<PAGE> 1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
---------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE EXCHANGE ACT OF 1934
Commission file number 333-38157
FIRST WAVE MARINE, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 76-0461352
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2102 BROADWAY
HOUSTON, TEXAS 77012
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 847-4600
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X} Yes [ ] No
Number of shares of common stock outstanding as of November 11, 1999:
11,756,955
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<PAGE> 2
FIRST WAVE MARINE, INC.
INDEX TO FORM 10-Q
FOR THE THREE MONTH PERIOD ENDED
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 1999 and
December 31, 1998 1
Consolidated Statements of Operations for the Three Month
and Nine Month Periods Ended September 30, 1999 and 1998 2
Consolidated Statements of Cash Flows for the Nine Month
Periods Ended September 30, 1999 and 1998 3
Notes to Unaudited Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 5
Item 3. Quantitative and Qualitative Disclosures about Market Risk 9
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 10
</TABLE>
<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1999 1998
-------------- --------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,925 $ 1,654
Investments available-for-sale -- 2,102
Investments held-to-maturity -- 6,262
Accounts receivable, less allowance of $202 in 1999
and $232 in 1998 12,935 19,369
Inventories 816 857
Costs and estimated earnings in excess of billings on
uncompleted contracts 1,958 2,615
Prepaids and other 2,210 785
Income tax receivable 2,102 492
Deferred income taxes 3,010 826
-------------- --------------
Total current assets 28,956 34,962
Property and equipment, net 74,006 73,067
Financing costs, net 3,670 4,021
Goodwill and other intangibles, net 14,835 15,214
Deposits and other 1,196 1,119
-------------- --------------
$ 122,663 $ 128,383
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,113 $ 2,944
Accrued liabilities 7,239 6,041
Billings in excess of costs and estimated earnings on
uncompleted contracts 767 255
Accrued interest payable 2,064 4,125
Current portion of long-term debt and capital lease obligation 234 167
Notes payable 187 199
-------------- --------------
Total current liabilities 14,604 13,731
Long-term obligations 3,959 3,042
Subordinated debt 6,328 6,328
Senior notes 90,000 90,000
Deferred income taxes 5,732 5,727
Other liabilities 1,345 1,279
Commitments and contingencies -- --
Stockholders' equity:
Preferred stock, $.01 par value, 2,000 shares
authorized, no shares issued -- --
Common stock, $.01 par value, 21,000 shares
authorized, 11,757 shares issued and outstanding
at September 30, 1999 and December 31, 1998 118 118
Additional paid-in capital 3,490 3,490
Retained earnings (deficit) (2,913) 4,668
-------------- --------------
695 8,276
-------------- --------------
$ 122,663 $ 128,383
============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
1
<PAGE> 4
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Month Periods Ended September 30,
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Repair and upgrades $ 12,070 $ 18,401 $ 46,100 $ 49,097
New construction 6,811 5,830 14,407 9,572
Environmental services 953 1,229 3,291 3,937
-------- -------- -------- --------
19,834 25,460 63,798 62,606
Cost of revenues 17,021 17,297 52,245 41,228
-------- -------- -------- --------
Gross profit 2,813 8,163 11,553 21,378
General and administrative expenses 5,573 4,467 15,685 11,906
-------- -------- -------- --------
Income from operations (2,760) 3,696 (4,132) 9,472
Interest expense - net 2,568 2,400 7,606 6,464
-------- -------- -------- --------
Income before income taxes and extraordinary item (5,328) 1,296 (11,738) 3,008
Income tax expense (benefit) (1,896) 508 (4,157) 1,237
-------- -------- -------- --------
Income before extraordinary item (3,432) 788 (7,581) 1,771
Extraordinary item-loss on extinguishment of debt, net
of income tax benefit of $559 -- -- -- (933)
-------- -------- -------- --------
Net income (loss) $ (3,432) $ 788 $ (7,581) $ 838
======== ======== ======== ========
Basic and diluted earnings per share:
Before extraordinary item $ (0.29) $ 0.07 $ (0.64) $ 0.15
Extraordinary item -- -- -- (0.08)
-------- -------- -------- --------
Net income (loss) $ (0.29) $ 0.07 $ (0.64) $ 0.07
======== ======== ======== ========
Weighted-averaged shares:
Basic and diluted 11,757 11,757 11,757 11,757
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE> 5
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Month Periods Ended September 30,
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (7,581) $ 838
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 4,836 2,956
Accretion of discounts on investments held-to-maturity (33) (403)
Provision for doubtful accounts 91 159
Loss (gain) on sale of property and equipment 13 (8)
Write-off of property and equipment 623 124
Write-off of financing costs -- 469
Deferred income tax provision (2,179) 354
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable 6,343 (11,953)
Inventories 41 72
Costs and estimated earnings in excess of billings on uncompleted contracts 657 (2,069)
Other assets (1,425) 713
Income tax receivable (1,610) (955)
Deposits and other (77) (479)
Accounts payable 1,169 1,614
Accrued liabilities 1,198 2,796
Billings in excess of costs and estimated earnings on uncompleted contracts 512 489
Accrued interest payable (2,061) 1,013
Other liabilities 66 767
----------- -----------
Net cash provided by (used in) operating activities 583 (3,503)
----------- -----------
Cash flows from investing activities:
Acquisition of property and equipment (4,783) (16,863)
Acquisition of businesses, net of cash acquired -- (19,399)
Purchase of investments held-to-maturity -- (10,792)
Proceeds from maturity of investments held-to-maturity 6,274 4,950
Proceeds from sales of investments available-for-sale 2,123 --
Purchase of investments available-for-sale -- (2,000)
Proceeds from sales of property and equipment 165 31
Asset acquisition costs -- (58)
----------- -----------
Net cash provided by (used in) investing activities 3,779 (44,131)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of debt -- 90,000
Payments on long-term debt and notes payable (91) (33,411)
Net payments on revolving lines of credit -- (1,027)
Financing costs -- (3,502)
----------- -----------
Net cash (used in) provided by financing activities (91) 52,060
----------- -----------
Net increase in cash and cash equivalents 4,271 4,426
Cash and cash equivalents at beginning of period 1,654 378
----------- -----------
Cash and cash equivalents at end of period $ 5,925 $ 4,804
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 6
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
Note 1 In the opinion of management the accompanying unaudited
consolidated financial statements reflect all adjustments necessary
to present fairly the financial position of First Wave Marine, Inc.
("First Wave" or the "Company") as of September 30, 1999, the
results of operations for the three and nine month periods ended
September 30, 1999 and 1998, and cash flows for the nine month
periods ended September 30, 1999 and 1998. All such adjustments are
of a normal recurring nature. These interim financial statements
should be read in conjunction with the audited financial statements
and related notes included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1998.
Note 2 The consolidated financial statements include the accounts of
First Wave and its wholly-owned subsidiaries. All material
intercompany transactions are eliminated in consolidation.
Note 3 The results of operations for the three and nine month periods
ended September 30, 1999 are not necessarily indicative of the
results to be expected for the entire year.
Note 4 Legal Proceedings - On August 11, 1999, one of the Company's
subsidiaries, Newpark Shipbuilding-Brady Island, Inc.
("Newpark-Brady"), received an Information from the State of Texas
charging Newpark-Brady with a one count water pollution
misdemeanor, for allegedly discharging industrial waste from a
barge in violation of Texas Water Code Section 26.121(a)(1) on or
about July 30, 1997. Newpark-Brady is presently investigating the
matter and plans to vigorously defend itself against the charge.
On August 13, 1998, Newpark-Brady was the subject of a search
warrant executed by a multi-agency environmental task force. The
government's search warrant was primarily directed at the facility's
wastewater treatment plant. The Board of Directors of the Company
authorized outside legal counsel to conduct an internal corporate
investigation of the matters raised by the agencies in their
investigation. In addition, the Company promptly undertook
aggressive measures to assure environmental compliance. The internal
investigation concluded that no officer or director of Newpark-Brady
or the Company participated in or had knowledge of any
non-compliance. The investigation did find some evidence of past
instances of non-compliance with environmental laws and regulations
in connection with Newpark-Brady's operation and monitoring of the
facility's wastewater treatment system. A state grand jury
investigation into these matters began in February 1999. In April
1999, for reasons apparently no more significant than prosecutorial
availability, the investigation was transferred to the federal
government. At this time, the Company cannot estimate the impact
that may result from enforcement action, if any, related to the
government's investigation. The Company does not believe that any
aspects of the matters described above will subject the parent
company, First Wave Marine, Inc., to criminal liability.
Note 5 Year 2000 - The Year 2000 issue relates to limitations in
computer systems and applications that may prevent proper
recognition of the Year 2000. The potential effect of the Year 2000
issue on the Company and its business partners will not be fully
determinable until the Year 2000 and thereafter. If Year 2000
modifications were not properly completed either by the Company or
entities with which the Company conducts business, the Company's
revenues and financial condition could be adversely impacted.
4
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This report on Form 10-Q contains "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements other than statements of historical facts
included in this Form 10-Q, including statements in this
"Management's Discussion and Analysis of Financial Condition and
Results of Operations," as well as statements as may be made by
management, orally or in writing related thereto, are
forward-looking statements. Forward-looking statements generally
are accompanied by words such as "anticipate", "believe",
"estimate", "expect" or similar statements. Such forward-looking
statements are subject to certain risks, uncertainties and
assumptions, including (i) risks of reduced levels of demand for
the Company's services resulting from reduced levels of capital
expenditures of the Company's customers in the offshore drilling
rig, offshore support vessel, offshore barge, ship and inland
marine industries, (ii) risks related to the expansion of
operations, (iii) operating risks relating to conversion and repair
of drilling rigs, offshore support vessels, offshore barges, ships
and inland marine vessels, (iv) contract bidding risks, (v) risks
related to dependence on significant customers, (vi) risks related
to the highly leveraged posture of the Company, and (vii) risks
related to regulatory and environmental matters including risks
relating to the ongoing environmental investigation of one of the
Company's subsidiaries. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those
anticipated, estimated or projected. Although the Company believes
that the expectations reflected in such forward-looking statements
are reasonable, no assurance can be given that such expectations
will prove to have been correct.
The following discussion of the Company's financial condition,
results of operations, liquidity and capital resources should be
read in conjunction with the Company's Consolidated Financial
Statements and the Notes to the Consolidated Financial Statements
included elsewhere in this report.
GENERAL
The Company's business is primarily derived from providing repair
and upgrade services to inland and offshore marine vessels,
including barges, boats, drilling rigs and ships. To a lesser
extent the Company engages in new construction of such inland and
offshore marine vessels.
First Wave currently operates three shipyards in the Houston, Texas
area (Brady Island, Greens Bayou and Pasadena) and three in the
Galveston, Texas area (East Pelican Island, West Pelican Island and
Galveston Island). The Company also provides related environmental
services, including cleaning, degassing and wastewater treatment.
The Company currently employs approximately 1,100 employees at its
six shipyards.
PENDING PROCEEDINGS
On August 11, 1999, one of the Company's subsidiaries,
Newpark-Brady, received an Information from the State of Texas
charging Newpark-Brady with a one count water pollution misdemeanor,
for allegedly discharging industrial waste from a barge in violation
of Texas Water Code Section 26.121(a)(1) on or about July 30, 1997.
Newpark-Brady is presently investigating the matter and plans to
vigorously defend itself against the charge.
On August 13, 1998, Newpark-Brady was the subject of a search
warrant executed by a multi-agency environmental task force. The
government's search warrant was primarily directed at the
facility's wastewater treatment plant. The Board of Directors of
the Company authorized outside legal counsel to conduct an internal
corporate investigation of the matters raised by the agencies in
their investigation. In addition, the Company promptly undertook
aggressive measures to assure environmental compliance. The
internal investigation concluded that no
5
<PAGE> 8
officer or director of Newpark-Brady or the Company participated in
or had knowledge of any non-compliance. The investigation did find
some evidence of past instances of non-compliance with environmental
laws and regulations in connection with Newpark-Brady's operation
and monitoring of the facility's wastewater treatment system. A
state grand jury investigation into these matters began in February
1999. In April 1999, for reasons apparently no more significant than
prosecutorial availability, the investigation was transferred to the
federal government. At this time, the Company cannot estimate the
impact that may result from enforcement action, if any, related to
the government's investigation. The Company does not believe that
any aspects of the matters described above will subject the parent
company, First Wave Marine, Inc., to criminal liability.
RESULTS OF OPERATIONS
Comparison of the three months ended September 30, 1999 to the
three months ended September 30, 1998.
Revenues decreased 22% to $19.8 million in the 1999 period,
compared with $25.5 million in the 1998 period, primarily due to
poor market conditions in all sectors served by the Company. The
decline in oilfield related work has been the result of a reduction
in the capital budgets of drilling rig contractors and offshore
support vessel operators due to the low prices of oil during 1998
continuing through early 1999. The decline in barge repair work was
due to a combination of reduced maintenance spending stemming from
a weaker market for commodities transportation and deferred
maintenance spending arising out of the market consolidation of
barge operators. Additionally, declines during 1998 and early 1999
in the prices of oil and natural gas had a negative impact on barge
operators and their capital budgets. As a result of difficult
market conditions, billable labor hours related to repair work were
down significantly.
Cost of revenue as a percentage of total revenues was 86% in the
1999 period compared to 68% in the 1998 period. The cost of revenue
percentage increased primarily due to the change in the mix of
work.
Gross profit decreased 66% to $2.8 million in the 1999 period from
$8.2 million in the 1998 period. The gross profit margin decreased
to 14% in the 1999 period from 32% in the 1998 period, due in part
to the increase in lower margin new construction revenue, the
decrease in higher margin inland boat and barge repair revenue and
the decrease in higher margin oilfield related repair and
conversion work as percentages of total revenues. The declines in
revenue were combined with substantial margin pressure in all
market sectors served. Additionally, the Company performed work at
lower rates in order to maintain certain volume levels and retain
its work force.
General and administrative expenses increased 25% to $5.6 million
in the 1999 period from $4.5 million in the 1998 period. General
and administrative expenses as a percentage of revenues for the
1999 period represented 28% of total revenues, as compared to 18%
for the 1998 period. The increase in general and administrative
expenses was due to increased staffing at start-up facilities and
at the corporate organization level, legal expenses for the ongoing
environmental investigations, and expenses related to development
of the Company's strategy for future expansion. During the current
period the Company incurred costs of approximately $380,000 related
to acquisition and equity offering efforts, and wrote-off
approximately $310,000 related to the cancellation of the purchase
of certain equipment.
Net interest expense increased to $2.6 million in the 1999 period
from $2.4 million in the 1998 period primarily due to additional
interest expense related to financed equipment purchases at one of
the Company's facilities, and a decrease in self-constructed
assets, resulting in less capitalized interest.
The decrease in income tax expense from approximately $508,000 in
the 1998 period to a net income tax benefit of $1.9 million in the
1999 period is directly attributable to the decrease in income
before income taxes.
6
<PAGE> 9
Comparison of the nine months ended September 30, 1999 to the nine
months ended September 30, 1998.
Revenues increased 2% to $63.8 million in the 1999 period, compared
with $62.6 million in the 1998 period. The 1998 period included
only eight months of revenue generation by the Pasadena and West
Pelican Island facilities acquired on February 2, 1998, and four
and one-half months of revenue generation by the Galveston Island
facility acquired on May 15, 1998. Though revenues in total
increased marginally, revenues for the period were adversely
affected by the general decline in market conditions in all sectors
served by the Company. As a result of poor market conditions,
billable labor hours related to repair work were down
significantly. Despite poor market conditions, revenue from the
Company's new construction activities increased 51% to $14.4
million.
Cost of revenue as a percentage of total revenues was 82% in the
1999 period compared to 66% in the 1998 period. The cost of revenue
percentage increased primarily due to the change in the mix of
work.
