,
warranties or representations made herein or in any of the other Loan Documents
or in any certificate or instrument hereafter furnished to it by or on behalf of
the Borrower, or be bound to ascertain or inquire as to the performance or
observance of any of the terms, conditions, covenants or agreements herein or in
any instrument at any time constituting, or intended to constitute, collateral
security for the Notes or to inspect any of the properties, books or records of
the Borrower or any of its Subsidiaries. The Agent shall not be bound to
ascertain whether any notice, consent, waiver or request delivered to it by the
Borrower or any holder of any of the Notes shall have been duly authorized or is
true, accurate and complete. The Agent has not made nor does it now make any
representations or warranties, express or implied, nor does it assume any
liability to the Banks, with respect to the credit worthiness or financial
conditions of the Borrower or any of its Subsidiaries. Each Bank acknowledges
that it has, independently and without reliance upon the Agent or any other
Bank, and based upon such information and documents as it has deemed
appropriate, made its own credit analysis and decision to enter into this Credit
Agreement.
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15.5. Payments.
15.5.1. Payments to Agent. A payment by the Borrower to the Agent
hereunder or any of the other Loan Documents for the account of any
Bank shall constitute a payment to such Bank. The Agent agrees promptly
to distribute to each Bank such Bank's pro rata share of payments
received by the Agent for the account of the Banks except as otherwise
expressly provided herein or in any of the other Loan Documents.
15.5.2. Distribution by Agent. If in the opinion of the Agent the
distribution of any amount received by it in such capacity hereunder,
under the Notes or under any of the other Loan Documents might involve
it in liability, it may refrain from making distribution until its right
to make distribution shall have been adjudicated by a court of competent
jurisdiction. If a court of competent jurisdiction shall adjudge that any
amount received and distributed by the Agent is to be repaid, each Person
to whom any such distribution shall have been made shall either repay to
the Agent its proportionate share of the amount so adjudged to be repaid
or shall pay over the same in such manner and to such Persons as shall
be determined by such court.
15.5.3. Delinquent Banks. Notwithstanding anything to the contrary
contained in this Credit Agreement or any of the other Loan Documents,
any Bank that fails (a) to make available to the Agent its pro rata
share of any Loan or (b) to comply with the provisions of Section 14 with
respect to making dispositions and arrangements with the other Banks,
where such Bank's share of any payment received, whether by setoff or
otherwise, is in excess of its pro rata share of such payments due and to
payable to all of the Banks, in each case as, when and to the full extent
required by the provisions of this Credit Agreement, shall be deemed
delinquent (a "Delinquent Bank") and shall be deemed a Delinquent Bank
until such time as such delinquency is satisfied. A Delinquent Bank shall
be deemed to have assigned any and all payments due to it from the
Borrower, whether on account of outstanding Loans, interest, fees or
otherwise, to the remaining nondelinquent Banks for application to, and
reduction of, their respective pro rata shares of all outstanding Loans.
The Delinquent Bank hereby authorizes the Agent to distribute such pay-
ments to the nondelinquent Banks in proportion to their respective pro
rata shares of all outstanding Loans. A Delinquent Bank shall be deemed to
have satisfied in full a delinquency when and if, as a result of applica-
tion of the assigned payments to all outstanding Loans of the non-
delinquent Banks, the Banks' respective pro rata shares of all outstanding
Loans have returned to those in effect immediately prior to such
delinquency and without giving effect to the nonpayment causing such
delinquency.
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15.6. Holders of Notes. The Agent may deem and treat the payee of any Note as
the absolute owner thereof for all purposes hereof until it shall have been
furnished in writing with a different name by such payee or by a subsequent
holder.
15.7. Indemnity. The Banks ratably agree hereby to indemnify and hold
harmless the Agent from and against any and all claims, actions and suits
(whether groundless or otherwise), losses, damages, costs, expenses (including
any expenses for which the Agent has not been reimbursed by the Borrower as
required by Section 16), and liabilities of every nature and character arising
out of or related to this Credit Agreement, the Notes, or any of the other Loan
Documents or the transactions contemplated or evidenced hereby or thereby, or
the Agent's actions taken hereunder or thereunder, except to the extent that any
of the same shall be directly caused by the Agent's willful misconduct or gross
negligence.
