UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED MARCH 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-23653
HORIZON OFFSHORE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 74-2162088
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2500 CITYWEST BOULEVARD, SUITE 2200
HOUSTON, TEXAS 77042
(Address of principal executive offices) (Zip code)
(713) 361-2600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [ ] No [X]
The number of shares of the registrant's Common Stock
outstanding as of May 11, 1998 was 19,826,480.
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
HORIZON OFFSHORE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 31, December 31,
1998 1997
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 134 $ 2,846
Accounts receivable-
Contract receivables 7,728 9,165
Costs in excess of billings 8,079 2,958
Related parties 358 577
Other current assets 543 542
Total current assets 16,842 16,088
PROPERTY AND EQUIPMENT, net 69,584 55,040
DEFERRED INCOME TAXES 317 137
OTHER ASSETS 2,229 1,724
$88,972 $72,989
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,264 $ 4,145
Accrued liabilties 5,365 2,540
Accrued job costs 7,943 5,501
Accrued interest 1,135 681
Billings in excess of costs 105 148
Current maturities of long-term debt 4,750 5,101
Income taxes payable 194 85
Total current liabilities 21,756 18,201
LONG-TERM DEBT, net of current maturities 43,562 34,729
Total liabilities 65,318 52,930
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $1 par value, 5,000,000 shares
authorized, none issued and outstanding 0 0
Common stock, $1 par value, 35,000,000 shares
authorized, 14,076,480 shares issued and outstanding 3,369 3,369
Subscription receivable 0 (950)
Additional paid-in capital 24,944 24,944
Accumulated deficit (4,659) (7,304)
Total stockholders' equity 23,654 20,059
$88,972 $72,989
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
HORIZON OFFSHORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
Three Months Ended March 31,
1998 1997
(Unaudited)
<S> <C> <C>
CONTRACT REVENUES $18,611 $ 4,505
COST OF CONTRACT REVENUES 13,227 5,911
Gross profit (loss) 5,384 (1,406)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,939 497
Operating income (loss) 3,445 (1,903)
OTHER INCOME (EXPENSE):
Interest (801) (865)
Gain on sale of asset 0 614
(801) (251)
NET INCOME (LOSS) BEFORE INCOME TAXES 2,644 (2,154)
INCOME TAX (PROVISION)BENEFIT 0 0
NET INCOME (LOSS) $ 2,644 $(2,154)
NET INCOME (LOSS) PER SHARE- BASIC AND DILUTED $ 0.19 $ (0.16)
SHARES USED IN COMPUTING
NET INCOME (LOSS) PER SHARE- BASIC AND DILUTED 14,076,480 13,750,000
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
HORIZON OFFSHORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended March 31,
1998 1997
CASH FLOW FROM OPERATING ACTIVITIES: (Unaudited)
<S> <C> <C>
Net income (loss) $ 2,644 $(2,154)
Adjustments to reconcile net income (loss) to net
cash used in operating activities-
Depreciation 432 344
Deferred income taxes (180)
Gain on sale of asset - (614)
Changes in operating assets and liabilities-
Accounts receivable 1,656 (632)
Costs in excess of billings (5,121) 2,019
Billings in excess of costs (43)
Other assets (1) (23)
Accounts payable (1,881) (508)
Accrued liabilities 2,825 (525)
Accrued job costs 2,442 (2,386)
Accrued interest 454 640
Income taxes payable 109
Net cash provided by (used in) operating activi 3,336 (3,839)
CASH FLOW FROM INVESTING ACTIVITIES:
Purchases and additions to equipment (14,975) (496)
Purchase of other assets - 117
Proceeds from sale of assets - 2,879
Net cash provided by (used in) in investing act (14,975) 2,500
CASH FLOW FROM FINANCING ACTIVITIES:
Borrowings under notes payable and long-term debt 8,903 130
Principal payments on long-term debt (421)
Issuance of common stock 950
Initial public offering costs (505)
Net cash provided by financing activities 8,927 130
NET INCREASE IN CASH AND CASH EQUIVALENTS (2,712) (1,209)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,846 2,650
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 134 $ 1,441
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ 379 $ -
Cash paid for income taxes $ 71
Non-cash investing and financing activites:
Gain on sale of assets to related party reflected as a capital
contribution, net of tax effect of $1,631 $ - $ 3,170
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
The consolidated interim financial statements included
herein have been prepared by Horizon Offshore, Inc. (a
Delaware corporation) and its subsidiaries (Horizon or the
Company), and are unaudited, except for the balance sheet at
December 31, 1997, which has been prepared from the audited
financial statements at that date. In the opinion of
management, the unaudited consolidated interim financial
statements include all adjustments necessary for a fair
presentation of the financial position as of March 31, 1998,
the statements of operations and the statements of cash
flows for the three months ended March 31, 1998 and 1997.
Although management believes the unaudited interim related
disclosures in these consolidated interim financial
statements are adequate to make the information presented
not misleading, certain information and footnote disclosures
normally included in annual audited financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the
rules of the Securities and Exchange Commission. The results
of operations for the three months ended March 31, 1998 are
not necessarily indicative of the result to be expected for
the entire year. The consolidated interim financial
statements included herein should be read in conjunction
with the audited financial statements and notes thereto
included in the Company's Registration Statement on Form S-1
(Registration No. 333-43965).
Organization
Horizon provides offshore construction services to the oil
and gas industry. These services generally consist of laying
and burying marine pipelines for the transportation of oil
and gas. Work is performed primarily on a fixed-price or day-
rate basis or a combination thereof.