Gross profit decreased 46% to $11.6 million in the 1999 period from
$21.4 million in the 1998 period. The gross profit margin decreased
to 18% in the 1999 period from 34% in the 1998 period, due in part
to the increase in lower margin new construction revenue, the
decrease in higher margin inland boat and barge repair revenue, and
the decrease in higher margin oilfield related repair and
conversion work as percentages of total revenues. The declines in
revenue were combined with substantial margin pressure in all
market sectors served. Additionally, the Company performed work at
lower rates in order to maintain certain volume levels and retain
its work force. During the first quarter of 1999, disruptions
caused by an initiative to upgrade production and control systems
at the recently acquired Galveston Island facility had a negative
impact of approximately $500,000 on the gross profit margin.
General and administrative expenses increased 32% to $15.7 million
in the 1999 period from $11.9 million in the 1998 period. General
and administrative expenses as a percentage of revenues for the
1999 period represented 25% of total revenues, as compared to 19%
for the 1998 period. The increase in general and administrative
expenses was due to the following: the increased staffing at
start-up facilities and at the corporate organization level,
expenses related to workforce development and training, legal
expenses for the on-going environmental investigations, and
expenses related to development of the Company's strategy for
future expansion. During the 1999 period the Company recorded an
impairment loss of approximately $325,000 related to a specialized
piece of equipment that is not in use, incurred costs of
approximately $640,000 related to acquisition and equity offering
efforts, and wrote-off approximately $310,000 related to the
cancellation of the purchase of certain equipment.
Net interest expense rose to $7.6 million in the 1999 period from
$6.5 million in the 1998 period primarily due to the following:
nine months of interest expense on the Company's $90 million 11%
Senior Notes, due 2008 reflected in the 1999 period compared with
only eight months interest expense on the Senior Notes in the 1998
period, additional interest expense related to financed equipment,
and a decrease in self-constructed assets resulting in less
capitalized interest.
The decrease in income tax expense from approximately $1.2 million
in the 1998 period to a net income tax benefit of $4.2 million in
the 1999 period is directly attributable to the decrease in income
before income taxes.
During the 1998 period, the Company recorded an extraordinary item
of ($933,000) which represented a $1.5 million loss on
extinguishment of debt, net of an income tax benefit of $559,000.
No extraordinary item was recorded in the 1999 period.
7
<PAGE> 10
INFLATION AND CHANGING PRICES
The Company does not believe that general price inflation has had a
significant impact on the Company's results of operations during
the periods presented. To the extent that the effects of inflation
are not offset by improvements in manufacturing and purchasing
efficiency and labor productivity, the Company generally has been
able to take such effects into account in pricing its contracts
with customers. There can be no assurance, however, that inflation
will not have a material effect on the Company's business in the
future.
LIQUIDITY AND CAPITAL RESOURCES
The Company's ongoing liquidity requirements arise primarily from
its need to service debt, fund working capital, acquire additional
shipyard facilities and make capital improvements to its
facilities. Prior to the Company's Senior Notes offering in 1998,
bank financing and internally generated funds provided funding for
these activities.
In October 1999, the Company and four of its subsidiaries entered
into a Loan and Security Agreement to obtain a $20.0 million credit
facility. The credit facility, which matures in October 2003,
initially provides for a $16.0 million revolving credit facility
and a $4.0 million term loan. As the term loan amortizes, the
availability under the revolver portion of the facility increases.
The revolving credit facility is collateralized by accounts
receivable of four subsidiaries of the Company and bears interest
at prime plus 0.50%. The term loan is collateralized by certain
assets of two subsidiaries, bears interest at prime plus 1.00%, and
requires monthly principal and interest payments amortized over a
six year period, with a balloon payment due in October 2003. The
Loan and Security Agreement requires the payment of certain fees
during the term of the agreement and requires the Company to
maintain certain cash flow levels. As of November 11, 1999, the
term loan portion of the facility was fully funded.
A subsidiary of the Company had an additional $1.75 million
revolving line of credit with a financial institution secured by
accounts receivable. In July 1999, the subsidiary moved this line of
credit to another financial institution and increased the line of
credit to $3.0 million. As of November 11, 1999, the subsidiary had
no outstanding borrowings under this line of credit but would need
to obtain a waiver of certain financial covenants to reinstate
availability under the line of credit.
During the first quarter of 1999, the Company financed the purchase
of certain machinery and equipment totaling $929,000. The largest
financing was for $860,000 which bears interest at 8% per annum
with principal and interest of approximately $12,000 due monthly
over a seven year period, and a final balloon payment of $86,000
due at maturity.
Net cash provided by (used in) operating activities for the nine
month periods ended September 30, 1999 and 1998 was $583,000 and
($3.5) million, respectively.
Net cash provided by (used in) investing activities was $3.8
million and ($44.1) million for the nine month periods ended
September 30, 1999 and 1998, respectively. During the 1999 period,
cash provided by investing activities was generated by sales and
maturities of investments which were partially offset by asset
additions.
Net cash (used in) provided by financing activities was ($91,000)
and $52.1 million for the nine month periods ended September 30,
1999 and 1998, respectively.
8
<PAGE> 11
Management believes that with the cash generated from operations,
and, if necessary, borrowings under the Company's lines of credit,
or an infusion of equity, the Company will have sufficient
resources available to meet its anticipated requirements for
capital expenditures and working capital needs for the foreseeable
future provided that market conditions stabilize or improve from
current levels.
YEAR 2000 DISCLOSURES
Many computer software systems, as well as certain hardware and
equipment containing date sensitive data, were structured to
utilize a two-digit date field meaning that they may not be able to
properly recognize dates in the Year 2000 and beyond. This could
result in significant system and equipment failures. The Company
has completed a detailed process to identify potential Year 2000
problems and to implement solutions for all of its information
technology ("IT") as well as non-IT systems. Necessary actions have
been taken to ensure that essential IT and non-IT systems and
services will continue to operate on and after January 1, 2000. The
Company's technology projects are addressing the Year 2000 issue in
those areas where replacement systems are being installed for
functionality reasons. Where existing systems are expected to
remain in place beyond 1999, the Company is implementing changes
utilizing a combination of internal and external resources. In
addition, the Company has communicated with its major customers,
suppliers and financial institutions to coordinate year 2000
readiness.
Based on steps the Company has taken to address this issue, the
Company does not expect the financial impact of Year 2000 date
conversion to be material to its financial statements. However, the
Company can give no assurance that the systems of other companies
on which the Company's systems rely will be modified or otherwise
addressed in a timely manner, or that any failure by another
company would not have a material impact on the Company's financial
statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is only minimally exposed to market risk which could
result from adverse changes in interest rates.
Total long-term debt at September 30, 1999 included one floating
rate facility in the amount of $3.0 million. During the third
quarter of 1999, the Company had maximum borrowings on this facility
of $500,000. As of November 11, 1999, there were no outstanding
borrowings on this facility. In the future, the Company's annual
interest expense could fluctuate because the interest rate on the
facility is a floating rate. Additionally, the Company's $20 million
credit facility entered into in October 1999 is a floating rate
facility. The Company did not have any open derivative contracts
relating to its floating rate debt.
9
<PAGE> 12
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On August 11, 1999, one of the Company's subsidiaries,
Newpark-Brady, received an Information from the State of Texas
charging Newpark-Brady with a one count water pollution misdemeanor,
for allegedly discharging industrial waste from a barge in violation
of Texas Water Code Section 26.121(a)(1) on or about July 30, 1997.
Newpark-Brady is presently investigating the matter and plans to
vigorously defend itself against the charge.
On August 13, 1998, Newpark-Brady was the subject of a search
warrant executed by a multi-agency environmental task force. The
government's search warrant was primarily directed at the facility's
wastewater treatment plant. The Board of Directors of the Company
authorized outside legal counsel to conduct an internal corporate
investigation of the matters raised by the agencies in their
investigation. In addition, the Company promptly undertook
aggressive measures to assure environmental compliance. The internal
investigation concluded that no officer or director of Newpark-Brady
or the Company participated in or had knowledge of any
non-compliance. The investigation did find some evidence of past
instances of non-compliance with environmental laws and regulations
in connection with Newpark-Brady's operation and monitoring of the
facility's wastewater treatment system. A state grand jury
investigation into these matters began in February 1999. In April
1999, for reasons apparently no more significant than prosecutorial
availability, the investigation was transferred to the federal
government. At this time, the Company cannot estimate the impact
that may result from enforcement action, if any, related to the
government's investigation. The Company does not believe that any
aspects of the matters described above will subject the parent
company, First Wave Marine, Inc., to criminal liability.
ITEM 2-5. NOT APPLICABLE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit
Number Description
------- -----------
*10.1 Loan and Security Agreement between First Wave
Marine, Inc., Newpark Shipbuilding-Galveston
Island, Inc., Newpark Shipbuilding-Pelican
Island, Inc., Newpark Shipbuilding-Greens Bayou,
Inc. and Newpark Shipbuilding-Pasadena, Inc., as
Borrowers, and Bank of America Commercial Finance
Corporation, as Lender, dated October 14, 1999.
*10.2 Amendment No. 1 to the First Wave Marine, Inc.
Amended and Restated 1997 Incentive Equity Plan.
*27.1 Financial Data Schedule.
* Filed herewith
(b) Reports on Form 8-K
None
10
<PAGE> 13
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.
FIRST WAVE MARINE, INC.
November 12, 1999 /s/ Frank R. Pierce
------------------------------
Frank R. Pierce
Vice President and
Chief Financial Officer
November 12, 1999 /s/ Dale E. Schexnayder
------------------------------
Dale E. Schexnayder
Corporate Controller
11
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
*10.1 Loan and Security Agreement between First Wave
Marine, Inc., Newpark Shipbuilding-Galveston
Island, Inc., Newpark Shipbuilding-Pelican
Island, Inc., Newpark Shipbuilding-Greens Bayou,
Inc. and Newpark Shipbuilding-Pasadena, Inc., as
Borrowers, and Bank of America Commercial Finance
Corporation, as Lender, dated October 14, 1999.
*10.2 Amendment No. 1 to the First Wave Marine, Inc.
Amended and Restated 1997 Incentive Equity Plan.
*27.1 Financial Data Schedule.
* Filed herewith
</TABLE>
<PAGE> 1
EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (as it may be amended, this
"AGREEMENT") is entered into on October 14, 1999 among BANC OF AMERICA
COMMERCIAL FINANCE CORPORATION, THROUGH ITS COMMERCIAL FUNDING DIVISION
("LENDER"), having an address at 1177 Avenue of the Americas, 36th Floor, New
York, New York 10036, FIRST WAVE MARINE, INC., a Delaware corporation ("FIRST
WAVE"), NEWPARK SHIPBUILDING - GALVESTON ISLAND, INC., a Texas corporation
("NEWPARK GALVESTON"), NEWPARK SHIPBUILDING - PELICAN ISLAND, INC., a Texas
corporation ("NEWPARK PELICAN ISLAND"), NEWPARK SHIPBUILDING - GREENS BAYOU,
INC., a Texas corporation ("NEWPARK GREENS BAYOU"), and NEWPARK SHIPBUILDING -
PASADENA, INC., a Texas corporation ("NEWPARK PASADENA"), (First Wave, Newpark
Galveston, Newpark Pelican Island, Newpark Greens Bayou and Newpark Pasadena
being referred to individually, collectively, and jointly and severally, as
"BORROWER"), each Borrower having its chief executive office at 2102 Broadway,
Houston, Texas 77012 ("BORROWER'S ADDRESS"). The Schedules to this Agreement are
an integral part of this Agreement and are incorporated herein by reference.
Terms used, but not defined elsewhere, in this Agreement are defined in Schedule
B.
1. LOANS AND CREDIT ACCOMMODATIONS.
1.1 AMOUNT. Subject to the terms and conditions contained in this
Agreement, Lender will:
(a) REVOLVING LOANS AND CREDIT ACCOMMODATIONS. From time to
time during the Term at Borrower's request, make revolving loans to Borrower
("REVOLVING LOANS"), and make letters of credit, bankers acceptances and other
credit accommodations ("CREDIT ACCOMMODATIONS") available to Borrower, in each
case to the extent that there is sufficient Availability at the time of such
request to cover, dollar for dollar, the requested Revolving Loan or Credit
Accommodation; PROVIDED, that after giving effect to such Revolving Loan or
Credit Accommodation, (x) the outstanding balance of all monetary Obligations
(INCLUDING the principal balance of any Term Loan and, solely for the purpose of
determining compliance with this provision, the Credit Accommodation Balance)
will not exceed the Maximum Facility Amount set forth in Section 1(a) of
Schedule A and (y) none of the other Loan Limits set forth in Section 1 of
Schedule A will be exceeded. For this purpose, "AVAILABILITY" means:
(i) the aggregate amount of Eligible Accounts (less
maximum existing or asserted taxes, discounts, credits and allowances)
multiplied by the Accounts Advance Rate set forth in Section 1(b) of
Schedule A;
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<PAGE> 2
MINUS
(ii) all Reserves which Lender has established
pursuant to Section 1.2 (including those to be established in
connection with the requested Revolving Loan or Credit Accommodation);
and
MINUS
(iii) the outstanding balance of all of the monetary
Obligations (EXCLUDING the Credit Accommodation Balance and the
principal balance of the Term Loan).
(b) TERM LOAN. On the date of this Agreement, make an advance
to Borrower computed with respect to the value of Borrower's Eligible Equipment
(the "TERM LOAN") in the principal amount, if any, set forth in Section 2(a) of
Schedule A.
1.2 RESERVES. Lender may from time to time establish and revise such
reserves as Lender deems appropriate in its sole discretion ("RESERVES") to
reflect (i) events, conditions, contingencies or risks which affect or may
affect (A) the Collateral or its value, or the security interests and other
rights of Lender in the Collateral or (B) the assets, business or prospects of
Borrower or any Obligor, (ii) Lender's good faith concern that any Collateral
report or financial information furnished by or on behalf of Borrower or any
Obligor to Lender is or may have been incomplete, inaccurate or misleading in
any material respect, (iii) any fact or circumstance which Lender determines in
good faith constitutes, or could constitute, a Default or Event of Default or
(iv) any other events or circumstances which Lender determines in good faith
make the establishment or revision of a Reserve prudent. Without limiting the
foregoing, if the outstanding principal balance of the Term Loan advance with
respect to Eligible Equipment exceeds the percentage set forth in Section 2(a)
of Schedule A of the appraised value of such Eligible Equipment, Lender may
establish an additional Reserve in the amount of such excess. In no event shall
the establishment of a Reserve in respect of a particular actual or contingent
liability obligate Lender to make advances hereunder to pay such liability or
otherwise obligate Lender with respect thereto.
1.3 OTHER PROVISIONS APPLICABLE TO CREDIT ACCOMMODATIONS. Lender may,
in its sole discretion and on terms and conditions acceptable to Lender, make
Credit Accommodations available to Borrower either by issuing them, or by
causing other financial institutions to issue them supported by Lender's
guaranty or indemnification; PROVIDED, that after giving effect to each Credit
Accommodation, the Credit Accommodation Balance will not exceed the Credit
Accommodation Limit set forth in Section 1(c) of Schedule A. Any amounts paid by
Lender in respect of a Credit Accommodation will be treated for all purposes as
a Revolving Loan which shall be secured by the Collateral and bear interest, and
be payable, in the same manner as a Revolving Loan. Borrower agrees to execute
all documentation required by Lender or the issuer of any Credit Accommodation
in connection with any such Credit Accommodation.