15.8. Agent as Bank. In its individual capacity, BkB shall have the same
obligations and the same rights, powers and privileges in respect to
its Commitment and the Loans made by it, and as the holder of any of the Notes,
as it would have were it not also the Agent.
15.9. Resignation. The Agent may resign at any time by giving sixty (60) days
prior written notice thereof to the Banks and the Borrower. Upon any such
resignation, the Majority Banks shall have the right to appoint a successor
Agent. Unless a Default or Event of Default shall have occurred and be continu-
ing, such successor Agent shall be reasonably acceptable to the Borrower. If no
successor Agent shall have been so appointed by the Majority Banks and shall
have accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of the Banks, appoint a successor Agent, which shall be a financial institution
having a rating of not less than A or its equivalent by Standard & Poor's
Corporation. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation, the provisions of this Credit
Agreement and the other Loan Documents shall continue in effect for its benefit
in respect of any actions taken or omitted to be taken by it while it was acting
as Agent.
15.10. Notification of Defaults and Events of Default. Each Bank hereby agrees
that, upon learning of the existence of a Default or an Event of Default, it
shall promptly notify the Agent thereof. The Agent hereby agrees that upon
receipt of any notice under this Section 15.10 it shall promptly notify the
other Banks of the existence of such Default or Event of Default.
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16. EXPENSES.
--------
The Borrower agrees to pay (a) the reasonable costs of producing and
reproducing this Credit Agreement, the other Loan Documents and the other
agreements and instruments mentioned herein, (b) any taxes (including any
interest and penalties in respect thereto) payable by the Agent or any of the
Banks (other than taxes based upon the Agent's or any Bank's net income) on or
with respect to the transactions contemplated by this Credit Agreement (the
Borrower hereby agreeing to indemnify the Agent and each Bank with respect
thereto), (c) the reasonable fees, expenses and disbursements of the Agent's
Special Counsel and any local counsel to the Agent incurred in connection with
the preparation, administration or interpretation of the Loan Documents and
other instruments mentioned herein, each closing hereunder, and amendments,
modifications, approvals, consents or waivers hereto or hereunder, (d) the fees,
expenses and disbursements of the Agent incurred by the Agent in connection with
the preparation, administration or interpretation of the Loan Documents and
other instruments mentioned herein, including all title insurance premiums and
surveyor, engineering and appraisal charges, (e) all reasonable out-of-pocket
expenses (including without limitation reasonable attorneys' fees and costs,
which attorneys may be employees of any Bank or the Agent, and reasonable
consulting, accounting, appraisal, investment banking and similar professional
fees and charges) incurred by any Bank or the Agent in connection with (i) the
enforcement of or preservation of rights under any of the Loan Documents against
the Borrower or any of its Subsidiaries or the administration thereof after the
occurrence of a Default or Event of Default and (ii) any litigation, proceeding
or dispute whether arising hereunder or otherwise, in any way related to any
Bank's or the Agent's relationship with the Borrower or any of its Subsidiaries
and (f) all reasonable fees, expenses and disbursements of any Bank or the Agent
incurred in connection with UCC searches, UCC filings or mortgage recordings.
The covenants of this Section 16 shall survive payment or satisfaction of
payment of amounts owing with respect to the Notes.
17. INDEMNIFICATION.
---------------
The Borrower agrees to indemnify and hold harmless the Agent and the
Banks from and against any and all claims, actions and suits whether groundless
or otherwise, and from and against any and all liabilities, losses, damages and
expenses of every nature and character arising out of this Credit Agreement or
any of the other Loan Documents or the transactions contemplated hereby
including, without limitation, (a) any actual or proposed use by the Borrower or
any of its Subsidiaries of the proceeds of any of the Loans or Letters of
Credit,(b) the Borrower or any of its Subsidiaries entering into or performing
this Credit Agreement or any of the other Loan Documents or (c) with respect to
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the Borrower and its Subsidiaries and their respective properties and assets,
the violation of any Environmental Law, the presence, disposal, escape, seepage,
leakage, spillage, discharge, emission, release or threatened release of any
Hazardous Substances or any action, suit, proceeding or investigation brought or
threatened with respect to any Hazardous Substances (including, but not limited
to claims with respect to wrongful death, personal injury or damage to
property), in each case including, without limitation, the reasonable fees and
disbursements of counsel and allocated costs of internal counsel incurred in
connection with any such investigation, litigation or other proceeding. In
litigation, or the preparation therefor, the Banks and the Agent shall be
entitled to select their own counsel and, in addition to the foregoing
indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses
of such counsel. If, and to the extent that the obligations of the Borrower
under this Section 17 are unenforceable for any reason, the Borrower hereby
agrees to make the maximum contribution to the payment in satisfaction of such
obligations which is permissible under applicable law. The covenants contained
in this Section 17 shall survive payment of satisfaction in full of all other
obligations.