In April 1998, the Company completed its initial public
offering (the Offering) of 5,750,000 shares of its common
stock at $13.00 per share and received $69.0 million, net of
$5.8 million of underwriting commissions and discounts and
expenses. The Company used the Offering proceeds to repay
its $23.8 million indebtedness under Subordinated Notes and
to acquire the Stephaniturm, a 230-foot diving support
vessel, for $17.5 million. The Company repaid $13.0 million
on its term loan indebtedness and $5.3 million on its
revolving note payable to Den Norske Bank. The Company has
incurred $5.6 million of costs related to the construction
of a derrick barge, the Pacific Horizon. The balance of the
proceeds is being invested in short-term securities pending
the completion of the Pacific Horizon.
Interest Capitalization
Interest is capitalized on the average amount of accumulated
expenditures for equipment that has been purchased and is
undergoing major modifications and refurbishments prior to
being placed into service. Interest is capitalized using an
effective rate based on related debt until the equipment is
placed into service. Interest expense for the three-months
ended March 31, 1998 is net of $148,000 interest
capitalized.
2. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following (in
thousands):
March 31, December 31,
1998 1997
---------- ----------
Barges, boats and related equipment $ 62,967 $ 51,349
Land and buildings 6,207 4,039
Machinery 533 245
Officer furniture and equipment 739 424
Leasehold improvements 824 237
---------- ----------
71,270 56,294
Less-Accumulated depreciation (1,686) (1,254)
---------- ----------
Property and equipment, net $ 69,584 $ 55,040
During the quarter ended March 31, 1998, the Company
expended an additional $15.0 million, primarily for
improvements and refurbishments to its fleet and
improvements to its marine support base near Port Arthur,
Texas.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in
conjunction with the Company's consolidated financial
statements and notes thereto and the discussion under
"Management's Discussion and Analysis of Financial
Conditions and Results of Operations" included in the
Company's Registration Statement on Form S-1 (Registration
No. 333-43965) (the "Registration Statement"), relating to
the Company's initial public offering (the "Offering").
General
The Company provides marine construction services to the oil
and gas industry primarily in the Gulf of Mexico. The
Company's marine fleet is used primarily to install marine
pipelines to transport oil and gas from newly installed
production platforms and other subsea production systems.
Over the past several years, improvements in seismic and
drilling technology and production techniques, which have
increased drilling success rates and efficiencies have
resulted in increased exploration and development in the
Gulf and have improved the economics of developing smaller
oil and gas fields especially in shallow water.
The Company's present management team, which assumed its
current role in July 1997, has aggressively expanded the
Company's operations and has assembled a fleet of eight
vessels, which includes four vessels capable of pipelaying
operations, one bury barge, one derrick/pipelay vessel, one
derrick barge and two diving support vessels. Two of the
pipelaying vessels, the American Horizon and the Cajun
Horizon, were placed into service in 1996. The American
Horizon and the Cajun Horizon installed approximately 19
miles of pipe ranging in diameter from three to ten inches
during the quarter ended March 31, 1997. Two pipelaying
vessels acquired during the second half of 1997, the Gulf
Horizon and Lone Star Horizon, became operational during the
first quarter of 1998. In shallow water, the Gulf Horizon
and the Lone Star Horizon can lay pipe with diameters
ranging up to 36" and 48", respectively. The Gulf Horizon
completed a project offshore Venezuela during the first
quarter of 1998. During the first quarter of 1998, these
four vessels installed 46 miles of pipe ranging in diameter
from three to 36 inches. In addition, a pipebury barge, the
Canyon Horizon, and a diving support vessel, the Pearl
Horizon, were acquired in the second half of 1997 and are
expected to become operational in the second quarter of
1998. The Phoenix Horizon, which was acquired during 1997,
is being upgraded and refurbished and is expected to be
placed into service during the fourth 1quarter of 1998 as a
derrick/pipelay vessel.
As discussed below, the Stephaniturm was acquired in April
1998 with Offering proceeds and is chartered to Det
Sondenfjelds-Norske Dampskibsselskab ASA (DSND) for $3
million until August 31, 1998. The Stephaniturm will offer
saturation diving in water depths up to 1,000 feet, riser
installation, tie-ins and commissioning services to allow
the Company to perform more complex projects and operate in
deeper water. The Company's expanded fleet competes in the
Gulf for substantially all pipeline installation projects in
shallow water depths of 200 feet and less and a significant
number of projects in intermediate water depths between 200
and 800 feet.
Results of Operations
The discussion below describes the Company's results of
operations. Certain factors in particular make the results
of the following periods difficult to compare. First, the
Company's new management team assumed its current role in
July 1997 and has implemented operational systems and
procedures that include improved bidding and profitability
analyses for projects, project supervision and review
procedures, and increased equipment utilization achieved
through vessel and project scheduling.
Second, the Company's fleet that operated during the first
quarter of 1997 consisted of two vessels, the American
Horizon and the Cajun Horizon. During the last quarter of
1997, the Company made significant acquisitions and
improvements to its fleet. The Company operated four vessels
during the first quarter of 1998. The Company anticipates
that due to the substantial growth in the size and operating
capabilities of its fleet, its operating results in the
future will not be comparable to the Company's historical
results. The Company's recent vessel acquisitions have
expanded its operating capabilities and increased its
operating cost structure. The Company's ability to
integrate these vessels into its operations will directly
impact the Company's future results of operations. The
aggregate amount of selling, general and administrative
expenses is also expected to increase to support this
growth.