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<PAGE> 3
1.4 REPAYMENT. Accrued interest on all monetary Obligations shall be
payable on the first day of each month. Principal of the Term Loan shall be
repaid as set forth in Section 2(b) of Schedule A. If at any time any of the
Loan Limits are exceeded, Borrower will immediately pay to Lender such amounts
(or provide cash collateral to Lender with respect to the Credit Accommodation
Balance in the manner set forth in Section 7.2), as shall cause Borrower to be
in full compliance with all of the Loan Limits. Notwithstanding the foregoing,
Lender may, in its sole discretion, make or permit Revolving Loans, the Term
Loan, any Credit Accommodations or any other monetary Obligations to be in
excess of any of the Loan Limits; PROVIDED, that Borrower shall, upon Lender's
demand, pay to Lender such amounts as shall cause Borrower to be in full
compliance with all of the Loan Limits. All unpaid monetary Obligations shall be
payable in full on the Maturity Date (as defined in Section 7.1) or, if earlier,
the date of any early termination pursuant to Section 7.1.
1.5 MINIMUM BORROWING. Subject to the terms and conditions of this
Agreement, Borrower agrees to (i) borrow sufficient amounts to cause the
outstanding principal balance of the Loans to equal or exceed, at all times
prior to the Maturity Date, the Minimum Loan Amount set forth in Section 4 of
Schedule A and (ii) maintain Availability sufficient to enable Borrower to do
so. However, Lender shall not be obligated to loan Borrower the Minimum Loan
Amount other than in accordance with all of the terms and conditions of this
Agreement.
1.6 JOINT AND SEVERAL OBLIGATIONS.
(a) Each Borrower states and acknowledges that: (i) pursuant
to this Agreement, Borrowers desire to use their borrowing potential on a
consolidated basis to the same extent possible if they were merged into a single
corporate entity and that this Agreement reflects the establishment of credit
facilities which would not otherwise be available to such Borrower if each
Borrower were not jointly and severally liable for payment of all of the
Obligations; (ii) it has determined that it will benefit specifically and
materially from the advances of credit contemplated by this Agreement; (iii) it
is both a condition precedent to the obligations of Lender hereunder and a
desire of the Borrowers that each Borrower execute and deliver to Lender this
Agreement; and (iv) Borrowers have requested and bargained for the structure and
terms of and security for the advances contemplated by this Agreement.
(b) Each Borrower hereby irrevocably and unconditionally: (i)
agrees that it is jointly and severally liable to Lender for the full and prompt
payment of the Obligations and the performance by each Borrower of its
obligations hereunder in accordance with the terms hereof; (ii) agrees to fully
and promptly perform all of its obligations hereunder with respect to each
advance of credit hereunder as if such advance had been made directly to it; and
(iii) agrees as a primary obligation to indemnify Lender on demand for and
against any loss incurred by Lender as a result of any of the obligations of any
one or more of the Borrowers being or becoming void, voidable, unenforceable or
ineffective for any reason whatsoever, whether or not known to Lender or any
Person, the amount of such loss being the amount which Lender would otherwise
have been entitled to recover from any one or more of the Borrowers.
3
<PAGE> 4
(c) It is the intent of each Borrower that the Obligations
hereunder of no one of them be subject to challenge on any basis, including,
without limitation, pursuant to any applicable fraudulent conveyance or
fraudulent transfer laws. Accordingly, as of the date hereof, the liability of
each Borrower under this section, together with all of its other liabilities to
all Persons as of the date hereof and as of any other date on which a transfer
or conveyance is deemed to occur by virtue of this Agreement, calculated in
amount sufficient to pay its probable net liabilities on its existing
indebtedness as the same become absolute and matured ("DATED LIABILITIES") is,
and is to be, less than the amount of the aggregate of a fair valuation of its
property as of such corresponding date ("DATED ASSETS"). To this end, each
Borrower under this section, (i) grants to and recognizes in each other
Borrower, ratably, rights of subrogation and contribution in the amount, if any,
by which the Dated Assets of such Borrower, but for the aggregate of subrogation
and contribution in its favor recognized herein, would exceed the Dated
Liabilities of such Borrower or, as the case may be, (ii) acknowledges receipt
of and recognizes its right to subrogation and contribution ratably from each of
the other Borrowers in the amount, if any, by which the Dated Liabilities of
such Borrower, but for the aggregate of subrogation and contribution in its
favor recognized herein, would exceed the Dated Assets of such Borrower under
this section. In recognizing the value of the Dated Assets and the Dated
Liabilities, it is understood that Borrowers will recognize, to at least the
same extent of their aggregate recognition of liabilities hereunder, their
rights to subrogation and contribution hereunder. It is a material objective of
this section that each Borrower recognizes rights to subrogation and
contribution rather than be deemed to be insolvent (or in contemplation thereof)
by reason of an arbitrary interpretation of its joint and several obligations
hereunder. In addition to and not in limitation of the foregoing provisions of
this section, the Borrowers and Lender hereby agree and acknowledge that it is
the intent of each Borrower and of Lender that the obligations of each Borrower
hereunder be in all respects in compliance with, and not be voidable pursuant
to, applicable fraudulent conveyance and fraudulent transfer laws.
2. INTEREST AND FEES.
2.1 INTEREST. All Loans and other monetary Obligations shall bear
interest at the Interest Rate(s) set forth in Section 3 of Schedule A, except
where expressly set forth to the contrary in this Agreement or another Loan
Document; PROVIDED, that after the occurrence of an Event of Default, all Loans
and other monetary Obligations shall, at Lender's option, bear interest at a
rate per annum equal to two percent (2%) in excess of the rate otherwise
applicable thereto (the "DEFAULT RATE") until paid in full (notwithstanding the
entry of any judgment against Borrower or the exercise of any other right or
remedy by Lender), and all such interest shall be payable on demand. Changes in
the Interest Rate shall be effective as of the date of any change in the Prime
Rate. No agreements, conditions, provisions or stipulations contained in this
Agreement or any other instrument, document or agreement between Borrower and
Lender or default of Borrower, or the exercise by Lender of the right to
accelerate the payment of the maturity of principal and interest, or to exercise
any option whatsoever contained in this Agreement or any other Loan Documents,
or the arising of any contingency whatsoever, shall entitle Lender to contract
for, charge, or receive, in any event, interest exceeding the maximum rate of
interest permitted by applicable state or federal law in effect from time to
time (hereinafter "MAXIMUM LEGAL RATE"). In no event shall Borrower be obligated
to pay interest exceeding
4
<PAGE> 5
such Maximum Legal Rate and all agreements, conditions or stipulations, if any,
which may in any event or contingency whatsoever operate to bind, obligate or
compel Borrower to pay a rate of interest exceeding the Maximum Legal Rate,
shall be without binding force or effect, at law or in equity, to the extent
only of the excess of interest over such Maximum Legal Rate. In the event any
interest is contracted for, charged or received in excess of the Maximum Legal
Rate ("EXCESS"), Borrower acknowledges and stipulates that any such contract,
charge, or receipt shall be the result of an accident and bona fide error, and
that any Excess received by Lender shall be applied, first, to reduce the
principal then unpaid hereunder; second, to reduce the other Obligations; and
third, returned to Borrower, it being the intention of the parties hereto not to
enter at any time into a usurious or otherwise illegal relationship. Borrower
recognizes that, with fluctuations in the Prime Rate and the Maximum Legal Rate,
such a result could inadvertently occur. By the execution of this Agreement,
Borrower covenants that (i) the credit or return of any Excess shall constitute
the acceptance by Borrower of such Excess, and (ii) Borrower shall not seek or
pursue any other remedy, legal or equitable, against Lender, based in whole or
in part upon contracting for, charging or receiving of any interest in excess of
the maximum authorized or receiving of any interest in excess of the maximum
authorized by applicable law if in fact such excess was a result of an accident
or bona fide error. For the purpose of determining whether or not any Excess has
been contracted for, charged or received by Lender, all interest at any time
contracted for, charged or received by Lender in connection with this Agreement
shall be amortized, prorated, allocated and spread in equal parts during the
entire term of this Agreement.
2.2 FEES. Borrower shall pay Lender the following fees, which are in
addition to all interest and other sums payable by Borrower to Lender under this
Agreement, and are not refundable:
(a) COMMITMENT FEE. A commitment fee in the amount set forth
in Section 6(a) of Schedule A.
(b) SERVICING FEE. A monthly servicing fee in the amount set
forth in Section 6(b) of Schedule A, in consideration of Lender's administration
and other services for each month (or part thereof), which shall be fully earned
as of, and payable in advance on, the date of this Agreement and on the first
day of each month thereafter so long as any of the Obligations are outstanding.
(c) UNUSED LINE FEE. An unused line fee at a rate equal to the
percentage per annum set forth in Section 6(c) of Schedule A of the amount by
which the Maximum Facility Amount exceeds the average daily outstanding
principal balance of the Loans and the Credit Accommodation Balance during the
immediately preceding month (or part thereof), which fee shall be payable, in
arrears, on the first day of each month so long as any of the Obligations are
outstanding and on the Maturity Date.
(d) MINIMUM BORROWING FEE. A minimum borrowing fee equal to
the excess, if any, of (i) interest which would have been payable in respect of
each period set forth in Section 6(d)(i) of Schedule A if, at all times during
such period, the principal balance of the Loans was equal to the Minimum Loan
Amount over (ii) the actual interest payable in respect of
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<PAGE> 6
such period, which fee shall be fully earned as of the last day of such period
and payable on the date set forth in Section 6(d)(ii) of Schedule A and on the
Maturity Date, commencing with the immediately following period.
(e) CREDIT ACCOMMODATION FEES. All of the fees relating to
Credit Accommodations set forth in Section 6(f) of Schedule A.
2.3 COMPUTATION OF INTEREST AND FEES. All interest and fees shall be
calculated daily on the closing balances in the Loan Account based on the actual
number of days elapsed in a year of 360 days. For purposes of calculating
interest and fees, if the outstanding daily principal balance of the Revolving
Loans is a credit balance, such balance shall be deemed to be zero.
2.4 LOAN ACCOUNT; MONTHLY ACCOUNTINGS. Lender shall maintain a loan
account for Borrower reflecting all advances, charges, expenses and payments
made pursuant to this Agreement (the "LOAN ACCOUNT"), and shall provide Borrower
with a monthly accounting reflecting the activity in the Loan Account. Each
accounting shall be deemed correct, accurate and binding on Borrower and an
account stated (except for reverses and reapplications of payments made and
corrections of errors discovered by Lender), unless Borrower notifies Lender in
writing to the contrary within sixty (60) days after such account is rendered,
describing the nature of any alleged errors or admissions. However, Lender's
failure to maintain the Loan Account or to provide any such accounting shall not
affect the legality or binding nature of any of the Obligations. Interest, fees
and other monetary Obligations due and owing under this Agreement (including
fees and other amounts paid by Lender to issuers of Credit Accommodations) may,
in Lender's discretion, be charged to the Loan Account, and will thereafter be
deemed to be Revolving Loans and will bear interest at the same rate as other
Revolving Loans.
3. SECURITY INTEREST.
3.1 REVOLVING OBLIGATIONS. To secure the full payment and performance
of all of the Revolving Obligations when due, Borrower hereby grants to Lender a
continuing security interest in all of the following described property of
Borrower, whether tangible or intangible, now owned or in existence or hereafter
acquired or arising, wherever located, whether or not eligible for lending
purposes: (i) all Accounts; (ii) to the extent relating to such Accounts, all
Chattel Paper, Instruments, Documents, General Intangibles; Deposit Accounts and
money relating to such Accounts, (iii) all proceeds and products of all of the
foregoing (including proceeds of any insurance policies, proceeds of proceeds
and claims against third parties for loss or any destruction of any of the
foregoing) and (iv) all books and records relating to any of the foregoing.
3.2 TERM OBLIGATIONS. To secure the full payment and performance of all
of the Term Obligations when due, Borrower hereby grants to Lender a continuing
security interest in all of the following described property of Borrower,
whether tangible or intangible, now owned or in existence or hereafter acquired
or arising, wherever located, whether or not eligible for lending purposes: (i)
all Equipment; (ii) all proceeds and products of all of the foregoing
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<PAGE> 7
(including proceeds of any insurance policies, proceeds of proceeds and claims
against third parties for loss or any destruction of any of the foregoing) and
(iii) all books and records relating to any of the foregoing.
4. ADMINISTRATION.
4.1 LOCK BOXES AND BLOCKED ACCOUNTS. Borrower will, at its expense,
establish (and revise from time to time as Lender may require) collection
procedures acceptable to Lender, in Lender's sole discretion, for the collection
of checks, wire transfers and other proceeds of Accounts ("ACCOUNT PROCEEDS"),
which may include (i) directing all Account Debtors to send all such proceeds
directly to a post office box designated by Lender either in the name of
Borrower (but as to which Lender has exclusive access) or, at Lender's option,
in the name of Lender (a "LOCK BOX") or (ii) depositing all Account Proceeds
received by Borrower into one or more bank accounts maintained in Lender's name
(each, a "BLOCKED ACCOUNT"), under an arrangement acceptable to Lender with a
depository bank acceptable to Lender, pursuant to which all funds deposited into
each Blocked Account are to be transferred to Lender in such manner, and with
such frequency, as Lender shall specify or (iii) a combination of the foregoing.
Borrower agrees to execute, and to cause its depository banks to execute, such
Lock Box and Blocked Account agreements and other documentation as Lender shall
require from time to time in connection with the foregoing.
4.2 REMITTANCE OF PROCEEDS. Except as provided in Section 4.1, all
proceeds arising from the sale or other disposition of any Collateral shall be
delivered, in kind, by Borrower to Lender in the original form in which received
by Borrower not later than the following Business Day after receipt by Borrower.
Until so delivered to Lender, Borrower shall hold such proceeds separate and
apart from Borrower's other funds and property in an express trust for Lender.
Nothing in this section shall limit the restrictions on disposition of
Collateral set forth elsewhere in this Agreement.
4.3 APPLICATION OF PAYMENTS AND COLLECTIONS. Lender may, in its sole
discretion, apply, reverse and re-apply all cash and non-cash proceeds of
Collateral or other payments received with respect to the Obligations, in such
order and manner as Lender shall determine, whether or not the Obligations are
due, and whether before or after the occurrence of a Default or an Event of
Default. For purposes of determining Availability, such amounts will be credited
to the Loan Account and the Collateral balances to which they relate upon
Lender's receipt of advice from Lender's Bank (set forth in Section 11 of
Schedule A) that such items have been credited to Lender's account at Lender's
Bank (or upon Lender's deposit thereof at Lender's Bank in the case of payments
received by Lender in kind), in each case subject to final payment and
collection. However, for purposes of computing interest on the Obligations, such
items shall be deemed applied by Lender two Business Days after Lender's receipt
of advice of deposit thereof at Lender's Bank. Anything to the contrary herein
notwithstanding, no proceeds of the Collateral described in Section 3.2 shall be
applied to the Revolver Obligations nor shall the proceeds of the Collateral
described in Section 3.1 hereof be applied to the Term Obligations.
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<PAGE> 8
4.4 NOTIFICATION; VERIFICATION. Lender or its designee may, from time
to time, whether or not a Default or Event of Default has occurred: (i) verify
directly with the Account Debtors the validity, amount and other matters
relating to the Accounts and Chattel Paper, by means of mail, telephone or
otherwise, either in the name of Borrower or Lender or such other name as Lender
may choose; (ii) notify Account Debtors that Lender has a security interest in
the Accounts and that payment thereof is to be made directly to Lender; and
(iii) demand, collect or enforce payment of any Accounts and Chattel Paper (but
without any duty to do so).