18. SURVIVAL OF COVENANTS, ETC.
--------------------------
All covenants, agreements, representations and warranties made herein,
in the Notes, in any of the other Loan Documents or in any documents or other
papers delivered by or on behalf of the Borrower or any of its Subsidiaries
pursuant hereto shall be deemed to have been relied upon by the Banks and the
Agent, notwithstanding any investigation heretofore or hereafter made by any of
them, and shall survive the making by the Banks of the Loans, as herein
contemplated, and shall continue in full force and effect so long as any amount
due under this Credit Agreement or the Notes or any of the other Loan Documents
remains outstanding or any Bank has any obligation to make any Loans, and for
such further time as may be otherwise expressly specified in this Credit
Agreement. All statements contained in any certificate or other paper delivered
to any Bank or the Agent at any time by or on behalf of the Borrower or any of
its Subsidiaries pursuant hereto or in connection with the transactions
contemplated hereby shall constitute representations and warranties by the
Borrower or such Subsidiary hereunder.
19. ASSIGNMENT AND PARTICIPATION.
----------------------------
19.1. Conditions to Assignment by Banks. Except as provided herein, each Bank
may assign to one or more Eligible Assignees all or a portion of its interests,
rights and obligations under this Credit Agreement (including all or a portion
of its Commitment Percentage and Commitment and the same portion of the Loans at
the time owing to it) and the Notes held by it; provided that (a) each of the
Agent and, unless a Default or Event of Default shall have occurred and be
continuing, the Borrower shall have given its prior written consent to such
assignment, which consent, in the case of the Borrower, will not be unreasonably
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withheld, (b) each such assignment shall be of a constant, and not a varying,
percentage of all the assigning Bank's rights and obligations under this Credit
Agreement provided, that BkB shall be permitted to assign a portion of its Loans
and Commitments which excludes the BkB Existing Debt, (c) each assignment shall
be in an amount that is a minimum of $5,000,000, and (d) the parties to such
assignment shall execute and deliver to the Agent, for recording in the Register
(as hereinafter defined), an Assignment and Acceptance, substantially in the
form of Exhibit E hereto (an "Assignment and Acceptance"), together with any
Notes subject to such assignment. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least five (5) Business Days after
the execution thereof, (a) the assignee thereunder shall be a party hereto and,
to the extent provided in such Assignment and Acceptance, have the rights and
obligations of a Bank hereunder, and (b) the assigning Bank shall, to the extent
provided in such assignment and upon payment to the Agent of the registration
fee referred to in Section 19.3, be released from its obligations under this
Credit Agreement.
19.2. Certain Representations and Warranties; Limitations; Covenants. By
executing and delivering an Assignment and Acceptance, the parties to the
assignment thereunder confirm to and agree with each other and the other
parties hereto as follows:
(a) other than the representation and warranty that it is the
legal and beneficial owner of the interest being assigned thereby free
and clear of any adverse claim, the assigning Bank makes no
representation or warranty, express or implied, and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with this Credit Agreement or
the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Credit Agreement, the other Loan Documents
or any other instrument or document furnished pursuant hereto or the
attachment, perfection or priority of any security interest or
mortgage;
(b) the assigning Bank makes no representation or warranty and
assumes no responsibility with respect to the financial condition of
the Borrower and its Subsidiaries or any other Person primarily or
secondarily liable in respect of any of the Obligations, or the
performance or observance by the Borrower and its Subsidiaries or any
other Person primarily or secondarily liable in respect of any of the
Obligations of any of their obligations under this Credit Agreement or
any of the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto;
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(c) such assignee confirms that it has received a copy of this
Credit Agreement, together with copies of the most recent financial
statements referred to in Section 7.4 and Section 8.4 and such other
documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and
Acceptance;
(d) such assignee will, independently and without reliance
upon the assigning Bank, 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 Credit Agreement;
(e) such assignee represents and warrants that it is an
Eligible Assignee;
(f) such assignee appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under
this Credit Agreement and the other Loan Documents as are delegated to
the Agent by the terms hereof or thereof, together with such powers as
are reasonably incidental thereto;
(g) such assignee agrees that it will perform in accordance
with their terms all of the obligations that by the terms of this
Credit Agreement are required to be performed by it as a Bank; and
(h) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance.