Three Months Ended March 31, 1998 Compared to the Three
Months Ended March 31, 1997
Contract Revenues. Contract revenues were $18.6 million for
the quarter ended March 31, 1998 compared to $4.5 million
for the quarter ended March 31, 1997. The Company's fleet
operating in the Gulf during the first quarter of 1998
increased to four vessels from two vessels operating in the
first quarter of last year. The Company installed
approximately 46 miles of pipe during the quarter ended
March 31, 1998 compared to approximately 19 miles for the
first quarter of 1997. The Company's results of operations
for the first quarter of 1998 reflect the level of offshore
activity in the Gulf and current management's ability to
competitively bid, win and successfully manage projects.
Gross Profit (Loss). Gross profit was $5.4 million (28.9% of
contract revenues) for the first quarter of 1998 as compared
to a gross loss of $1.4 million for the first quarter of
1997. Under the guidance of present management, the Company
continued to improve its gross profit margin in the last
half of 1997 and the first quarter of 1998 through more
efficient execution of projects, greater equipment
utilization and an increase in the number of contracts
awarded.
The gross loss for the first quarter of 1997 was primarily
attributable to the number of contracts performed and
resulting lack of equipment utilization and backlog. Also,
included in the cost of contract revenues for the quarter
ended March 31, 1997 is $.4 million of operating costs
associated with the three boats and certain equipment
which were sold to an affiliate in March 1997.
Selling, General and Administrative Expenses. Selling,
general and administrative expenses increased to $1.9
million (10.4% of contract revenues) for the three months
ended March 31, 1998 from $.5 million (11.0% of contract
revenues) for the first three months in 1997 primarily due
to the addition of personnel and other expenses associated
with the growth of the Company.
Interest Expense. Interest expense was $.8 million and $.9
million for the three months ended March 31, 1998 and 1997,
respectively. The Company's total outstanding debt
increased during the last quarter of 1996 due to additional
borrowings to fund acquisitions, capital improvements and
working capital requirements. In connection with a
recapitalization of the Company on March 31, 1997, Highwood
Partners, L.P. and Westgate International, L.P. (the
Principal Stockholders) contributed $21.0 million of debt to
additional paid-in capital. The Company applied $12.0
million of the proceeds from the sale of assets in March
1997, as described below, to reduce debt to the Principal
Stockholders. The Company's outstanding debt increased
significantly during the fourth quarter of 1997 and the
first quarter of 1998 as a result of the vessel acquisitions
and improvements made to expand the Company's fleet and the
acquisition of marine bases in Houma, Louisiana and Port
Arthur, Texas.
Other Income. The Company sold one of its vessels to an
unaffiliated third party in February 1997 for $3.3 million
cash resulting in the recognition of a $.6 million gain.
Income Taxes. The Company uses the liability method of
accounting for income taxes. As of December 31, 1997, the
Company had net operating loss carryforwards that offset
income taxes in the first quarter of 1998 and may be
available to reduce future income taxes. For financial
reporting purposes, a valuation allowance has been
established as of March 31, 1998 and December 31, 1997 to
offset the Company's net deferred tax assets, including
those related to carryforwards, to the extent they were not
realizable through the sale of appreciated assets.
The Company recorded a $1.6 million deferred tax asset in
Fiscal 1996 related to the $4.8 million gain from the sale
of assets which was included in taxable income for 1997. The
Company accounted for the $3.2 million gain on the sale, net
of taxes of approximately $1.6 million, as a capital
contribution for financial reporting purposes.
Net Income (Loss). Net income was $2.6 million for the
three months ended March 31, 1998 as compared to a net loss
for the three months ended March 31, 1997 of $2.2 million.
The net loss for the first quarter of 1997 was primarily due
to the number of contracts performed and resulting lack of
equipment utilization and backlog.
Liquidity and Capital Resources
In April 1998, the Company completed its initial public
offering of 5,750,000 shares of common stock and received
approximately $69.0 million, net of $5.8 million of
underwriting commissions and discounts and expenses. The
Company repaid its $23.8 million indebtedness under its
Subordinated Notes, acquired the Stephaniturm for $17.5
million and expects to use the remaining Offering proceeds
to construct the Pacific Horizon. The Company has incurred
$5.6 million of costs related to the construction of the
Pacific Horizon. Pending application of the proceeds for the
construction of the Pacific Horizon, the Company repaid
$13.0 million on the term loan and $5.3 million on the
revolving note payable to Den norske Bank (DNB). The balance
of the proceeds is being invested in short-term securities.
In May 1998 the Company amended its credit facility with DNB
(the "Credit Facility") to provide for $50 million of
borrowings. The amended Credit Facility provides for a $30
million reducing revolver to be reduced in monthly
increments of $625,000 beginning March 31, 1999 and a $20
million revolving note due June 30, 2000. The amendment
requires that certain conditions be met in order for the
Company to obtain advances under the Credit Facility. The
Company has met certain of these conditions and estimates
that it currently has available borrowing capacity of $35
million under the Credit Facility. The Credit Facility is
secured by substantially all assets of the Company,
including mortgages on all vessels owned by the Company, as
well as accounts receivable. Other significant terms and
covenants under the Credit Facility are described in the
Company's Registration Statement.
The Company had working capital deficits of $4.9 million at
March 31, 1998 and $2.1 million at December 31, 1997.
Prior to the completion of the Offering and the amendment to
the Credit Facility, the Company financed its vessel and property
acquisitions and improvements through operating cash flow
and short-term borrowings. The significant growth
in the number of construction contracts and related contract
revenues has resulted in an increase in contract receivables.
Cash provided by operations was $3.3 million for the quarter
ended March 31, 1998 compared to cash used by operations
of $3.8 million during the first quarter of last year.
Cash used for capital expenditures totaled $15.0
million and $.5 million during the first quarters of
1998 and 1997, respectively. Principal payments on long-term
debt were $.4 million during the first quarter of 1998.