4.5 POWER OF ATTORNEY. Borrower hereby grants to Lender an irrevocable
power of attorney, coupled with an interest, authorizing and permitting Lender
(acting through any of its officers, employees, attorneys or agents), at any
time (whether or not a Default or Event of Default has occurred and is
continuing, except as expressly provided below), at Lender's option, but without
obligation, with or without notice to Borrower, and at Borrower's expense, to do
any or all of the following, in Borrower's name or otherwise: (i) execute on
behalf of Borrower any documents that Lender may, in its sole discretion, deem
advisable in order to perfect and maintain Lender's security interests in the
Collateral, to exercise a right of Borrower or Lender, or to fully consummate
all the transactions contemplated by this Agreement and the other Loan Documents
(including such financing statements and continuation financing statements, and
amendments thereto, as Lender shall deem necessary or appropriate) and to file
as a financing statement any copy of this Agreement or any financing statement
signed by Borrower; (ii) execute on behalf of Borrower any document exercising,
transferring or assigning any option to purchase, sell or otherwise dispose of
or lease (as lessor or lessee) any real or personal property which is part of
the Collateral or in which Lender has an interest; (iii) execute on behalf of
Borrower any invoices relating to any Accounts, any draft against any Account
Debtor, any proof of claim in bankruptcy, any notice of Lien or claim, and any
assignment or satisfaction of mechanic's, materialman's or other Lien; (iv)
execute on behalf of Borrower any notice to any Account Debtor; (v) receive and
otherwise take control in any manner of any cash or non-cash items of payment or
proceeds of Collateral; (vi) endorse Borrower's name on all checks and other
forms of remittances received by Lender; (vii) pay, contest or settle any Lien,
charge, encumbrance, security interest and adverse claim in or to any of the
Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; (viii) after the occurrence of a Default or
Event of Default, grant extensions of time to pay, compromise claims relating
to, and settle Accounts, Chattel Paper and General Intangibles for less than
face value and execute all releases and other documents in connection therewith;
(ix) pay any sums required on account of Borrower's taxes or to secure the
release of any Liens therefor; (x) pay any amounts necessary to obtain, or
maintain in effect, any of the insurance described in Section 5.12; (xi) settle
and adjust, and give releases of, any insurance claim that relates to any of the
Collateral and obtain payment therefor; (xii) instruct any third party having
custody or control of any Collateral or books or records belonging to, or
relating to, Borrower to give Lender the same rights of access and other rights
with respect thereto as Lender has under this Agreement; and (xiii) after the
occurrence of a Default or Event of Default, change the address for delivery of
Borrower's mail and receive and open all mail addressed to Borrower. Any and all
sums paid, and any and all costs, expenses, liabilities, obligations and
reasonable attorneys' fees incurred, by Lender with respect to the foregoing
shall be added to and become part of the Obligations, shall be payable on
demand, and shall bear interest at a rate equal to the highest interest rate
applicable
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<PAGE> 9
to any of the Obligations. Borrower agrees that Lender's rights under the
foregoing power of attorney or any of Lender's other rights under this Agreement
or the other Loan Documents shall not be construed to indicate that Lender is in
control of the business, management or properties of Borrower.
4.6 DISPUTES. Borrower shall promptly notify Lender of all disputes or
claims relating to Accounts and Chattel Paper. Borrower will not, without
Lender's prior written consent, compromise or settle any Account or Chattel
Paper for less than the full amount thereof, grant any extension of time of
payment of any Account or Chattel Paper, release (in whole or in part) any
Account Debtor or other person liable for the payment of any Account or Chattel
Paper or grant any credits, discounts, allowances, deductions, return
authorizations or the like with respect to any Account or Chattel Paper; except
that prior to the occurrence of an Event of Default, Borrower may take any of
such actions in the ordinary course of its business, PROVIDED that Borrower
promptly reports the same to Lender.
4.7 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and
on one Business Day's notice, prior to the occurrence of a Default or an Event
of Default, and at any time and with or without notice after the occurrence of a
Default or an Event of Default, Lender or its agents shall have the right to
inspect the Collateral, and the right to examine and copy Borrower's books and
records. Lender shall take reasonable steps to keep confidential all information
obtained in any such inspection or examination, but Lender shall have the right
to disclose any such information to its auditors, regulatory agencies, attorneys
and participants, and pursuant to any subpoena or other legal process. Borrower
agrees to give Lender access to any or all of Borrower's premises to enable
Lender to conduct such inspections and examinations. Such inspections and
examinations shall be at Borrower's expense and the charge therefor shall be
$750 per person per day (or such higher amount as shall represent Lender's then
current standard charge), plus reasonable out-of-pocket expenses. Lender may, at
Borrower's expense, use Borrower's personnel, computer and other equipment,
programs, printed output and computer readable media, supplies and premises for
the collection, sale or other disposition of Collateral to the extent Lender, in
its sole discretion, deems appropriate. Borrower hereby irrevocably authorizes
all accountants and third parties to disclose and deliver to Lender, at
Borrower's expense, all financial information, books and records, work papers,
management reports and other information in their possession regarding Borrower.
Borrower will not enter into any agreement with any accounting firm, service
bureau or third party to store Borrower's books or records at any location other
than Borrower's Address without first obtaining Lender's written consent (which
consent may be conditioned upon such accounting firm, service bureau or other
third party agreeing to give Lender the same rights with respect to access to
books and records and related rights as Lender has under this Agreement).
5. REPRESENTATIONS, WARRANTIES AND COVENANTS.
To induce Lender to enter into this Agreement, Borrower represents,
warrants and covenants as follows (it being understood that (i) each such
representation and warranty will be deemed remade as of the date on which each
Loan is made and each Credit Accommodation is provided and shall not be affected
by any knowledge of, or any investigation by, Lender, and
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(ii) the accuracy of each such representation, warranty and covenant will be a
condition to each Loan and Credit Accommodation):
5.1 EXISTENCE AND AUTHORITY. Borrower is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation. Borrower is qualified and licensed to do business in
all jurisdictions in which any failure to do so would have a material adverse
effect on Borrower. The execution, delivery and performance by Borrower of this
Agreement and all of the other Loan Documents have been duly and validly
authorized, do not violate Borrower's articles or certificate of incorporation,
by-laws or other organizational documents, or any law or any agreement or
instrument or any court order which is binding upon Borrower or its property, do
not constitute grounds for acceleration of any indebtedness or obligation under
any agreement or instrument which is binding upon Borrower or its property, and
do not require the consent of any Person. This Agreement and such other Loan
Documents have been duly executed and delivered by, and are enforceable against,
Borrower, and all other Obligors who have signed them, in accordance with their
respective terms. Sections 9(f) and 9(g) of Schedule A set forth the ownership
of Borrower and the names and ownership of Borrower's Subsidiaries as of the
date of this Agreement.
5.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct and complete legal name as of the date
hereof. Listed in Sections 9(a), 9(b) and 9(c) of Schedule A are all prior names
of Borrower and all of Borrower's present and prior trade names. Borrower shall
give Lender at least 30 days' prior written notice before changing its name or
doing business under any other name. Borrower has complied with all laws
relating to the conduct of business under a fictitious business name. Borrower
represents and warrants that (i) each trade name does not refer to another
corporation or other legal entity; (ii) all Accounts invoiced under any such
trade names are owned exclusively by Borrower and are subject to the security
interest of Lender and the other terms of this Agreement and (iii) all schedules
of Accounts, including any sales made or services rendered using any trade name
shall show Borrower's name as assignor.
5.3 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower has good and
marketable title to the Collateral. The Collateral now is and will remain free
and clear of any and all liens, charges, security interests, encumbrances and
adverse claims, except for Permitted Liens. Lender now has, and will continue to
have, a first-priority perfected and enforceable security interest in all of the
Collateral, subject only to the Permitted Liens, and Borrower will at all times
defend Lender and the Collateral against all claims of others. None of the
Collateral which is Equipment is or will be affixed to any real property in such
a manner, or with such intent, as to become a fixture. Except for leases or
subleases as to which Borrower has delivered to Lender a landlord's waiver in
form and substance satisfactory to Lender, Borrower is not a lessee or sublessee
under any real property lease or sublease pursuant to which the lessor or
sublessor may obtain any rights in any of the Collateral, and no such lease or
sublease now prohibits, restrains, impairs or conditions, or will prohibit,
restrain, impair or condition, Borrower's right to remove any Collateral from
the premises. Whenever any Collateral is located upon premises in which any
third party has an interest (whether as owner, mortgagee, beneficiary under a
deed of trust, lien or otherwise), Borrower shall, whenever requested by Lender,
cause each such third party to execute and deliver
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to Lender, in form acceptable to Lender, such waivers and subordinations as
Lender shall specify, so as to ensure that Lender's rights in the Collateral
are, and will continue to be, superior to the rights of any such third party.
Borrower will keep in full force and effect, and will comply with all the terms
of, any lease of real property where any of the Collateral now or in the future
may be located.
5.4 ACCOUNTS AND CHATTEL PAPER. As of each date reported by Borrower,
all Accounts which Borrower has reported to Lender as being Eligible Accounts
comply in all respects with the criteria for eligibility established by Lender
and in effect at such time. All Accounts and Chattel Paper are genuine and in
all respects what they purport to be, arise out of a completed, bona fide and
unconditional and non-contingent sale and delivery of goods or rendition of
services by Borrower in the ordinary course of its business and in accordance
with the terms and conditions of all purchase orders, contracts or other
documents relating thereto, each Account Debtor thereunder had the capacity to
contract at the time any contract or other document giving rise to such Accounts
and Chattel Paper were executed, and the transactions giving rise to such
Accounts and Chattel Paper comply with all applicable laws and governmental
rules and regulations without further consent by Borrower.
5.5 THIS SECTION INTENTIONALLY LEFT BLANK.
5.6 PLACE OF BUSINESS; LOCATION OF COLLATERAL. Borrower's Address is
Borrower's chief executive office and the location of its books and records. In
addition, except as provided in the immediately following sentence, Borrower has
places of business and Collateral located only at the locations set forth on
Schedule C hereto. Borrower will give Lender at least 30 days' prior written
notice before opening any additional place of business, changing its chief
executive office or the location of its books and records, or moving any of the
Collateral to a location other than Borrower's Address or one of the locations
set forth on Schedule C hereto and will execute and deliver all financing
statements and other agreements, instruments and documents which Lender shall
require as a result thereof.
5.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial
statements delivered to Lender by or on behalf of Borrower have been prepared in
conformity with GAAP and completely and fairly reflect the financial condition
of Borrower, at the times and for the periods therein stated. Between the last
date covered by any such financial statement provided to Lender and the date
hereof (or, with respect to the remaking of this representation in connection
with the making of any Loan or the providing of any Credit Accommodation, the
date such Loan is made or such Credit Accommodation is provided), there has been
no material adverse change in the financial condition or business of Borrower.
Borrower is solvent and able to pay its debts as they come due, and has
sufficient capital to carry on its business as now conducted and as proposed to
be conducted. All schedules, reports and other information and documentation
delivered by Borrower to Lender with respect to the Collateral are, or will be,
when delivered, true, correct and complete as of the date delivered or the date
specified therein.
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5.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has
timely filed all tax returns and reports required by applicable law, has timely
paid all applicable taxes, assessments, deposits and contributions owing by
Borrower and will timely pay all such items in the future as they became due and
payable. Borrower may, however, defer payment of any contested taxes; PROVIDED,
that Borrower (i) in good faith contests Borrower's obligation to pay such taxes
by appropriate proceedings promptly and diligently instituted and conducted;
(ii) notifies Lender in writing of the commencement of, and any material
development in, the proceedings; (iii) posts bonds or takes any other steps
required to keep the contested taxes from becoming a Lien upon any of the
Collateral and (iv) maintains adequate reserves therefor in conformity with
GAAP. Borrower is unaware of any claims or adjustments proposed for any of
Borrower's prior tax years which could result in additional taxes becoming due
and payable by Borrower. Borrower has paid, and shall continue to pay, all
amounts necessary to fund all present and future pension, profit sharing and
deferred compensation plans in accordance with their terms, and Borrower has not
withdrawn from participation in, permitted partial or complete termination of,
or permitted the occurrence of any other event with respect to, any such plan
which could result in any liability of Borrower, including any liability to the
Pension Benefit Guaranty Corporation or any other governmental agency.
5.9 COMPLIANCE WITH LAWS. Borrower has complied in all material
respects with all provisions of all applicable laws and regulations, including
those relating to Borrower's ownership of real or personal property, the conduct
and licensing of Borrower's business, the payment and withholding of taxes,
ERISA and other employee matters, safety and environmental matters.
5.10 LITIGATION. Schedule C discloses all claims, proceedings,
litigation or investigations pending or (to the best of Borrower's knowledge)
threatened against Borrower. There is no claim, suit, litigation, proceeding or
investigation pending or (to the best of Borrower's knowledge) threatened by or
against or affecting Borrower in any court or before any governmental agency (or
any basis therefor known to Borrower) which may result, either separately or in
the aggregate, in any material adverse change in the financial condition or
business of Borrower, or in any material impairment in the ability of Borrower
to carry on its business in substantially the same manner as it is now being
conducted. Borrower will promptly inform Lender in writing of any claim,
proceeding, litigation or investigation in the future threatened or instituted
by or against Borrower.
5.11 USE OF PROCEEDS. All proceeds of all Loans will be used solely for
lawful business purposes.
5.12 INSURANCE. Borrower will at all times carry property, liability
and other insurance, with insurers acceptable to Lender, in such form and
amounts, and with such deductibles and other provisions, as Lender shall
require, and Borrower will provide evidence of such insurance to Lender, so that
Lender is satisfied that such insurance is, at all times, in full force and
effect. Each property insurance policy shall name Lender as loss payee and shall
contain a lender's loss payable endorsement in form acceptable to Lender, each
liability insurance policy shall name Lender as an additional insured, and each
business interruption insurance
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policy shall be collaterally assigned to Lender, all in form and substance
satisfactory to Lender. All policies of insurance shall provide that they may
not be cancelled or changed without at least thirty days' prior written notice
to Lender, shall contain breach of warranty coverage, and shall otherwise be in
form and substance satisfactory to Lender. Upon receipt of the proceeds of any
such insurance, Lender shall apply such proceeds in reduction of the Obligations
as Lender shall determine in its sole discretion. Borrower will promptly deliver
to Lender copies of all reports made to insurance companies.
5.13 FINANCIAL AND COLLATERAL REPORTS. Borrower has kept and will keep
adequate records and books of account with respect to its business activities
and the Collateral in which proper entries are made in accordance with GAAP
reflecting all its financial transactions, and will cause to be prepared and
furnished to Lender the following (all to be prepared in accordance with GAAP,
unless Borrower's certified public accountants concur in any change therein and
such change is disclosed to Lender):
(a) COLLATERAL REPORTS. On or before the fifteenth day of each
month, an aging of Borrower's Accounts, Chattel Paper and notes receivable, in
such form, and together with such additional certificates, schedules and other
information with respect to the Collateral or the business of Borrower or any
Obligor, as Lender shall request; PROVIDED, that Borrower's failure to execute
and deliver the same shall not affect or limit Lender's security interests and
other rights in any of the Accounts, nor shall Lender's failure to advance or
lend against a specific Account affect or limit Lender's security interest and
other rights therein. Together with each such schedule, at Lender's request,
Borrower shall furnish Lender with copies (or originals) of all contracts,
orders, invoices, and other similar documents, and all original shipping
instructions, delivery receipts, bills of lading, and other evidence of
delivery, for any goods the sale or disposition of which gave rise to such
Accounts, and Borrower warrants the genuineness of all of the foregoing. In
addition, Borrower shall deliver to Lender the originals of all Instruments,
Chattel Paper, security agreements, guaranties and other documents and property
evidencing or securing any Accounts, immediately upon receipt thereof and in the
same form as received, with all necessary endorsements. Lender may destroy or
otherwise dispose of all documents, schedules and other papers delivered to
Lender pursuant to this Agreement (other than originals of Instruments, Chattel
Paper, security agreements, guaranties and other documents and property
evidencing or securing any Accounts) six months after Lender receives them,
unless Borrower requests their return in writing in advance and arranges for
their return to Borrower at Borrower's expense.