19.3. Register. The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register or similar list (the "Register") for
the recordation of the names and addresses of the Banks and the Commitment
Percentage of, and principal amount of the Revolving Credit Loans owing to and
Letter of Credit Participations purchased by, the Banks from time to time. The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Borrower, the Agent and the Banks may treat each Person whose name is
recorded in the Register as a Bank hereunder for all purposes of this Credit
Agreement. The Register shall be available for inspection by the Borrower and
the Banks at any reasonable time and from time to time upon reasonable prior
notice. Upon each such recordation, the assigning Bank agrees to pay to the
Agent a registration fee in the sum of $3,500.
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19.4. New Notes. Upon its receipt of an Assignment and Acceptance executed by
the parties to such assignment, together with each Note subject to such assign-
ment, the Agent shall (a) record the information contained therein in the
Register, and (b) give prompt notice thereof to the Borrower and the Banks
(other than the assigning Bank). Within five (5) Business Days after receipt of
such notice, the Borrower, at its own expense, shall execute and deliver to the
Agent, in exchange for each surrendered Note, a new Note to the order of such
Eligible Assignee in an amount equal to the amount assumed by such Eligible
Assignee pursuant to such Assignment and Acceptance and, if the assigning Bank
has retained some portion of its obligations hereunder, a new Note to the order
of the assigning Bank in an amount equal to the amount retained by it hereunder.
Such new Notes shall provide that they are replacements for the surrendered
Notes, shall be in an aggregate principal amount equal to the aggregate
principal amount of the surrendered Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially the form
of the assigned Notes. Within five (5) days of issuance of any new Notes
pursuant to this Section 19.4, the Borrower shall deliver an opinion of counsel,
addressed to the Banks and the Agent, relating to the due authorization, execu-
tion and delivery of such new Notes and the legality, validity and binding
effect thereof, in form and substance satisfactory to the Banks. The surrendered
Notes shall be cancelled and returned to the Borrower.
19.5. Participations. Each Bank may sell participations to one or more banks or
other entities in all or a portion of such Bank's rights and obligations under
this Credit Agreement and the other Loan Documents; provided that (a) each such
participation shall be in an amount of not less than $5,000,000, (b) any such
sale or participation shall not affect the rights and duties of the selling Bank
hereunder to the Borrower and (c) the only rights granted to the participant
pursuant to such participation arrangements with respect to waivers, amendments
or modifications of the Loan Documents shall be the rights to approve waivers,
amendments or modifications that would reduce the principal of or the interest
rate on any Loans, extend the term or increase the amount of the Commitment of
such Bank as it relates to such participant, reduce the amount of any commitment
fees to which such participant is entitled or extend any regularly scheduled
payment date for principal or interest.
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19.6. Disclosure. The Borrower agrees that in addition to disclosures made in
accordance with standard and customary banking practices any Bank may disclose
information obtained by such Bank pursuant to this Credit Agreement to assignees
or participants and potential assignees or participants hereunder; provided that
such assignees or participants or potential assignees or participants shall
agree (a) to treat in confidence such information unless such information
otherwise becomes public knowledge, (b) not to disclose such information to a
third party, except as required by law or legal process and (c) not to make use
of such information for purposes of transactions unrelated to such contemplated
assignment or participation.
19.7. Assignee or Participant Affiliated with the Borrower. If any assignee Bank
is an Affiliate of the Borrower, then any such assignee Bank shall have no right
to vote as a Bank hereunder or under any of the other Loan Documents for
purposes of granting consents or waivers or for purposes of agreeing to amend-
ments or other modifications to any of the Loan Documents or for purposes of
making requests to the Agent pursuant to Section 13.1 or Section 13.2, and the
determination of the Majority Banks shall for all purposes of this Agreement and
the other Loan Documents be made without regard to such assignee Bank's interest
in any of the Loans. If any Bank sells a participating interest in any of the
Loans to a participant, and such participant is the Borrower or an Affiliate of
the Borrower, then such transferor Bank shall promptly notify the Agent of the
sale of such participation. A transferor Bank shall have no right to vote as a
Bank hereunder or under any of the other Loan Documents for purposes of granting
consents or waivers or for purposes of agreeing to amendments or modifications
to any of the Loan Documents or for purposes of making requests to the Agent
pursuant to Section 13.1 or Section 13.2 to the extent that such participation
is beneficially owned by the Borrower or any Affiliate of the Borrower, and the
determination of the Majority Banks shall for all purposes of this Agreement and
the other Loan Documents be made without regard to the interest of such
transferor Bank in the Loans to the extent of such participation.