No payments were made on debt during the first quarter of 1997.
The Company increased its borrowings under the Subordinated
Notes and the Credit Facility to make acquisitions and
upgrades in the first quarter of 1998. As of March 31, 1998,
$23.8 million was due under the Subordinated Notes,
including accrued interest. As of March 31, 1998, the
Company had $13.0 million outstanding under the Term Loan
and $4.3 million outstanding under the revolving
note payable to DNB bearing interest at 9.0% per annum.
Planned capital expenditures for the remaining nine months
in 1998 are estimated to total approximately $15.7
million to complete improvements to the Company's existing
fleet, excluding the Stephaniturm and the Pacific Horizon
discussed above. Management believes that cash generated
from operations, together with available borrowings under
the Credit Facility, will be sufficient to fund the
Company's currently planned capital projects and working
capital requirements for 1998. Pursuant to the amended
Credit Facility, the Company estimates available borrowing
capacity of $35 million. under its Credit Facility. The
Company's strategy, however, is to make other acquisitions
to expand its operating capabilities and expand into selected
international markets. To the extent the Company is
successful in identifying acquisition opportunities, it may
require additional debt or equity financing depending upon
the size of the transaction.
Risk Factors and Forward-Looking Statements
Management's Discussion and Analysis of Financial Conditions
and Results of Operations contains certain statements that
are not historical in nature and are intended to be "forward-
looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934, as
amended. The Company cautions readers that forward-
looking statements, including, without limitation those
related to the Company's future business prospects,
revenues, working capital, liquidity, capital needs and
capital expenditures are subject to a number of material
risks and uncertainties, including competition, equipment
and labor productivity, contract estimating, weather
conditions, risks inherent in marine construction and other
risks and uncertainties that are beyond the Company's
control. Such forward-looking statements are not guarantees
of future performance and actual results, developments
and business decisions may differ from those envisaged by
such forward-looking statements. Important factors that
could cause actual results to differ materially from the
Company's expectations are discussed under the heading "Risk
Factors" in the Company's Registration Statement.
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
Use of Proceeds.
The Company's Registration Statement on Form S-1
(Registration No. 333-43965) (the "Registration Statement"),
relating to the Company's initial public offering (the
"Offering") was declared effective by the Securities and
Exchange Commission on April 1, 1998. The sale of 5,750,000
shares of the Company's common stock, $1 par value,
commenced on April 1, 1998 and has been completed. The
managing underwriters for the Offering were
Smith Barney, Inc., PaineWebber Incorporated and Raymond
James & Associates, Inc. The total price to the public was
$74.7 million, the underwriting discounts and commissions
totaled $5.2 million and expenses are estimated at $.6
million.
As of May 6, 1998, the Company had used the $69.0 million
net proceeds from the Offering as follows: (i) to repay
its $23.8 million indebtedness under its Subordinated Notes,
(ii) to acquire the Stephaniturm for $17.5 million from
DSND, its strategic alliance partner, (iii) to incur $5.6
million of costs related to the construction of the Pacific
Horizon and (iv) to repay $13.0 million on the term loan
indebtedness and $5.3 on the revolving note payable to DNB
pending the application of the proceeds for the construction of the
Pacific Horizon. The balance of the proceeds is being
invested in short-term securities.
Excluding the repayment of the Subordinated Notes to the Principal
Stockholders and the purchase of the Stephaniturm from DSND,
none of such payments were direct or indirect payments to
directors or officers of the Company or their associates, to
persons owning 10% or more of any class of equity securities
of the Company or to affiliates of the Company.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
3.1 Amended and Restated Certificate of Incorporation
of the Company 1
3.2 Bylaws of the Company 1
10.1 Amended and Restated Credit Agreement dated May 13, 1998
Provided by Den Norske Bank to Horizon Vessels, Inc. and
Horizon Offshore Contractors, Inc., as borrowers, and
guaranteed by the Company
27.1 Financial Data Schedule
(b) none
_____________________
1 Incorporated by reference to the Company's Registration Statement
on Form S-1 (Registration Statement No. 333-43965).
SIGNATURE
Pursuant to the requirements 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.
HORIZON OFFSHORE, INC.
Date: May 14, 1998 By: /s/ David W. Sharp
David W. Sharp
Executive Vice President and
Chief Financial Officer
USD 50,000,000.00
AMENDED AND RESTATED CREDIT AGREEMENT
Provided by
DEN NORSKE BANK ASA
to
HORIZON VESSELS, INC.
and
HORIZON OFFSHORE CONTRACTORS, INC.
as Borrowers
HORIZON OFFSHORE, INC.