(b) ANNUAL STATEMENTS. Not later than 90 days after the close
of each fiscal year of Borrower: (i) unqualified (except for a qualification for
a change in accounting principles with which the accountant concurs) audited
financial statements of Borrower and its Subsidiaries as of the end of such
year, on a consolidated basis, certified by a firm of independent certified
public accountants of recognized standing selected by Borrower but acceptable to
Lender, together with a copy of any management letter issued in connection
therewith and a letter from such accountants acknowledging that Lender is
relying on such financial statements; and (ii) financial statements prepared by
Borrower as of the end of such year, on a consolidating basis, certified by the
principal financial officer of Borrower;
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(c) INTERIM STATEMENTS. As indicated below, at the end of each
month (including the last month of Borrower's fiscal year), unaudited interim
financial statements of Borrower and its Subsidiaries as of the end of such
month and of the portion of Borrower's fiscal year then elapsed, on a
consolidated and consolidating basis. Such statements need not contain notes,
but shall be certified by the principal financial officer of Borrower, be
prepared in accordance with GAAP, fairly present the consolidated financial
position and results of operations of Borrower and its Subsidiaries for such
month and period and be subject only to changes from audit and year-end
adjustments;
(i) For each January; February; April; May; July; August;
October; November, not later than thirty days after the end of such
month;
(ii) For each March, June and September, not later than
forty-five days after the end of such month; and
(iii) For each December, preliminary statements not later than
sixty (60) days after the end of such month, and final statements not
later than ninety (90) days after the end of such month.
(d) PROJECTIONS, ETC. Such business projections, Availability
projections, business plans, budgets and cash flow statements for Borrower and
its Subsidiaries as Lender shall request from time to time;
(e) SHAREHOLDER REPORTS, ETC. Promptly after the sending or
filing thereof, as the case may be, copies of any proxy statements, financial
statements or reports which Borrower has made available to its shareholders and
copies of any regular, periodic and special reports or registration statements
which Borrower files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or any national
securities exchange;
(f) ERISA REPORTS. Upon request by Lender, copies of any
annual report to be filed pursuant to the requirements of ERISA in connection
with each plan subject thereto; and
(g) OTHER INFORMATION. Such other data and information
(financial and otherwise) as Lender, from time to time, may reasonably request,
bearing upon or related to the Collateral or Borrower's and each of its
Subsidiary's financial condition or results of operations.
5.14 LITIGATION COOPERATION. Should any third-party suit or proceeding
be instituted by or against Lender with respect to any Collateral or in any
manner relating to Borrower, Borrower shall, without expense to Lender, make
available Borrower and its officers, employees and agents, and Borrower's books
and records, without charge, to the extent that Lender may deem them reasonably
necessary in order to prosecute or defend any such suit or proceeding.
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5.15 MAINTENANCE OF COLLATERAL, ETC. Borrower will maintain all of its
Equipment in good working condition, ordinary wear and tear excepted, and
Borrower will not use the Collateral for any unlawful purpose. Borrower will
immediately advise Lender in writing of any material loss or damage to the
Collateral and of any investigation, action, suit, proceeding or claim relating
to the Collateral or which may result in an adverse impact upon Borrower's
business, assets or financial condition.
5.16 NOTIFICATION OF CHANGES. Borrower will promptly notify Lender in
writing of any change in its officers or directors, the opening of any new bank
account or other deposit account, or any material adverse change in the business
or financial affairs of Borrower or the existence of any circumstance which
would make any representation or warranty of Borrower untrue in any material
respect or constitute a material breach of any covenant of Borrower.
5.17 FURTHER ASSURANCES. Borrower agrees, at its expense, to take all
actions, and execute or cause to be executed and delivered to Lender all
promissory notes, security agreements, agreements with landlords, mortgagees and
processors and other bailees, subordination and intercreditor agreements and
other agreements, instruments and documents as Lender may request from time to
time, to perfect and maintain Lender's security interests in the Collateral and
to fully effectuate the transactions contemplated by this Agreement.
5.18 NEGATIVE COVENANTS. Except as set forth in Section 13 of Schedule
A, Borrower will not, without Lender's prior written consent, (i) merge or
consolidate with another Person, form any new Subsidiary or acquire any interest
in any Person; (ii) acquire any assets except in the ordinary course of business
and as otherwise permitted by this Agreement and the other Loan Documents; (iii)
enter into any transaction outside the ordinary course of business; (iv) sell or
transfer any Collateral or other assets, except equipment which is obsolete and
has a value which is not in excess of $10,000, in each case; (v) make any loans
to, or investments in, any Affiliate (other than a Borrower), or other Person in
the form of money or other assets; (vi) incur any debt outside the ordinary
course of business, other than debt secured by purchase money security interests
in equipment so long as (A) such security interests do not apply to any property
of Borrower other than the equipment so acquired and (B) the indebtedness
secured thereby does not exceed the cost of the equipment so acquired; (vii)
guaranty or otherwise become liable with respect to the obligations of another
party or entity; (viii) pay or declare any dividends or other distributions on
Borrower's stock (other than dividends or distributions to any other Borrower)
(except for dividends payable solely in capital stock of Borrower); (ix) redeem,
retire, purchase or otherwise acquire, directly or indirectly, any of Borrower's
capital stock or other equity interests; (x) make any change in any Borrower's
capital structure, (other than pursuant to a placement of private equity of
First Wave or pursuant to an initial public offering of the capital stock of
First Wave, and, if such placement or offering includes any provisions for
mandatory dividends or similar terms, the terms of which such placement or
offering are reasonably acceptable to Lender); (xi) dissolve or elect to
dissolve; (xii) pay any principal or interest on any indebtedness owing to an
Affiliate other than Borrower, (xiii) enter into any transaction with an
Affiliate other than on arms-length terms; or (xiv) agree to do any of the
foregoing.
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5.19 FINANCIAL COVENANTS.
(a) NET LOSSES. Borrower will not permit its cumulative net
loss (after the pro rata allocation of debt service to Newpark Shipbuilding -
Brady Island, Inc.) to exceed the amount set forth in Section 8(a) of Schedule
A.
(b) Other Financial Covenants. Borrower will comply with any
additional financial covenants set forth in Section 8(b) of Schedule A.
5.20 YEAR 2000. Borrower and its affiliates are taking all necessary
and appropriate steps to ascertain the extent of, and to quantify and
successfully address business and financial risks facing the Borrower and its
affiliates as a result of what is commonly referred to as the `Year 2000
problem' ("Y2K") (i.e., the inability of certain computer applications to
recognize correctly and perform date-sensitive functions involving certain dates
prior to and after December 31, 1999), including risks resulting from the
failure of key vendors and suppliers of the Borrower and its affiliates to
successfully address the Year 2000 problem, and b) the Borrower's and its
affiliates' material computer applications and those of its key vendors and
suppliers, will, on a timely basis, adequately address the Year 2000 problem in
all material respects. Borrower represents, warrants and covenants that on or
before November 1, 1999 each system of Borrower, comprised of software,
hardware, databases, or embedded control systems (microprocessor controlled or
controlled by any robotic or other device) (collectively, a "SYSTEM") that
constitutes any material part of, or is used in connection with the use,
operation, or enjoyment of, any material tangible or intangible asset or real
property of the Borrower, will not be materially adversely affected by the
advent of the year 2000, the advent of the twenty-first century, or the
transition from the twentieth century through the year 2000 and into the
twenty-first century. On and after November 1, 1999 the Borrower will not incur
material expenses arising from or relating to the failure of any of its Systems
as a result of the advent of the year 2000, the advent of the twenty-first
century, or the transition from the twentieth century through the year 2000 and
into the twenty-first century. On and after November 1, 1999 each System of the
Borrower will be able to accurately process date data, including but not limited
to, calculating, comparing, and sequencing from, into, and between the twentieth
century (through the year 1999), the year 2000, and the twenty-first century,
including leap year calculations.
6. RELEASE AND INDEMNITY.
6.1 RELEASE. Borrower hereby releases Lender and its Affiliates and
their respective directors, officers, employees, attorneys and agents and any
other Person affiliated with or representing Lender (the "RELEASED PARTIES")
from any and all liability arising from acts or omissions under or pursuant to
this Agreement, whether based on errors of judgment or mistake of law or fact,
except for those arising from willful misconduct or gross negligence. However,
in no circumstance will any of the Released Parties be liable for lost profits
or other special or consequential damages. Such release is made on the date
hereof and remade upon each request for a Loan or Credit Accommodation by
Borrower. Without limiting the foregoing:
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(a) Lender shall not be liable for (i) any shortage or
discrepancy in, damage to, or loss or destruction of, any goods, the sale or
other disposition of which gave rise to an Account; (ii) any error, act,
omission, or delay of any kind occurring in the settlement, failure to settle,
collection or failure to collect any Account; (iii) settling any Account in good
faith for less than the full amount thereof; or (iv) any of Borrower's
obligations under any contract or agreement giving rise to an Account; and
(b) In connection with Credit Accommodations or any underlying
transaction, Lender shall not be responsible for the conformity of any goods to
the documents presented, the validity or genuineness of any documents, delay,
default or fraud by Borrower, shippers and/or any other Person. Borrower agrees
that any action taken by Lender, if taken in good faith, or any action taken by
an issuer of any Credit Accommodation, under or in connection with any Credit
Accommodation, shall be binding on Borrower and shall not create any resulting
liability to Lender. In furtherance thereof, Lender shall have the full right
and authority to clear and resolve any questions of non-compliance of documents,
to give any instructions as to acceptance or rejection of any documents or
goods, to execute for Borrower's account any and all applications for steamship
or airway guaranties, indemnities or delivery orders, to grant any extensions of
the maturity of, time of payment for, or time of presentation of, any drafts,
acceptances or documents, and to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the Credit Accommodations or applications and other documentation pertaining
thereto.
6.2 INDEMNITY. Borrower hereby agrees to indemnify the Released Parties
and hold them harmless from and against any and all claims, debts, liabilities,
demands, obligations, actions, causes of action, penalties, costs and expenses
(including attorneys' fees), of every nature, character and description, which
the Released Parties may sustain or incur based upon or arising out of any of
the transactions contemplated by this Agreement or the other Loan Documents or
any of the Obligations, including any transactions or occurrences relating to
the issuance of any Credit Accommodation, the Collateral relating thereto, any
drafts thereunder and any errors or omissions relating thereto (including any
loss or claim due to any action or inaction taken by the issuer of any Credit
Accommodation) (and for this purpose any charges to Lender by any issuer of
Credit Accommodations shall be conclusive as to their appropriateness and may be
charged to the Loan Account), or any other matter, cause or thing whatsoever
occurred, done, omitted or suffered to be done by Lender relating to Borrower or
the Obligations (except any such amounts sustained or incurred as the result of
the willful misconduct of the Released Parties). Notwithstanding any provision
in this Agreement to the contrary the indemnity agreement set forth in this
section shall survive any termination of this Agreement.
7. TERM.
7.1 MATURITY DATE. (a) Lender's obligation to make Loans under this
Agreement may be terminated prior to the Maturity Date set forth in Section 7 of
Schedule A (the "MATURITY DATE") as follows: (i) by Borrower, effective thirty
business days after written notice of termination is given to Lender or (ii) by
Lender at any time after the occurrence of an Event of Default, without notice,
effective immediately; PROVIDED, that if any Affiliate of Borrower is also
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a party to a financing arrangement with Lender, no such early termination shall
be effective unless such Affiliate simultaneously terminates its financing
arrangement with Lender. If so terminated under this section, Borrower shall pay
to Lender an early termination fee (the "EARLY TERMINATION Fee") in the amount
set forth in Section 6(e) of Schedule A. Such fee shall be due and payable on
the effective date of termination and thereafter shall bear interest at a rate
equal to the highest rate applicable to any of the Obligations, PROVIDED, that
if at any time which is more than eighteen (18) months after the date hereof,
this Agreement is terminated pursuant to a financing agreement with Merrill
Lynch Business Financial Services, Inc. and/or Bank of America, N.A. (or any
affiliate thereof), no Early Termination Fee shall be payable, other than any
amounts due pursuant to Section 7.2(b) hereof.
(b) If Borrower terminates and repays the Obligations without
having provided Lender with at least thirty days' prior written notice thereof,
an additional amount equal to thirty days of interest at the applicable Interest
Rate(s), based on the average outstanding amount of the Obligations for the six
month period immediately preceding the date of termination shall be due and
payable on the effective date of termination and thereafter shall bear interest
at a rate equal to the highest rate applicable to any of the Obligations.
7.2 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay in full all Obligations,
whether or not all or any part of such Obligations are otherwise then due and
payable. Without limiting the generality of the foregoing, if, on the Maturity
Date or on any earlier effective date of termination, there are any outstanding
Credit Accommodations, then on such date Borrower shall provide to Lender cash
collateral in an amount equal to 110% of the Credit Accommodation Balance to
secure all of the Revolving Obligations (including estimated attorneys' fees and
other expenses) relating to said Credit Accommodations or such greater
percentage or amount as Lender reasonably deems appropriate, pursuant to a cash
pledge agreement in form and substance satisfactory to Lender.
7.3 EFFECT OF TERMINATION. No termination shall affect or impair any
right or remedy of Lender or relieve Borrower of any of the Obligations until
all of the monetary Obligations have been indefeasibly paid in full. Upon
indefeasible payment and performance in full of all of the monetary Obligations
(and the provision of cash collateral with respect to any Credit Accommodation
Balance as required by Section 7.2) and termination of this Agreement, Lender
shall promptly deliver to Borrower termination statements, requests for
reconveyances and such other documents as may be reasonably required to
terminate Lender's security interests in the Collateral.