19.8. Miscellaneous Assignment Provisions. Any assigning Bank shall retain its
rights to be indemnified pursuant to Section 17 with respect to any claims or
actions arising prior to the date of such assignment. If any assignee Bank is
not incorporated under the laws of the United States of America or any state
thereof, it shall, prior to the date on which any interest or fees are payable
hereunder or under any of the other Loan Documents for its account, deliver to
the Borrower and the Agent certification as to its exemption from deduction or
withholding of any United States federal income taxes. Anything contained in
this Section 19 to the contrary notwithstanding, any Bank may at any time pledge
all or any portion of its interest and rights under this Credit Agreement
(including all or any portion of its Notes) to any of the twelve Federal Reserve
Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section
341. No such pledge or the enforcement thereof shall release the pledgor Bank
from its obligations hereunder or under any of the other Loan Documents.
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19.9. Assignment by Borrower. The Borrower shall not assign or transfer any of
its rights or obligations under any of the Loan Documents without the prior
written consent of each of the Banks.
20. NOTICES, ETC.
------------
Except as otherwise expressly provided in this Credit Agreement, all
notices and other communications made or required to be given pursuant to this
Credit Agreement or the Notes shall be in writing and shall be delivered in
hand, mailed by United States registered or certified first class mail, postage
prepaid, sent by overnight courier, or sent by telegraph, telecopy, telefax or
telex and confirmed by delivery via courier or postal service, addressed as
follows:
(a) if to the Borrower, to Mark Tanner, Chief Financial
Officer, 10405 New Berlin Road East, Jacksonville, Florida 32226, with
a copy to Mr. John McCown, Chairman of the Board and Chief Executive
Officer, 660 Madison Avenue, 10th Floor, New York, New York 10021-8405,
or at such other address for notice as the Borrower shall last have
furnished in writing to the Person giving the notice;
(b) if to the Agent, at 100 Federal Street, Boston,
Massachusetts 02110, USA, Attention: Transportation Division, or such
other address for notice as the Agent shall last have furnished in
writing to the Person giving the notice, with a copy to Amy L. Kyle,
Esq., Bingham Dana LLP, 150 Federal Street, Boston, Massachusetts
02110; and
(c) if to any Bank, at such Bank's address set forth on
Schedule 1 hereto, or such other address for notice as such Bank shall
have last furnished in writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or
made and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(ii) if sent by registered or certified first-class mail, postage prepaid, on
the third Business Day following the mailing thereof.
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21. GOVERNING LAW.
-------------
THIS CREDIT AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS, EXCEPT AS
OTHERWISE SPECIFICALLY PROVIDED THEREIN, ARE CONTRACTS UNDER THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID OF COMMONWEALTH OF
MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE
BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE OF
COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENT
TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY
SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN
SECTION 20. THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HERE-
AFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS
BROUGHT IN AN INCONVENIENT COURT.
22. HEADINGS.
--------
The captions in this Credit Agreement are for convenience of reference
only and shall not define or limit the provisions hereof.
23. COUNTERPARTS.
------------
This Credit Agreement and any amendment hereof may be executed in
several counterparts and by each party on a separate counterpart, each of which
when so executed and delivered shall be an original, and all of which together
shall constitute one instrument. In proving this Credit Agreement it shall not
be necessary to produce or account for more than one such counterpart signed by
the party against whom enforcement is sought.
24. ENTIRE AGREEMENT, ETC.
---------------------
The Loan Documents and any other documents executed in connection
herewith or therewith express the entire understanding of the parties with
respect to the transactions contemplated hereby. Neither this Credit Agreement
nor any term hereof may be changed, waived, discharged or terminated, except as
provided in Section 26.