as Guarantor
Dated as of May __, 1998
TABLE OF CONTENTS
Section 1. Definitions 1
1.1 Certain Definitions 1
1.2 Accounting Terms 10
Section 2. Facility A. 10
2.1 Reducing Revolving Loan. 10
Section 3. Facility B. 11
3.1 Revolving Credit 11
3.2 Borrowing Base 11
3.3 Counter Indemnity 12
3.4 Drawings Under Letters of Credit 12
3.5 Variations 12
3.6 Security 12
3.7 Certificates 12
Section 4. The Notes. 12
Section 5. Manner of Drawdown and Issuance of Letters of
Credit 13
5.1 Manner of Drawdown or Issuance 13
5.2 Disbursement of Funds 13
5.3 Failure to Borrow; Delay 13
Section 6. Interest 14
6.1 Rate of Interest 14
6.2 Payment of Interest 14
6.3 Conversion of LIBOR Advance to Prime Advance 14
6.4 Overdue Payment of Principal and Interest 15
6.5 Compliance with Law 15
Section 7. Loan Payments 15
7.1 Payments on Non-Business Days 15
7.2 Reduction of Facility A 16
7.3 Repayment of Facility A and Facility B. 17
7.4 [Intentionally Omitted] 17
7.5 Mandatory Prepayment 17
7.6 Payment Procedure 18
7.7 Net Payments 18
7.8 Rights of Set-off 18
7.9 Changes in Circumstances 19
7.10 Unavailability of Dollars 21
7.11 Holding Account. 22
7.12 Tax Treaty. 23
Section 8. Security 23
8.1 Mortgages 23
8.2 Security Agreement 23
8.3 Guaranty 23
8.4 Holding Account Agreement. 23
8.5 Deed of Trust 23
8.6 Further Assurances 23
Section 9. Conditions Precedent 24
9.1 Documents Required as Conditions Precedent
to the Drawdown of the First Advance 24
9.2 Additional Conditions Precedent to
Subsequent Advances and Letters of Credit 26
9.3 Waiver of Conditions Precedent 27
Section 10. Fees and Expenses 27
10.1 Fees 27
10.2 Expenses 28
10.3 General Indemnity 29
10.4 Survival. 31
Section 11. Representations and Warranties of Borrowers 31
11.1 Due Incorporation, Qualification, Etc 31
11.2 Capacity 31
11.3 Authority and Enforceability 31
11.4 Governmental Approvals 32
11.5 Compliance with Other Instruments 32
11.6 Financial Statements 32
11.7 Material Adverse Events 33
11.8 Litigation, Etc 33
11.9 Principal Place of Business 33
11.10 Patent and Other Rights 33
11.11 Taxes 33
11.12 Employee Retirement Income Security Act of 1974 34
11.13 Investment Company Act of 1940 34
11.14 Subsidiaries 34
11.15 Environmental Compliance 34
11.16 Indebtedness 35
Section 12. Affirmative Covenants of Borrowers 35
12.1 Financial Statements, Reports and Inspection 35
12.2 Insurance 38
12.3 Other Debt 38
12.4 Maintenance of Existence; Conduct of Business 38
12.5 Financial Records 38
12.6 Maintenance of Vessels 39
12.7 Environmental Compliance 39
12.8 Environmental Notifications 39
12.9 Environmental Indemnification 40
12.10 Notification of Total Loss 41
12.11 Additional Security 41
12.12 Year 2000 Compliance 42
Section 13. Negative Covenants of Borrowers 42
13.1 Liens 42
13.2 Line of Business 43
13.3 Consolidation, Merger, Etc 43
13.4 Modification of Agreements 43
13.5 Indebtedness 43
13.6 Reportable Event 44
13.7 Change of Legal Structure 44
13.8 Change of Place of Business 44
13.9 Management of Vessels 44
13.10 Subsidiaries 44
13.11 Charter 44
13.12 Modifications to Vessels 44
13.13 Sale of Vessel, Etc 45
13.14 Current Ratio 45
13.15 Working Capital 45
13.16 Fixed Charge Coverage Ratio. 45
13.17 Interest Coverage Ratio. 45
13.18 Debt Ratio 45
13.19 Net Worth 45
13.20 Compliance with Federal Reserve Board Regulations 45
13.21 Loans and Investments 46
13.22 Contracts with Affiliates 46
13.23 Change of Management 46
13.24 Lease Expense. 46
13.25 Dividends 46
13.26 Use of Vessels 46
13.27 Fiscal Years. 46
Section 14. Events of Default 46
14.1 Events 46
14.2 Change of Control 49
Section 15. Minimum Value, Evaluation and Additional Security 50
15.1 Minimum Value 50
15.2 Evaluation 50
15.3 Failure to Maintain Minimum Value 50
Section 16. [Intentionally Omitted]. 51
Section 17. Miscellaneous 51
17.1 Entire Agreement 51
17.2 No Waiver 51
17.3 Survival 51
17.4 Notices 51
17.5 Termination 52
17.6 Severability of Provisions 52
17.7 Successors and Assigns 52
17.8 Assignment and Participation 52
17.9 Counterparts 53
17.10 Jurisdiction 53
17.11 Choice of Law 54
17.12 Waiver of Jury Trial 54
17.13 Amendment and Waiver 55
17.14 No Oral Agreements 55
17.15 Headings, Etc 55
17.16 Taxes 55
17.17 Controlling Agreement 55
Schedule 1 - List of Vessels
Exhibit A-1 - Facility A Promissory Note
Exhibit A-2 - Facility B Promissory Note
Exhibit B - Request for Borrowing
Exhibit C - Request for Letter of Credit
Exhibit D - Borrowing Base Report
Exhibit E - Form of Letter of Credit
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT dated as of May
13, 1998 (this "Credit Agreement"), among Horizon Vessels, Inc.,
a corporation organized and existing under the laws of the State
of Delaware, Horizon Offshore Contractors, Inc., a corporation
organized and existing under the laws of the State of Delaware
(individually a "Borrower" and collectively the "Borrowers"),
Horizon Offshore, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Guarantor") and Den
norske Bank ASA, a banking corporation organized and existing
under the laws of the Kingdom of Norway (the "Lender").