8. EVENTS OF DEFAULT AND REMEDIES.
8.1 EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an "EVENT OF DEFAULT" under this Agreement, and Borrower shall
give Lender immediate written notice thereof: (i) if any warranty,
representation, statement, report or certificate made or delivered to Lender by
Borrower or any of Borrower's officers, employees or agents is untrue or
misleading; (ii) if Borrower fails to pay when due any principal or interest on
any Loan or any other monetary Obligation; (iii) if Borrower breaches any
covenant or obligation contained in this
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Agreement or any other Loan Document or fails to perform any other non-monetary
Obligation; (iv) if any levy, assessment, attachment, seizure, lien or
encumbrance (other than a Permitted Lien) is made or permitted to exist on all
or any part of the Collateral; (v) any (A) money judgment or judgments in excess
of $25,000 (individually or in the aggregate) is/are filed against any Borrower
or any of such Borrower's Property, and such judgment(s) shall remain unpaid,
unsatisfied by insurance, and unstayed for more than ten (10) days, or (B) a
writ of attachment or similar process is filed against any Borrower or any of
such Borrower's property, and such writ of attachment or similar process is not
bonded or secured in an amount and manner reasonably satisfactory to Lender;
(vi) the occurrence of any default under any financing agreement or security
agreement executed and delivered by (A) Borrower with, or in favor of, any
Person other than Lender or (B) Borrower or any Affiliate of Borrower with, or
in favor of, Lender or any Affiliate of Lender; (vii) the dissolution, death,
termination of existence in good standing, insolvency or business failure or
suspension or cessation of business as usual of Borrower or any Obligor (or of
any general partner of Borrower or any Obligor if it is a partnership) or the
appointment of a receiver, trustee or custodian for all or any part of the
property of, or an assignment for the benefit of creditors by Borrower or any
Obligor, or the commencement of any proceeding by Borrower or any Obligor under
any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect, or if Borrower makes or sends a notice of a bulk transfer or
calls a meeting of its creditors; (viii) the commencement of any proceeding
against Borrower or any Obligor under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect; (ix) the actual or
attempted revocation or termination of, or limitation or denial of liability
upon, any guaranty of the Obligations, or any security document securing the
Obligations, by any Obligor; (x) if Borrower makes any payment on account of any
indebtedness or obligation which has been subordinated to the Obligations other
than as permitted in the applicable subordination agreement, or if any Person
who has subordinated such indebtedness or obligations attempts to limit or
terminate its subordination agreement; (xi) other than disclosed to Lender, if
there is any actual or threatened indictment of Borrower or any Obligor under
any criminal statute or commencement or threatened commencement of criminal or
civil proceedings against Borrower or any Obligor, pursuant to which the
potential penalties or remedies sought or available include forfeiture of any
property of Borrower or such Obligor; (xii) if there is a Change of Control (as
such term is defined in the Indenture) (xiii) if there is any change in the
chief executive officer, chief operating officer or chief financial officer of
Borrower; (xiv) if an Event of Default occurs under any Loan and Security
Agreement between Lender and an Affiliate of Borrower; (xv) an "Event of
Default" shall occur and be continuing pursuant to the terms of the Indenture or
(xvi) if Lender determines in good faith that the Collateral is insufficient to
fully secure the Obligations or that the prospect of payment of performance of
the Obligations is impaired. Notwithstanding any misrepresentations or breach of
any covenant or other obligations contained in Sections 5.1 (the first two
sentences), 5.8, 5.9, 5.13(c), (d), (f), and (g), and 5.14 of this Agreement,
such misrepresentations or breach shall not constitute an Event of Default until
ten (10) days after the earlier of (A) Borrower has knowledge of, or should have
had knowledge of, the existence of such misrepresentation or breach, or (B)
notice by Lender to Borrower of such misrepresentation or breach
19
<PAGE> 20
8.2 REMEDIES. Upon the occurrence of any Default, and at any time
thereafter, Lender, at its option, may cease making Loans or otherwise extending
credit to Borrower under this Agreement or any other Loan Document. Upon the
occurrence of any Event of Default, and at any time thereafter, Lender, at its
option, and without notice or demand of any kind (all of which are hereby
expressly waived by Borrower), may do any one or more of the following: (i)
cease making Loans or otherwise extending credit to Borrower under this
Agreement or any other Loan Document; (ii) accelerate and declare all or any
part of the Obligations to be immediately due, payable and performable,
notwithstanding any deferred or installment payments allowed by any instrument
evidencing or relating to any of the Obligations; (iii) take possession of any
or all of the Collateral wherever it may be found, and for that purpose Borrower
hereby authorizes Lender, without judicial process, to enter onto any of
Borrower's premises without interference to search for, take possession of,
keep, store, or remove any of the Collateral, and remain (or cause a custodian
to remain) on the premises in exclusive control thereof, without charge for so
long as Lender deems it reasonably necessary in order to complete the
enforcement of its rights under this Agreement or any other agreement; PROVIDED,
that if Lender seeks to take possession of any of the Collateral by court
process, Borrower hereby irrevocably waives (A) any bond and any surety or
security relating thereto required by law as an incident to such possession, (B)
any demand for possession prior to the commencement of any suit or action to
recover possession thereof and (C) any requirement that Lender retain possession
of, and not dispose of, any such Collateral until after trial or final judgment;
(iv) require Borrower to assemble any or all of the Collateral and make it
available to Lender at one or more places designated by Lender which are
reasonably convenient to Lender and Borrower, and to remove the Collateral to
such locations as Lender may deem advisable; (v) complete the processing,
manufacturing or repair of any Collateral prior to a disposition thereof and,
for such purpose and for the purpose of removal, Lender shall have the right to
use Borrower's premises, vehicles and other Equipment and all other property
without charge; (vi) sell, lease or otherwise dispose of any of the Collateral,
in its condition at the time Lender obtains possession of it or after further
manufacturing, processing or repair, at one or more public or private sales, in
lots or in bulk, for cash, exchange or other property, or on credit (a "SALE"),
and to adjourn any such Sale from time to time without notice other than oral
announcement at the time scheduled for Sale (and, in connection therewith, (A)
Lender shall have the right to conduct such Sale on Borrower's premises without
charge, for such times as Lender deems reasonable, on Lender's premises, or
elsewhere, and the Collateral need not be located at the place of Sale; (B)
Lender may directly or through any of its Affiliates purchase or lease any of
the Collateral at any such public disposition, and if permissible under
applicable law, at any private disposition and (C) any Sale of Collateral shall
not relieve Borrower of any liability Borrower may have if any Collateral is
defective as to title, physical condition or otherwise at the time of sale);
(vii) demand payment of and collect any Accounts, Chattel Paper, Instruments and
General Intangibles included in the Collateral and, in connection therewith,
Borrower irrevocably authorizes Lender to endorse or sign Borrower's name on all
collections, receipts, Instruments and other documents, to take possession of
and open mail addressed to Borrower and remove therefrom payments made with
respect to any item of Collateral or proceeds thereof and, in Lender's sole
discretion, to grant extensions of time to pay, compromise claims and settle
Accounts, General Intangibles and the like for less than face value; and (viii)
demand and receive possession of any of Borrower's federal and state income tax
returns and the books and records utilized in the preparation thereof
20
<PAGE> 21
or relating thereto. In addition to the foregoing remedies, upon the occurrence
of any Event of Default resulting from a breach of any of the financial
covenants set forth in Section 5.19, Lender may, at its option, upon not less
than ten days' prior notice to Borrower, reduce any or all of the Advance Rates
set forth in Section 1(b) of Schedule A to the extent Lender, in its sole
discretion, deems appropriate. In addition to the rights and remedies set forth
above, Lender shall have all the other rights and remedies accorded a secured
party after default under the UCC and under all other applicable laws, and under
any other Loan Document, and all of such rights and remedies are cumulative and
non-exclusive. Exercise or partial exercise by Lender of one or more of its
rights or remedies shall not be deemed an election or bar Lender from subsequent
exercise or partial exercise of any other rights or remedies. The failure or
delay of Lender to exercise any rights or remedies shall not operate as a waiver
thereof, but all rights and remedies shall continue in full force and effect
until all of the Obligations have been fully paid and performed. If notice of
any sale or other disposition of Collateral is required by law, notice at least
seven days prior to the sale designating the time and place of sale in the case
of a public sale or the time after which any private sale or other disposition
is to be made shall be deemed to be reasonable notice, and Borrower waives any
other notice. If any Collateral is sold or leased by Lender on credit terms or
for future delivery, the Obligations shall not be reduced as a result thereof
until payment is collected by Lender.
8.3 APPLICATION OF PROCEEDS. Subject to the provisions of Section 4.3
hereof and to any application required by law, all proceeds realized as the
result of any Sale shall be applied by Lender to the Obligations in such order
as Lender shall determine in its sole discretion. Any surplus shall be paid to
Borrower or other persons legally entitled thereto; but Borrower shall remain
liable to Lender for any deficiency. If Lender, in its sole discretion, directly
or indirectly enters into a deferred payment or other credit transaction with
any purchaser at any Sale, Lender shall have the option, exercisable at any
time, in its sole discretion, of either reducing the Obligations by the
principal amount of the purchase price or deferring the reduction of the
Obligations until the actual receipt by Lender of the cash therefor.
9. GENERAL PROVISIONS.
9.1 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally, by reputable private delivery
service, by regular first-class mail or certified mail return receipt requested,
addressed to Lender or Borrower at the address shown in the heading to this
Agreement, or by facsimile to the facsimile number shown in Schedule C hereto,
or at any other address (or to any other facsimile number) designated in writing
by one party to the other party in the manner prescribed in this section. All
notices shall be deemed to have been given when received or when delivery is
refused by the recipient.
9.2 SEVERABILITY. If any provision of this Agreement, or the
application thereof to any party or circumstance, is held to be void or
unenforceable by any court of competent jurisdiction, such defect shall not
affect the remainder of this Agreement, which shall continue in full force and
effect.
21
<PAGE> 22
9.3 INTEGRATION. This Agreement and the other Loan Documents represent
the final, entire and complete agreement between Borrower and Lender and
supersede all prior and contemporaneous negotiations, oral representations and
agreements, all of which are merged and integrated into this Agreement. THERE
ARE NO ORAL UNDERSTANDINGS, REPRESENTATIONS OR AGREEMENTS BETWEEN THE PARTIES
WHICH ARE NOT SET FORTH IN THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.
9.4 WAIVERS. The failure of Lender at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other Loan Documents shall not waive or diminish any right of Lender later to
demand and receive strict compliance therewith. Any waiver of any default shall
not waive or affect any other default, whether prior or subsequent, and whether
or not similar. None of the provisions of this Agreement or any other Loan
Document shall be deemed to have been waived by any act or knowledge of Lender
or its agents or employees, but only by a specific written waiver signed by an
authorized officer of Lender and delivered to Borrower. Borrower waives demand,
protest, notice of protest and notice of default or dishonor, notice of payment
and nonpayment, release, compromise, settlement, extension or renewal of any
commercial paper, Instrument, Account, General Intangible, Document, Chattel
Paper or guaranty at any time held by Lender on which Borrower is or may in any
way be liable, and notice of any action taken by Lender, unless expressly
required by this Agreement, and notice of acceptance hereof.
9.5 AMENDMENT. The terms and provisions of this Agreement may not be
amended or modified except in a writing executed by Borrower and a duly
authorized officer of Lender.
9.6 TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement and the other Loan
Documents.
9.7 ATTORNEYS FEES AND COSTS. Borrower shall reimburse Lender for all
reasonable attorneys' and paralegals' fees (including in-house attorneys and
paralegals employed by Lender) and all filing, recording, search, title
insurance, appraisal, audit, and other costs incurred by Lender, pursuant to, in
connection with, or relating to this Agreement, including all reasonable
attorneys' fees and costs Lender incurs to prepare and negotiate this Agreement
and the other Loan Documents; to obtain legal advice in connection with this
Agreement and the other Loan Documents or Borrower or any Obligor; to administer
this Agreement and the other Loan Documents (including the cost of periodic
financing statement, tax lien and other searches conducted by Lender); to
enforce, or seek to enforce, any of its rights; prosecute actions against, or
defend actions by, Account Debtors; to commence, intervene in, or defend any
action or proceeding; to initiate any complaint to be relieved of the automatic
stay in bankruptcy; to file or prosecute any probate claim, bankruptcy claim,
third-party claim, or other claim; to examine, audit, copy, and inspect any of
the Collateral or any of Borrower's books and records; to protect, obtain
possession of, lease, dispose of, or otherwise enforce Lender's security
interests in, the Collateral; and to otherwise represent Lender in any
litigation relating to Borrower. If either Lender or Borrower files any lawsuit
against the other predicated on a breach of this Agreement, the prevailing party
in such action shall be entitled to recover its reasonable costs and attorneys'
fees, including reasonable attorneys' fees and costs incurred in the enforcement
of, execution
22
<PAGE> 23
upon or defense of any order, decree, award or judgment. All attorneys' fees and
costs to which Lender may be entitled pursuant to this section shall immediately
become part of the Obligations, shall be due on demand, and shall bear interest
at a rate equal to the highest interest rate applicable to any of the
Obligations.
9.8 BENEFIT OF AGREEMENT; ASSIGNABILITY. The provisions of this
Agreement shall be binding upon and inure to the benefit of the respective
successors, assigns, heirs, beneficiaries and representatives of Borrower and
Lender; PROVIDED, that Borrower may not assign or transfer any of its rights
under this Agreement without the prior written consent of Lender, and any
prohibited assignment shall be void. No consent by Lender to any assignment
shall release Borrower from its liability for any of the Obligations. Lender
shall have the right to assign all or any of its rights and obligations under
the Loan Documents, and to sell participating interests therein, to one or more
other Persons, and Borrower agrees to execute all agreements, instruments and
documents requested by Lender in connection with each such assignment and
participation.
9.9 HEADINGS; CONSTRUCTION. Section and subsection headings are used in
this Agreement only for convenience. Borrower and Lender acknowledge that the
headings may not describe completely the subject matter of the applicable
sections or subsections, and the headings shall not be used in any manner to
construe, limit, define or interpret any term or provision of this Agreement.
This Agreement has been fully reviewed and negotiated between the parties and no
uncertainty or ambiguity in any term or provision of this Agreement shall be
construed strictly against Lender or Borrower under any rule of construction or
otherwise.
9.10 GOVERNING LAW; CONSENT TO FORUM, ETC. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED, AND SHALL BE DEEMED TO HAVE BEEN MADE, IN
NEW YORK, NEW YORK, AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF SUCH STATE. BORROWER HEREBY CONSENTS AND AGREES THAT THE STATE AND
FEDERAL COURTS IN NEW YORK, NEW YORK OR THE STATE IN WHICH ANY OF THE COLLATERAL
IS LOCATED SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN BORROWER AND LENDER PERTAINING TO THIS AGREEMENT, ANY
OTHER LOAN DOCUMENTS OR ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT
OR THE OTHER LOAN DOCUMENTS. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE
TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND
WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. BORROWER ALSO AGREES THAT
ANY CLAIM OR DISPUTE BROUGHT BY BORROWER AGAINST LENDER PURSUANT TO THIS
AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY MATTER ARISING OUT OF THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT EXCLUSIVELY IN THE STATE AND FEDERAL
COURTS OF NEW YORK. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS,
COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT
SERVICE OF SUCH SUMMONS,
23
<PAGE> 24
COMPLAINT AND OTHER PROCESS MAY BE MADE IN THE MANNER AND SHALL BE DEEMED
RECEIVED AS SET FORTH IN SECTION 9.1 FOR NOTICES, TO THE EXTENT PERMITTED BY
LAW. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF
LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO
PRECLUDE THE ENFORCEMENT BY LENDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH
FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE THE SAME IN
ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
9.11 WAIVER OF JURY TRIAL, ETC. BORROWER WAIVES (i) THE RIGHT TO TRIAL
BY JURY (WHICH LENDER ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS,
THE OBLIGATIONS OR THE COLLATERAL OR ANY CONDUCT, ACTS OR OMISSIONS OF LENDER OR
BORROWER OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR
AGENTS OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR BORROWER, WHETHER SOUNDING
IN CONTRACT, TORT OR OTHERWISE; (ii) THE RIGHT TO INTERPOSE ANY CLAIMS,
DEDUCTIONS, SETOFFS OR COUNTERCLAIMS OF ANY KIND IN ANY ACTION OR PROCEEDING
INSTITUTED BY LENDER WITH RESPECT TO THE LOAN DOCUMENTS OR ANY MATTER RELATING
THERETO, EXCEPT FOR COMPULSORY COUNTERCLAIMS; (iii) NOTICE PRIOR TO LENDER'S
TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH
MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF
LENDER'S REMEDIES and (iv) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND
EXEMPTION LAWS. BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL
INDUCEMENT TO LENDER'S ENTERING INTO THIS AGREEMENT AND THAT LENDER IS RELYING
UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH BORROWER. BORROWER
WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS
LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
9.12 WAIVER OF CONSUMER RIGHTS. BORROWER HEREBY WAIVES ITS RIGHTS UNDER
THE DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION ACT, SECTION 17.41 ET. SEQ.
OF THE TEXAS BUSINESS & COMMERCE CODE, A LAW THAT GIVE CONSUMERS SPECIAL RIGHTS
AND PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF THE BORROWER'S OWN
SELECTION, THE BORROWER VOLUNTARILY CONSENTS TO THIS WAIVER. BORROWER EXPRESSLY
WARRANTS AND REPRESENTS THAT THE BORROWER (A) IS NOT IN A SIGNIFICANTLY
DISPARATE BARGAINING POSITION RELATIVE TO THE LENDER, AND (B) HAS BEEN
REPRESENTED BY LEGAL COUNSEL IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT.