25. WAIVER OF JURY TRIAL.
--------------------
The Borrower hereby waives its right to a jury trial with respect to
any action or claim arising out of any dispute in connection with this Credit
Agreement, the Notes or any of the other Loan Documents, any rights or
obligations hereunder or thereunder or the performance of such rights and
obligations. Except as prohibited by law, the Borrower hereby waives any right
it may have to claim or recover in any litigation referred to in the preceding
sentence any special, exemplary, punitive or consequential damages or any
damages other than, or in addition to, actual damages. The Borrower (a)
certifies that no representative, agent or attorney of any Bank or the Agent has
represented, expressly or otherwise, that such Bank or the Agent would not, in
the event of litigation, seek to enforce the foregoing waivers and (b)
acknowledges that the Agent and the Banks have been induced to enter into this
Credit Agreement, the other Loan Documents to which it is a party by, among
other things, the waivers and certifications contained herein.
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26. CONSENTS, AMENDMENTS, WAIVERS, ETC.
----------------------------------
Except as otherwise expressly provided in this Credit Agreement, any
consent or approval required or permitted by this Credit Agreement to be given
by one or more or all of the Banks may be given, and any term of this Credit
Agreement or of any other instrument related hereto or mentioned herein may be
amended, and the performance or observance by the Borrower of any terms of this
Credit Agreement or such other instrument or the continuance of any Default or
Event of Default may be waived (either generally or in a particular instance and
either retroactively or prospectively) with, but only with, the written consent
of the Borrower and the written consent of the Majority Banks. Notwithstanding
the foregoing, the rate of interest on the Notes (other than interest accruing
pursuant to Section 5.10.2 following the effective date of any waiver by the
Majority Banks of the Default or Event of Default relating thereto), the term of
the Notes, the amount of the Commitments of the Banks, and the amount of commit-
ment fee hereunder may not be changed without the written consent of the
Borrower and the written consent of each Bank affected thereby; the release of
substantially all of the Collateral and the release of any Guaranty may not be
effected without the written consent of all of the Banks; the definition of
Majority Banks may not be amended without the written consent of all of the
Banks; and the amount of the Agent's fee and Section 15 may not be amended
without the written consent of the Agent. No waiver shall extend to or affect
any obligation not expressly waived or impair any right consequent thereon. No
course of dealing or delay or omission on the part of either Bank in exercising
any right shall operate as a waiver thereof or otherwise be prejudicial thereto.
No notice to or demand upon the Borrower shall entitle the Borrower to other or
further notice or demand in similar or other circumstances.
27. SEVERABILITY.
------------
The provisions of this Credit Agreement are severable and if any one
clause or provision hereof shall be held invalid or unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect
only such clause or provision, or part thereof, in such jurisdiction, and shall
not in any manner affect such clause or provision in any other jurisdiction, or
any other clause or provision of this Credit Agreement in any jurisdiction.
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IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement as a sealed instrument as of the date first set forth above.
TRAILER BRIDGE, INC.
By: _________________________________
Name:
Title:
BANKBOSTON, N.A., individually
and as Agent
By: _________________________________
Name:
Title:
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED FINANCIAL STATEMENTS OF TRAILER BRIDGE, INC. AS OF AND FOR THE
ONE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001039184
<NAME> Trailer Bridge, Inc.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 5,561,996
<SECURITIES> 0
<RECEIVABLES> 14,584,854
<ALLOWANCES> (1,093,403)
<INVENTORY> 0
<CURRENT-ASSETS> 21,823,044
<PP&E> 68,893,325
<DEPRECIATION> (6,838,687)
<TOTAL-ASSETS> 89,229,089
<CURRENT-LIABILITIES> 17,859,945
<BONDS> 35,387,182
0
0
<COMMON> 97,775
<OTHER-SE> 31,246,152
<TOTAL-LIABILITY-AND-EQUITY> 89,229,089
<SALES> 0
<TOTAL-REVENUES> 77,240,644
<CGS> 0
<TOTAL-COSTS> 80,286,293
<OTHER-EXPENSES> 828,514
<LOSS-PROVISION> 1,040,721
<INTEREST-EXPENSE> 1,035,769
<INCOME-PRETAX> (3,874,163
<INCOME-TAX> (1,358,133)
<INCOME-CONTINUING> (2,516,030)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,516,030)
<EPS-PRIMARY> (.26)
<EPS-DILUTED> (.26)
</TABLE>