W I T N E S S E T H:
WHEREAS, the Borrowers and the Lender entered into that
certain Credit Agreement dated as of October 27, 1997 (the
"Original Credit Agreement"), pursuant to which the Lender made a
credit facility available to the Borrowers in a principal amount
of up to Sixteen Million United States Dollars (USD
16,000,000.00) to repay existing debt of the Borrowers, assist
with the cost of upgrading the Vessels and provide working
capital for the Borrowers; and
WHEREAS, the Borrowers and the Lender entered into Amendment
No. 1 to the Original Credit Agreement to, among other things,
increase the amount available under the Original Credit Agreement
to USD 20,000,000;
WHEREAS, the Borrowers have requested that the Lender
increase the facility provided under the Original Credit
Agreement to up to USD 50,000,000;
WHEREAS, the Lender is prepared to provide the financing
described above on the terms and conditions contained in this
Credit Agreement;
NOW, THEREFORE, in consideration of the above recitals, and
other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as
follows:
Section 1. Definitions.
1.1 Certain Definitions. As used herein, the following
terms shall have the following respective meanings:
"Advance" means a loan by the Lender to the Borrowers under
this Credit Agreement.
"Affiliate" of any Person means (i) any Person directly or
indirectly controlled by, controlling or under common control
with such first Person and (ii) any director or officer of such
first Person or of any Person referred to in clause (i) above.
For the purposes of this definition "control" of any Person
includes (a) with respect to any corporation or other Person
having voting shares or the equivalent and elected directors,
managers, or Persons performing similar functions, the ownership
or power to vote, directly or indirectly shares or the equivalent
representing 50% or more of the power to vote in the election of
directors, managers or Persons performing similar functions, (b)
ownership of 50% or more of the equity or beneficial interest in
any other entity and (c) the ability to direct the business and
affairs of any Person by acting as a general partner, manager or
otherwise.
"Borrowing Base" means at any time an amount equal to 80% of
the face value of Eligible Accounts from a U.S. domiciled Person
payable in USD.
"Breakage Cost" means any amount reasonably necessary to
compensate the Lender for costs or expenses incurred by the
Lender in connection with the payment or acceleration of the
Loan, in whole or in part, whether voluntarily or involuntarily,
on a date which is not the last date of the then applicable
Interest Period for the portion of the Loan being paid, including
(without limitation) any loss incurred in obtaining, liquidating
or employing deposits from third parties.
"Business Day" means any day on which commercial banks are
open for business in Houston, Texas, New York, New York and
London, England.
"Cash Equivalents" means (i) securities issued or directly
and fully guaranteed or insured by the United States of America
or any agency or instrumentality thereof having maturities of not
more than one (1) year from the date of acquisition, (ii) time
deposits (including Eurodollar time deposits) and certificates of
deposit of any bank meeting the qualifications specified in
clause (iv) below with maturities of not more than 90 days from
the date of acquisition, (iii) fully secured repurchase
obligations with a term of not more than 90 days for underlying
securities of the types described in clause (i) entered into with
any bank meeting the qualifications specified in clause (iv)
below, (iv) commercial paper issued by the parent corporation of
any bank referred to in this clause (iv) or any commercial bank
of recognized standing having capital and surplus in excess of
USD 300,000,000.00 and commercial paper rated at least A-2 or the
equivalent thereof by Standard & Poor's Corporation or at least
P-2 or the equivalent thereof by Moody's Investor Services, Inc.,
and in each case maturing within 90 days after the date of
acquisition, and (v) remarketed certificates of participation
issued through any bank meeting the qualifications specified in
clause (iv) above rated at least A-2 or the equivalent thereof by
Standard & Poor's Corporation or at least P-2 or the equivalent
thereof by Moody's Investor Services, Inc. and maturing within 90
days after the date of acquisition.
"Commitment" means a maximum of USD 50,000,000.00 as it may
be reduced from time to time pursuant to the provisions of this
Credit Agreement.
"Commitment Reduction Date" means the last day of each month
following the Facility A Conversion Date.
"Controlled Group" means a "controlled group of
corporations" as defined in Section 1563(a) of the Internal
Revenue Code of 1986, as amended, determined without regard to
Section 1563(a)(4) and (e) (3) (C) of such Code, of which either
Borrower is a part.
"Credit Facility" means the aggregate amount of Advances and
Letters of Credit made hereunder and the aggregate amount of the
unused but still available portion of the Commitment.
"Current Assets" means those assets of the Guarantor which
would in accordance with GAAP be classified on a consolidated
basis as current assets of a corporation conducting a business
the same as or similar to the business of the Guarantor.
"Current Liabilities" means Indebtedness of the Guarantor
which would in accordance with GAAP be classified on a
consolidated basis as current liabilities of a corporation
conducting a business the same as or similar to the business of
the Guarantor, excluding the current maturities of amounts
outstanding under this Credit Agreement and the current
maturities of the Borrowers' or the Guarantor's other long-term
debt.
"Current Ratio" means the ratio of the Guarantor's Current
Assets to the Guarantor's Current Liabilities.
"Debt Ratio" means the Guarantor's total consolidated
Indebtedness divided by the sum of consolidated Indebtedness and
stockholders' equity.
"Deed of Trust" means the Deed of Trust, Security Agreement
and Absolute Assignment of Leases and Rents on the real estate
and improvements owned by Horizon Vessels, Inc. in Port Arthur,
Jefferson County, Texas in form and substance satisfactory to the
Lender.
"Dollars" and the sign "USD" mean lawful money of the United
States of America.
"Drawdown Date" means the date upon which an Advance is made
or a Letter of Credit is issued.
"EBITDA" means, for any period, the consolidated earnings of
the Guarantor during such period from continuing operations,
before gains or losses on sales of assets (to the extent such
gains or losses are included in earnings from continuing
operations) and extraordinary items, as determined under GAAP,
federal, state, foreign and local income taxes, Interest Expense,
depreciation and amortization.