24
<PAGE> 25
BORROWER HAS READ AND UNDERSTANDS SECTION 9.12:
/s/ (INITIALS OF OFFICER OF BORROWER)
-------------------------
/s/ (INITIALS OF OFFICER OF BORROWER)
-------------------------
/s/ (INITIALS OF OFFICER OF BORROWER)
-------------------------
/s/ (INITIALS OF OFFICER OF BORROWER)
-------------------------
/s/ (INITIALS OF OFFICER OF BORROWER)
-------------------------
9.13 ORAL AGREEMENTS. THE WRITTEN LOAN AGREEMENTS REPRESENT THE FINAL
AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
9.14 NONAPPLICABILITY OF CHAPTER 346 OF THE TEXAS FINANCE CODE. To the
extent, if at all, that Texas law may apply to this Agreement, Borrower and
Lender hereby agree that, except for Section 346.004 thereof, the provisions of
Chapter 346 of the Texas Finance Code (regulating certain revolving credit loans
and revolving tri-party accounts) shall not apply to this Agreement or any of
the other Loan Documents.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
25
<PAGE> 26
IN WITNESS WHEREOF, Borrower and Lender have signed this Agreement as
of the date set forth in the heading.
LENDER:
BANC OF AMERICA COMMERCIAL FINANCE
CORPORATION, THROUGH ITS
COMMERCIAL FUNDING DIVISION
By: /s/ Robert Bellish
--------------------------------
Its Authorized Signatory
BORROWER:
FIRST WAVE MARINE, INC., a Delaware
corporation
By: /s/ David B. Ammons
--------------------------------
Its: Its Authorized Signatory
NEWPARK SHIPBUILDING - GALVESTON
ISLAND, INC., a Texas corporation
By: /s/ David B. Ammons
--------------------------------
Its Authorized Signatory
NEWPARK SHIPBUILDING - PELICAN
ISLAND, INC., a Texas corporation
By: /s/ David B. Ammons
--------------------------------
Its Authorized Signatory
NEWPARK SHIPBUILDING - GREENS
BAYOU, INC., a Texas corporation
By: /s/ David B. Ammons
--------------------------------
Its Authorized Signatory
NEWPARK SHIPBUILDING - PASADENA,
INC., a Texas corporation
By: /s/ David B. Ammons
--------------------------------
Its Authorized Signatory
<PAGE> 27
SCHEDULE A
DESCRIPTION OF CERTAIN TERMS
This Schedule is an integral part of the Loan and Security Agreement
dated as of October 14, 1999 (the "AGREEMENT"), among FIRST WAVE MARINE, INC.,
NEWPARK SHIPBUILDING - GALVESTON ISLAND, INC., NEWPARK SHIPBUILDING PELICAN
ISLAND, INC. NEWPARK SHIPBUILDING - GREENS BAYOU, INC., NEWPARK SHIPBUILDING -
PASADENA, INC., and BANC OF AMERICA COMMERCIAL FINANCE CORPORATION, THROUGH ITS
COMMERCIAL FUNDING DIVISION.
1. Loan Limits for Revolving Loans:
(a) Maximum Facility Amount: $20,000,000
(b) Accounts Advance Rates:
Advance Rate: 85%; PROVIDED, that if the
Dilution Percentage exceeds
5%, such advance rate will
be reduced by the number of
full or partial percentage
points of such excess.
(c) Credit Accommodation Limit: $1,000,000.
2. Loan Limits for Term Loan:
(a) Principal Amount of the Term The lesser of $4,000,000 or
Loan: 90% of the appraised
auction sale value of
Borrower's Eligible
Equipment.
(b) Repayment Schedule: The Term Loan shall be
repaid in equal consecutive
monthly installments
amortized over 72 months
payable on the first day of
each calendar month
commencing December 1,
1999, with the entire
unpaid balance due and
payable on the Maturity
Date.
3. Interest Rates:
(a) Revolving Loans: 0.50% per annum in excess
of the Prime Rate
(b) Term Loan: 1.00% per annum in excess
of the Prime Rate
A-1
<PAGE> 28
4. Minimum Loan Amount: $5,000,000
5. Maximum Days:
(a) Maximum days after original
invoice date for Eligible
Accounts: Ninety (90) days
(b) Maximum days after original
invoice due date for Eligible
Accounts: Sixty (60) days
6. Fees:
(a) Commitment Fee: $100,000, of which 50% was
paid at the time of the
Commitment Letter dated
September 8, 1999 and 50%
shall be payable on the
date hereof.
(b) Servicing Fee: $2,500 per month
(c) Unused Line Fee: 0.25% per annum
(d) Minimum Borrowing Fee:
(i) Applicable period: Each year
(ii) Date payable: Payable on the anniversary
of the date of the
Agreement and on the
Maturity Date.
(e) Early Termination Fee: (i) 2.50% of the Maximum
Facility Amount if
terminated during
the first year of
the Term;
(ii) 1.50% of the Maximum
Facility Amount if
terminated during
the second year of
the Term;
(iii) 0.75% of the Maximum
Facility Amount if
terminated during
the third year of
the term; and
(iv) and 0.25% of the
Maximum Facility
Amount if terminated
thereafter and prior
to the Maturity
Date.
(f) Fees for letters of
credit and other Credit
Accommodations (or
guaranties thereof by
Lender): One percent (1%) per annum.
7. Maturity Date: October 14, 2003
A-2
<PAGE> 29
8. Financial Covenants:
(a) Maximum Cumulative Net Loss: From and after October 1,
1999, Cumulative Net Losses
of the Borrower less
amounts contributed as
equity to the capital of
Borrower, shall not exceed
$3,000,000. As used herein
"Cumulative Net Losses"
shall mean net income (or
net loss, as applicable)of
Borrower, plus depreciation
and amortization, and less
debt service and any
non-financed capital
expenditures (as adjusted
for any allocation of such
amounts to Newpark
Shipbuilding - Brady
Island, Inc.).
(b) Additional Financial Covenants: Not applicable.
9. Borrower Information:
(a) Prior Names of Borrower: See Schedule C attached
hereto.
(b) Prior Trade Names of Borrower: See Schedule C attached
hereto.
(c) Existing Trade Names of Borrower: See Schedule C attached
hereto.
(d) Other Locations: See Schedule C attached
hereto.
(e) Litigation: See Schedule C attached
hereto.
(f) Ownership of Borrower: See Schedule C attached
hereto.
(g) Subsidiaries (and ownership See Schedule C attached
thereof): hereto.
(h) Facsimile Numbers:
Borrower: 713.847-4601
Lender: 212:597-1666
10. Description of Real Property: See Schedule D attached
hereto.
11. Lender's Bank: First National Bank of
Chicago (to be renamed Bank
One)
One First National Plaza
Chicago, Illinois
60670-0286
or as otherwise designated
by Lender in writing
12. Other Covenants: Not applicable.
A-3
<PAGE> 30
13. Exceptions to Negative Covenants: Not applicable.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
A-4
<PAGE> 31
IN WITNESS WHEREOF, Borrower and Lender have signed this Schedule A as
of the date set forth in the heading to the Agreement.
LENDER:
BANC OF AMERICA COMMERCIAL FINANCE
CORPORATION, THROUGH ITS COMMERCIAL
FUNDING DIVISION
By: /s/ Robert Bellish
-----------------------------------
Name:
Title:
BORROWER:
FIRST WAVE MARINE, INC., a Delaware
corporation
By: /s/ David B. Ammons
-----------------------------------
Its:Its Authorized Signatory
NEWPARK SHIPBUILDING - GALVESTON
ISLAND, INC., a Texas corporation
By: /s/ David B. Ammons
-----------------------------------
Its: Authorized Signatory
NEWPARK SHIPBUILDING - PELICAN ISLAND,
INC., a Texas corporation
By: /s/ David B. Ammons
-----------------------------------
Its Authorized Signatory
NEWPARK SHIPBUILDING - GREENS BAYOU,
INC., a Texas corporation
By: /s/ David B. Ammons
-----------------------------------
Its Authorized Signatory
<PAGE> 32
NEWPARK SHIPBUILDING - PASADENA, INC.,
a Texas corporation
By: /s/ David B. Ammons
-----------------------------------
Its Authorized Signatory
<PAGE> 33
SCHEDULE B
DEFINITIONS
This Schedule is an integral part of the Loan and Security Agreement
among BANC OF AMERICA COMMERCIAL FINANCE CORPORATION, THROUGH ITS COMMERCIAL
FUNDING DIVISION, FIRST WAVE MARINE, INC., NEWPARK SHIPBUILDING -GALVESTON
ISLAND, INC., NEWPARK SHIPBUILDING-PELICAN ISLAND, INC. NEWPARK SHIPBUILDING -
GREENS BAYOU, INC., AND NEWPARK SHIPBUILDING - PASADENA, INC., (the
"AGREEMENT").
As used in the Agreement, the following terms have the following
meanings:
"ACCOUNT" means any right to payment for Goods sold or leased
or for services rendered which is not evidenced by an Instrument or Chattel
Paper, whether or not it has been earned by performance.
"ACCOUNT DEBTOR" means the obligor on an Account or Chattel
Paper.
"ACCOUNT PROCEEDS" has the meaning set forth in Section 4.1.
"AFFILIATE" means, with respect to any Person, a relative,
partner, shareholder, member, manager, director, officer, or employee of such
Person, any parent or subsidiary of such Person, or any Person controlling,
controlled by or under common control with such Person or any other Person
affiliated, directly or indirectly, by virtue of family membership, ownership,
management or otherwise.
"AGREEMENT" and "THIS AGREEMENT" mean the Loan and Security
Agreement of which this Schedule B is a part and the Schedules thereto.
"AVAILABILITY" has the meaning set forth in Section 1.1(a)
"BANKRUPTCY CODE" means the United States Bankruptcy Code (11
U.S.C. Section 101 et seq.).
"BLOCKED ACCOUNT" has the meaning set forth in Section 4.1.
"BORROWER" has the meaning set forth in the heading to the
Agreement.
"BORROWER'S ADDRESS" has the meaning set forth in the heading
to the Agreement.
"BUSINESS DAY" means a day other than a Saturday or Sunday or
any other day on which Lender or banks in New York are authorized to close.
B-1
<PAGE> 34
"CHATTEL PAPER" has the meaning set forth in the UCC.
"COLLATERAL" means all property and interests in property in
or upon which a security interest or other Lien is granted pursuant to this
Agreement or the other Loan Documents.
"CREDIT ACCOMMODATION" has the meaning set forth in Section
1.1(a).
"CREDIT ACCOMMODATION BALANCE" means the sum of (i) the
aggregate undrawn face amount of all outstanding Credit Accommodations and (ii)
all interest, fees and costs due or, in Lender's estimation, likely to become
due in connection therewith.
"DEFAULT" means any event which with notice or passage of
time, or both, would constitute an Event of Default.
"DEFAULT RATE" has the meaning set forth in Section 2.1.
"DEPOSIT ACCOUNT" has the meaning set forth in the UCC.
"DILUTION PERCENTAGE" means the gross amount of all returns,
allowances, discounts, credits, write-offs and similar items relating to
Borrower's Accounts computed as a percentage of Borrower's gross sales,
calculated on a ninety (90) day rolling average or the prior 12 consecutive
months average.
"DOCUMENT" has the meaning set forth in the UCC.
"EARLY TERMINATION FEE" has the meaning set forth in Section
7.1.
"ELIGIBLE ACCOUNT" means, at any time of determination, an
Account which satisfies the general criteria set forth below and which is
otherwise acceptable to Lender (PROVIDED, that Lender may, in its sole
discretion, change the general criteria for acceptability of Eligible Accounts
upon at least fifteen days' prior notice to Borrower). An Account shall be
deemed to meet the current general criteria if (i) neither the Account Debtor
nor any of its Affiliates is an Affiliate, creditor or supplier of Borrower;
(ii) it does not remain unpaid more than the earlier to occur of (A) the number
of days after the original INVOICE DATE set forth in Section 5(a) of Schedule A
or (B) the number of days after the original INVOICE DUE DATE set forth in
Section 5(b) of Schedule A; (iii) the Account Debtor or its Affiliates are not
past due on other Accounts owing to Borrower comprising more than 50% of all of
the Accounts owing to Borrower by such Account Debtor or its Affiliates; (iv)
all Accounts owing by such Account Debtor or its Affiliates do not represent
more than 20% of all otherwise Eligible Accounts (PROVIDED, that Accounts which
are deemed to be ineligible solely by reason of this clause (iv) shall be
considered Eligible Accounts to the extent of the amount thereof which does not
exceed 20% of all otherwise Eligible Accounts); (v) no covenant, representation
or warranty contained in this Agreement with respect to such Account (including
any of the representations set forth in
B-2
<PAGE> 35
Section 5.4) has been breached; (vi) the Account is not subject to any contra
relationship, counterclaim, dispute or set-off (PROVIDED, that Accounts which
are deemed to be ineligible solely by reason of this clause (vi) shall be
considered Eligible Accounts to the extent of the amount thereof which is not
affected by such contra relationships, counterclaims, disputes or set-offs);
(vii) the Account Debtor's chief executive office or principal place of business
is located in the United States or Provinces of Canada which have adopted the
Personal Property Security Act or a similar act, unless (A) the sale is fully
backed by a letter of credit, guaranty or acceptance acceptable to Lender in its
sole discretion, and if backed by a letter of credit, such letter of credit has
been issued or confirmed by a bank satisfactory to Lender, is sufficient to
cover such Account, and if required by Lender, the original of such letter of
credit has been delivered to Lender or Lender's agent and the issuer thereof
notified of the assignment of the proceeds of such letter of credit to Lender or
(B) such Account is subject to credit insurance payable to Lender issued by an
insurer and on terms and in an amount acceptable to Lender; (viii) it is
absolutely owing to Borrower and does not arise from a sale on a bill-and-hold,
guarantied sale, sale-or-return, sale-on-approval, consignment, retainage or any
other repurchase or return basis or consist of progress billings; (ix) Lender
shall have verified the Account in a manner satisfactory to Lender; (x) the
Account Debtor is not the United States of America or any state or political
subdivision (or any department, agency or instrumentality thereof), unless
Borrower has complied with the Assignment of Claims Act of 1940 (31 U.S.C.
Section 203 et seq.) or other applicable similar state or local law in a manner
satisfactory to Lender; (xi) it is at all times subject to Lender's duly
perfected, first priority security interest and to no other Lien that is not a
Permitted Lien, and the goods giving rise to such Account (A) were not, at the
time of sale, subject to any Lien except Permitted Liens and (B) have been
delivered to and accepted by the Account Debtor, or the services giving rise to
such Account have been performed by Borrower and accepted by the Account Debtor;
(xii) the Account is not evidenced by Chattel Paper or an Instrument of any kind
and has not been reduced to judgment; (xiii) the Account Debtor's total
indebtedness to Borrower does not exceed the amount of any credit limit
established by Borrower or Lender and the Account Debtor is otherwise deemed to
be creditworthy by Lender (PROVIDED, that Accounts which are deemed to be
ineligible solely by reason of this clause (xiii) shall be considered Eligible
Accounts to the extent the amount of such Accounts does not exceed the lower of
such credit limits); (xiv) there are no facts or circumstances existing, or
which could reasonably be anticipated to occur, which might result in any
adverse change in the Account Debtor's financial condition or impair or delay
the collectibility of all or any portion of such Account; (xv) Lender has been
furnished with all documents and other information pertaining to such Account
which Lender has requested, or which Borrower is obligated to deliver to Lender,
pursuant to this Agreement; (xvi) Borrower has not made an agreement with the
Account Debtor to extend the time of payment thereof beyond the time periods set
forth in clause (ii) above; (xvii) Borrower has not posted a surety or other
bond in respect of the contract under which such Account arose; and (xviii) such
Account is not subject to any right of offset.
"ELIGIBLE EQUIPMENT" means, at any time of determination,
Equipment owned by Borrower which Lender, in its sole discretion, deems to be
eligible for borrowing purposes.
B-3
<PAGE> 36
"EQUIPMENT" means those watercraft and structures commonly
referred to as "dry docks," which secure a ship or other vessel during the
process of building and/or maintenance and all attachments, accessories,
accessions, replacements, substitutions, additions or improvements to, or spare
parts for, any of the foregoing, including but not limited to the Equipment
described on Annex A hereto.
"ERISA" means the Employee Retirement Income Security Act of
1974 and all rules, regulations and orders promulgated thereunder.
"EVENT OF DEFAULT" has the meaning set forth in Section 8.1.
"GAAP" means generally accepted accounting principles as in
effect from time to time, consistently applied.
"GENERAL INTANGIBLES" has the meaning set forth in the UCC,
and includes all books and records pertaining to the Collateral and other
business and financial records in the possession of Borrower or any other
Person, inventions, designs, drawings, blueprints, patents, patent applications,
trademarks, trademark applications (other than "intent to use" applications
until a verified statement of use is filed with respect to such applications)
and the goodwill of the business symbolized thereby, names, trade names, trade
secrets, goodwill, copyrights, registrations, licenses, franchises, customer
lists, security and other deposits, causes of action and other rights in all
litigation presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and all judgments now or hereafter arising
therefrom, rights to purchase or sell real or personal property, rights as a
licensor or licensee of any kind, royalties, telephone numbers, internet
addresses, proprietary information, purchase orders, and all insurance policies
and claims (including life insurance, key man insurance, credit insurance,
liability insurance, property insurance and other insurance), tax refunds and
claims, letters of credit, banker's acceptances and guaranties, computer
programs, discs, tapes and tape files in the possession of Borrower or any other
Person, claims under guaranties, security interests or other security held by or
granted to Borrower, all rights to indemnification and all other intangible
property of every kind and nature.
"GOODS" means all things which are movable at the time the
security interest attaches or which are fixtures (other than money, Documents,
Instruments, Accounts, Chattel Paper, General Intangibles, or minerals or the
like (including oil and gas) before extraction), including standing timber which
is to be cut and removed under a conveyance or contract for sale, the unborn
young of animals, and growing crops.
"INDENTURE" means that certain indenture, dated February 2,
1998, as supplemented to October 14, 1999, among First Wave, as the Borrower,
the Subsidiary Guarantors named therein, Bank One, N.A., as the Trustee, and the
holders of the 11% Senior Notes due 2008.
"INSTRUMENT" has the meaning set forth in the UCC.
B-4
<PAGE> 37
"LENDER" has the meaning set forth in the heading to the
Agreement.
"LIEN" means any interest in property securing an obligation
owed to, or a claim by, a Person other than the owner of the property, whether
such interest is based on common law, statute or contract, including rights of
sellers under conditional sales contracts or title retention agreements and
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting property. For the purpose of this Agreement, Borrower shall be deemed
to be the owner of any property which it has acquired or holds subject to a
conditional sale agreement or other arrangement pursuant to which title to the
property has been retained by or vested in some other Person for security
purposes.
"LOAN ACCOUNT" has the meaning set forth in Section 2.4.
"LOAN DOCUMENTS" means the Agreement and all notes,
guaranties, security agreements, certificates, landlord's agreements, Lock Box
and Blocked Account agreements and all other agreements, documents and
instruments now or hereafter executed or delivered by Borrower or any Obligor in
connection with, or to evidence the transactions contemplated by, this
Agreement.
"LOAN LIMITS" means, collectively, the Availability limits and
all other limits on the amount of Loans and Credit Accommodations set forth in
this Agreement.
"LOANS" means, collectively, the Revolving Loans and any Term
Loan.
"LOCK BOX" has the meaning set forth in Section 4.1.
"MATURITY DATE" has the meaning set forth in Section 7.1.
"MAXIMUM LEGAL RATE" has the meaning set forth in Section 2.1.
"OBLIGATIONS" means all Revolving Obligations and all Term
Obligations.
"OBLIGOR" means any guarantor (including without limitation,
each of EAE Industries, Inc., EAE Services, Inc. and First Wave Management,
Inc.), endorser, acceptor, surety or other person liable on, or with respect to,
the Obligations or who is the owner of any property which is security for the
Obligations, other than Borrower.
"PERMITTED LIENS" means: (i) Liens for taxes not yet due and
payable; (ii) additional Liens which are fully subordinate to the security
interests of Lender and are consented to in writing by Lender; (iii) security
interests being terminated concurrently with the execution of this Agreement;
(iv) Liens of materialmen, mechanics, warehousemen or carriers arising in the
ordinary course of business and securing obligations which are not delinquent;
(v)
B-5
<PAGE> 38
Liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods; and (vi) security
deposits posted in connection with real property leases or subleases. Lender
will have the right to require, as a condition to its consent under clause (ii)
above, that the holder of the additional Lien sign an intercreditor agreement in
form and substance satisfactory to Lender, in its sole discretion, acknowledging
that the Lien is subordinate to the security interests of Lender, and agreeing
not to take any action to enforce its subordinate Lien so long as any
Obligations remain outstanding, and that Borrower agree that any uncured default
in any obligation secured by the subordinate Lien shall also constitute an Event
of Default under this Agreement.
"PERSON" means any individual, sole proprietorship,
partnership, joint venture, limited liability company, trust, unincorporated
organization, association, corporation, government or any agency or political
division thereof, or any other entity.
"PRIME RATE" means, at any given time, the prime rate as
quoted in The Wall Street Journal as the base rate on corporate loans posted as
of such time by at least 75% of the nation's 30 largest banks (which rate is not
necessarily the lowest rate offered by such banks).
"REAL PROPERTY" means the real property described in Section
10 of Schedule A.
"RELEASED PARTIES" has the meaning set forth in Section 6.1.
"RESERVES" has the meaning set forth in Section 1.2.
"REVOLVING LOANS" has the meaning set forth in Section 1.1(a).
"REVOLVING OBLIGATIONS" means all present and future Revolving
Loans, advances, debts, liabilities, obligations, guaranties, covenants, duties
and indebtedness at any time owing by Borrower to Lender, whether evidenced by
this Agreement or any other Loan Document, whether arising from an extension of
credit, opening of a Credit Accommodation, guaranty, indemnification or
otherwise (including all fees, costs and other amounts which may be owing to
issuers of Credit Accommodations and all taxes, duties, freight, insurance,
costs and other expenses, costs or amounts payable in connection with Credit
Accommodations or the underlying goods), whether direct or indirect (including
those acquired by assignment and any participation by Lender in Borrower's
indebtedness owing to others), whether absolute or contingent, whether due or to
become due, and whether arising before or after the commencement of a proceeding
under the Bankruptcy Code or any similar statute, including all interest,
charges, expenses, fees, attorney's fees, expert witness fees, audit fees,
letter of credit fees, loan fees, Early Termination Fees, Minimum Borrowing Fees
and any other sums chargeable to Borrower under this Agreement or under any
other Loan Document.
"SALE" has the meaning set forth in Section 8.2.
B-6
<PAGE> 39
"SUBSIDIARY" means any corporation or other entity of which a
Person owns, directly or indirectly, through one or more intermediaries, more
than 50% of the capital stock or other equity interest at the time of
determination.
"TERM" means the period commencing on the date of this
Agreement and ending on the Maturity Date.
"TERM LOAN" has the meaning set forth in Section 1.1(b).
"TERM OBLIGATIONS" means the Term Loan and all advances,
debts, liabilities, obligations, guaranties, covenants, duties and indebtedness
at any time owing by Borrower to Lender, arising in connection therewith,
whether evidenced by this Agreement or any other Loan Document, whether arising
from an extension of credit, whether absolute or contingent, whether due or to
become due, and whether arising before or after the commencement of a proceeding
under the Bankruptcy Code or any similar statute, including all interest,
charges, expenses, fees, attorney's fees, expert witness fees, audit fees,
letter of credit fees, loan fees, Early Termination Fees, Minimum Borrowing Fees
and any other sums chargeable to Borrower under this Agreement or under any
other Loan Document in connection with the Term Loan.
"UCC" means, at any given time, the Uniform Commercial Code as
adopted and in effect at such time in the State of Texas.
All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance with GAAP.
All other terms contained in this Agreement, unless otherwise indicated, shall
have the meanings provided by the UCC, to the extent such terms are defined
therein. The term "INCLUDING," whenever used in this Agreement, shall mean
"including but not limited to." The singular form of any term shall include the
plural form, and vice versa, when the context so requires. References to
Sections, subsections and Schedules are to Sections and subsections of, and
Schedules to, this Agreement. All references to agreements and statutes shall
include all amendments thereto and successor statutes in the case of statutes.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
B-7
<PAGE> 40
IN WITNESS WHEREOF, Borrower and Lender have signed this Schedule B as
of the date set forth in the heading to the Agreement.
LENDER:
BANC OF AMERICA COMMERCIAL FINANCE
CORPORATION, THROUGH ITS COMMERCIAL
FUNDING DIVISION
By: /s/ Robert Bellish
-------------------------------------
Name: Robert Bellish
-----------------------------------
Title: Vice President
----------------------------------
BORROWER:
FIRST WAVE MARINE, INC., a Delaware
corporation
By: /s/ David B. Ammons
-------------------------------------
Name: David B. Ammons
-----------------------------------
Title: Executive Vice President
----------------------------------
NEWPARK SHIPBUILDING - GALVESTON ISLAND,
INC., a Texas corporation
By: /s/ David B. Ammons
-------------------------------------
Name: David B. Ammons
-----------------------------------
Title: Secretary
----------------------------------
NEWPARK SHIPBUILDING - PELICAN ISLAND,
INC., a Texas corporation
By: /s/ David B. Ammons
-------------------------------------
Name: David B. Ammons
-----------------------------------
Title: Secretary
----------------------------------
<PAGE> 41
NEWPARK SHIPBUILDING - GREENS BAYOU,
INC., a Texas corporation
By: /s/ David B. Ammons
-------------------------------------
Name: David B. Ammons
-----------------------------------
Title: Secretary
----------------------------------
NEWPARK SHIPBUILDING - PASADENA, INC., a
Texas corporation
By: /s/ David B. Ammons
-------------------------------------
Name: David B. Ammons
-----------------------------------
Title: Secretary
----------------------------------
<PAGE> 1
EXHIBIT 10.2
AMENDMENT NO. 1
TO THE
FIRST WAVE MARINE, INC.
AMENDED AND RESTATED 1997 INCENTIVE EQUITY PLAN
Pursuant to the terms and provisions of Section 6 of the First Wave
Marine, Inc. Amended and Restated 1997 Incentive Equity Plan (the "Plan"), First
Wave Marine, Inc., a Delaware corporation (the "Company"), hereby adopts the
following Amendment No. 1 to the Plan (the "Amendment No. 1").
1.
The second paragraph of Section 2.3 of the Plan shall be amended in its
entirety by substituting the following therefor:
"No Option may be exercised by a Participant: (i) in the case
of a Participant who is an employee of the Company or a Related
Company, prior to the date on which such Participant completes one
continuous year of employment with the Company, or any Related Company,
after the date as of which the Option is granted (provided, however,
that the Committee may permit earlier exercise following such
Participant's Date of Termination by reason of death or Disability or a
change in control of the Company); (ii) in the case of a Participant
who is a Non-Employee Director of the Company or a Related Company,
prior to the date on which such Participant completes one continuous
year of service on the Board of Directors of the Company or a Related
Company (provided, however, that the Committee may permit earlier
exercise following such Participant's Date of Termination by reason of
death or Disability or a change in control of the Company); or (iii)
after the Expiration Date applicable to that Option."
2.
Subsection (d) of Section 7.1 shall be amended in its entirety by
substituting the following therefor:
"(d) Date of Termination. The Participant's "Date of Termination"
shall be (i) in the case of a Participant who is an employee
of the Company or a Related Company, the first day occurring
on or after the date of Participant's Agreement, on which the
Participant's employment with the Company and all Related
Companies terminates for any reason (death, Disability or
Service Separation); provided that a termination of employment
shall not be deemed to occur by reason of a transfer of the
Participant between the Company and a Related Company or
between two Related Companies; and further provided that the
Participant's employment shall not be considered terminated
while the Participant is on a leave of absence from the
Company or a Related Company approved by the Participant's
employer; and further provided, that
<PAGE> 2
if, as a result of a sale or other transaction, the
Participant's employer ceases to be the Company or a Related
Company, the occurrence of such transaction shall be treated
as the Participant's Date of Termination caused by the
Participant being discharged by the employer, or (ii) in the
case of a Participant who is a Non-Employee Director of the
Company or a Related Company, the first day occurring on or
after the date of Participant's Agreement, on which the
Participant ceases to be a director of the Company and all
Related Companies for any reason (death, Disability or Service
Separation); provided that a termination shall not be deemed
to occur by reason of the Participant ceasing to be a director
of the Company and becoming a director of a Related Company,
or ceasing to be a director of one Related Company and
becoming a director of another Related Company; and further
provided that the Participant shall not be considered to have
ceased being a director of the Company or a Related Company
while the Participant is on an approved leave of absence from
his or her duties as a director of the Company or a Related
Company; and further provided, that if, as a result of a sale
or other transaction, the Participant ceases to be a director
of the Company or a Related Company, the occurrence of such
transaction shall be treated as the Participant's Date of
Termination."
3.
Subsection (f) of Section 7.1 of the Plan is hereby amended in its
entirety by substituting the following therefor:
"(f) Eligible Person. The term "Eligible Person" shall mean (i) any
employee of the Company or a Related Company, (ii) an
individual to whom a bona fide written offer of employment
from the Company or a Related Company has been extended or
(iii) any Non-Employee Director of the Company or a Related
Company."
4.
Subsection (g) of Section 7.1 shall be amended in its entirety by
substituting the following therefor:
"(g) Service Separation. The term "Service Separation" means (i) in
the case of a Participant who is an employee of the Company or
a Related Company, Participant's resignation from employment,
including retirement, or the termination of a Participant from
employment of the Company or a Related Company, or (ii) in the
case of a Participant who is a Non-Employee Director of the
Company or a Related Company, Participant's resignation as a
director of the Company or a Related Company, or the removal
of a Participant as a director of the Company or a Related
Company."
-2-
<PAGE> 3
5.
A subsection (k) will be added to Section 7.1 of the Plan in order to
incorporate the following defined term into the Plan:
"(k) Non-Employee Director. The term "Non-Employee Director" shall
mean a director of the Company or a Related Company who, at
the time of his or her service as a director, (i) is not
otherwise employed by the Company or a Related Company, and
(ii) does not receive compensation from the Company or a
Related Company for services rendered in any capacity other
than as a director of the Company or a Related Company."
6.
Throughout the Plan, all occurrences of the term "Eligible Employee"
shall be deleted and the term "Eligible Person" shall be substituted therefor.
7.
Throughout the Plan, all occurrences of the term "Employment
Separation" shall be deleted and the term "Service Separation" shall be
substituted therefor.
8.
Each amendment made by this Amendment No. 1 to the Plan has been
effected in conformity with the provisions of the Plan.
9.
This Amendment No. 1 was adopted by the Board of Directors of the
Company on October 5, 1999. Approval of this Amendment No. 1 by the shareholders
of the Company is not required pursuant to the terms and provisions of the Plan
or by applicable law.
Dated: October 5, 1999.
FIRST WAVE MARINE, INC.
By: /s/ Frank R. Pierce
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
-3-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 5,925
<SECURITIES> 0
<RECEIVABLES> 13,137
<ALLOWANCES> 202
<INVENTORY> 816
<CURRENT-ASSETS> 28,956
<PP&E> 83,510
<DEPRECIATION> 9,504
<TOTAL-ASSETS> 122,663
<CURRENT-LIABILITIES> 14,604
<BONDS> 0
0
0
<COMMON> 118
<OTHER-SE> 577
<TOTAL-LIABILITY-AND-EQUITY> 122,663
<SALES> 63,798
<TOTAL-REVENUES> 63,798
<CGS> 52,245
<TOTAL-COSTS> 52,245
<OTHER-EXPENSES> 15,685
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,606
<INCOME-PRETAX> (11,738)
<INCOME-TAX> (4,157)
<INCOME-CONTINUING> (7,581)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,581)
<EPS-BASIC> (0.64)
<EPS-DILUTED> (0.64)
</TABLE>