"Eligible Accounts" means, at any time, the aggregate amount
of the Borrowers' accounts receivable for the shipment and sale
of products or for services rendered for which invoices have been
issued and payment for which is due within sixty (60) days. In
determining accounts receivable constituting Eligible Accounts,
there shall be excluded (i) accounts receivable remaining unpaid
for a period of more than ninety (90) days from the date of
invoice (or due date in the case of instruments, lease agreements
and chattel paper), (ii) accounts receivable arising from sale to
or services rendered for any subsidiary or Affiliate of the
Borrowers, if any, (iii) accounts receivable in which the Lender
does not have a first priority perfected security interest, (iv)
accounts receivable which are subject to a right of offset, claim
or defense, (v) accounts receivable due from suppliers of
materials or inventory to the Borrowers to the extent that the
Borrowers are indebted to such suppliers with respect to
materials or supplies purchased by the Borrowers from such
suppliers, (vi) accounts receivable due from customers known to
be insolvent or in bankruptcy proceedings, and (vii) accounts
receivable rejected in whole or in part by the Lender in its sole
discretion as containing unacceptable risk.
"Equipment" shall have the meaning set forth in Section 1.01
of the Security Agreement.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Event of Default" means each of the Events of Default
described in Section 14 hereof.
"Excess Cash Flow" means for any period, EBITDA minus the
sum of total Interest Expense, principal payments on Facility A
(both scheduled and optional) and actual Taxes paid.
"Facility A" means the USD 30,000,000.00 senior secured
reducing revolving loan provided for in Section 2 of this Credit
Agreement, as reduced pursuant to Section 7.2(a).
"Facility A Commitment" means a maximum of USD 30,000,000.00
as it may be reduced from time to time pursuant to the provisions
of this Credit Agreement.
"Facility A Conversion Date" means March 31, 1999.
"Facility A Maturity Date" means April 30, 2003.
"Facility A Note" means the secured promissory note of the
Borrowers in the original principal amount of USD 30,000,000.00,
substantially in the form of Exhibit A-1 hereto and all renewals,
extensions, rearrangements and replacements thereof.
"Facility B" means the USD 20,000,000.00 senior secured
revolving loan provided for in Section 3 of this Credit
Agreement.
"Facility B Commitment" means a maximum of USD 20,000,000.00
as it may be reduced from time to time pursuant to the provisions
of this Credit Agreement.
"Facility B Maturity Date" means July 31, 2000.
"Facility B Note" means the secured promissory note of the
Borrowers in the original principal amount of USD 20,000,000.00,
substantially in the form of Exhibit A-2 hereto and all renewals,
extensions, rearrangements and replacements thereof.
"Fixed Charge Coverage Ratio" means for any period, EBITDA
divided by the sum total of Interest Expense, required payments
under this Credit Agreement, and actual Taxes paid.
"GAAP" means generally accepted accounting principles in
effect from time to time in the United States of America.
"Governmental Agency" means any United States or foreign
government or any state, department or other political
subdivision thereof or governmental body, agency, authority,
department or commission (including without limitation any court
or tribunal) exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government and any corporation, partnership or other entity
directly or indirectly owned by the foregoing.
"Guaranty" means the guaranty by the Guarantor of the
Borrowers' obligations under this Credit Agreement and the Notes
dated October 27, 1997, as amended and ratified from time to
time.
"Hazardous Substances" means petroleum and used oil, or any
other pollutant or contaminant, hazardous, dangerous or toxic
waste, substance or material as defined in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601, et seq. (hereinafter called
"CERCLA"); the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Section 9601, et seq. (hereinafter called "RCRA");
the Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601,
et seq. (hereinafter called "TSCA"); the Hazardous Materials
Transportation Act, as amended, 49 U.S.C. Section 1801, et seq.
(hereinafter called "HMTA"); the Oil Pollution Act of 1990, 33
U.S.C. Section 2701 et seq. (hereinafter called "OPA"); or any other
statute, law, ordinance, code or regulation of any Governmental
Agency relating to or imposing liability or standards of conduct
concerning the use, production, generation, treatment, storage,
recycling, handling, transportation, release, threatened release
or disposal of any waste, substance or material, currently in
effect or at any time hereafter adopted.
"Holding Account Agreement" means the agreement among The
Frost National Bank, the Borrowers and the Lender establishing
the lock box arrangement for the accounts receivable of the
Borrowers, in form and substance satisfactory to the Lender.
"Indebtedness" of the Borrowers or the Guarantor means all
items of indebtedness which, in accordance with GAAP, would be
included in determining liabilities as shown on the liability
side of a balance sheet of the Borrowers or the Guarantor, as of
the date as of which indebtedness and liabilities is to be
determined and shall include all indebtedness and liabilities of
others assumed or guaranteed by the Borrowers or the Guarantor or
in respect of which the Borrowers or the Guarantor are
secondarily or contingently liable (other than by endorsement of
instruments in the course of collection and performance
guarantees and similar transactions entered into in the ordinary
course of business) whether by reason of any agreement to acquire
such indebtedness or to supply or advance sums or otherwise but
shall exclude deferred Taxes.
"Indemnity Payment" means a payment by the Borrowers to the
Lender equal to the amount the Lender has paid to a beneficiary
under a Letter of Credit in accordance with the terms and
conditions of such Letter of Credit and this Credit Agreement.
"Interest Coverage Ratio" means, for any period, EBITDA for
such period divided by Interest Expense of the Guarantor for such
period.
"Interest Expense" means, with respect to any Person, for
any period of determination, its interest expense determined in
accordance with GAAP.
"Interest Payment Date" means, with respect to any Prime
Advance, the last Business Day of each month and, with respect to
any LIBOR Advance, the end of each Interest Period except if such
Interest Period is longer than ninety (90) days, every ninety
(90) days and at the end of such Interest Period.
"Interest Period" means with respect to any LIBOR Advance,
each period selected by the Borrowers for which the rate of
interest on such LIBOR Advance is fixed being the period
commencing on the date of the LIBOR Advance or the date of the
expiration of the preceding Interest Period for such LIBOR
Advance and ending on the corresponding day in the calendar month
selected by the Borrowers which is one (1) month, two (2) months,
three (3) months or six (6) months later or, if such month has no
numerical corresponding day, on the last Business Day of such
month. If the last day of any such Interest Period is not a
Business Day, then such Interest Period shall end on the next
succeeding Business Day, subject to Section 7.1 hereof. If any
Interest Period determined hereunder would extend beyond the
Maturity Date, such Interest Period shall end on the Maturity
Date.
"IPO" means the initial public offering of shares of common
stock of the Guarantor.
"Letter of Credit" means a standby letter of credit issued
by Lender pursuant to Section 3.3 below substantially in the form
of Exhibit D attached hereto.
"LIBOR Advance" means a Facility A Advance or a Facility B
Advance as to which the Borrowers have selected LIBOR to
determine the interest rate.
"LIBOR Rate" means in respect of any Interest Period, the
rate of interest per annum at which deposits in U.S. Dollars are
offered to major banks in the London interbank market at
approximately 11:00 a.m. (London time), as reported by the
Telerate System page 3750 or such other page as may replace such
page 3750 on such system (rounded upwards, if necessary, to the
nearest one-sixteenth of one percent) for the purpose of
reporting London Interbank Offered Rates of major banks under the
heading for British Bankers Association Interest Settlement Rates
in the column designated "USD" (U. S. Dollar), two (2) Business
Days before the first day of an Interest Period. In the event
that LIBOR interest rates are not reported on the Telerate System
or such reported rates are not applicable to the selected
Interest Period, the Lender shall notify the Borrowers and upon
such notification, the LIBOR Rate shall mean in respect of any
Interest Period the rate of interest per annum (rounded upwards,
if necessary, to the nearest one sixteenth of one percent) at
which the Lender is able to acquire funds in Dollars equal to the
outstanding amount of the Advance for which the rate is to be
determined for the duration of the relevant Interest Period in
the London Interbank Eurocurrency Market at or about 11:00 a.m.
London time on the second Business Day prior to the commencement
of the relevant Interest Period for value on the first day of
such Interest Period, or at such time in any alternative marker
for such funds available to the Lender, as notified by the Lender
to the Borrowers, such notification, absent manifest error, to be
conclusive.
"Loan" means the principal amounts advanced by the Lender
hereunder and outstanding, the face amount of all Letters of
Credit outstanding hereunder, and the principal amount of any
unpaid Indemnity Payments outstanding hereunder.
"Loan Documents" means this Credit Agreement, the Mortgages,
the Security Agreement, the Deed of Trust, the Guaranty, the
Holding Account Agreement and the Notes.
"Material adverse effect" or "materially adversely affected"
means, unless specified otherwise, to affect in a material manner
the ability of the Borrowers to perform their obligations under
this Credit Agreement or the ability of the Guarantor to perform
its obligations under the Guaranty.
"Mortgages" means the United States First Preferred Fleet
Mortgage on the U.S. flag Vessels, the Vanuatu First Preferred
Fleet Mortgage on the Vanuatu flag Vessels, and the Bahamian
Statutory Mortgage and Deed of Covenants respecting the Bahamian
flag vessel, each in form and substance satisfactory to the
Lender.
"Net Worth" means the sum of the (i) par value of the
Guarantor's and the Borrowers' common stock, (ii) capital in
excess of par value of the Guarantor and the Borrowers and (iii)
retained earnings of the Guarantor and the Borrowers, but
excluding the amount of any write-up of any assets over their
depreciated cost.
"Notes" means the Facility A Note and the Facility B Note.
"Obligations" means and includes all loans, advances, debts,
liabilities, obligations, letters of credit or any other
financial accommodations, howsoever arising, owing by either
Borrower to the Lender of every kind and description (whether or
not for the payment of money); direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter
arising pursuant to the terms of this Credit Agreement, the Notes
and the other Loan Documents, including, without limitation, all
interest and other expenses that the Borrowers are obligated to
pay thereunder.
"Person" means any natural person, corporation, partnership,
limited liability company, firm, association, government,
Governmental Agency or any other entity other than the Borrowers
and whether acting in an individual, fiduciary or other capacity.
"Plan" means any employee pension benefit plan subject to
Title IV of ERISA and maintained by the Borrower or any member of
a Controlled Group, or any such plan, to which the Borrower or
any member of a Controlled Group is required to contribute on
behalf of any of its employees.
"Prime Advance" means a Facility A Advance or a Facility B
Advance as to which the Borrowers have selected the Prime Rate to
determine the interest rate or as to which the Prime Rate has
been applied pursuant to Section 6.3(b) below.
"Prime Rate" means the rate announced by the Lender at its
New York, New York office from time to time as its prime rate.
"Reportable Event" means a reportable event as defined in
Section 4043 of ERISA (29 U.S.C. Section 1343), except events for
which the notice provision has been waived by the Pension Benefit
Guaranty Corporation.
"Request for Borrowing" means each request for borrowing
given by the Borrowers pursuant to Section 5.1(c) hereof,
substantially in the form attached hereto as Exhibit B.
"Request for Letter of Credit" means a Request for Letter of
Credit given by the Borrowers pursuant to Section 5.1(d) hereof,
substantially in the form attached hereto as Exhibit C.
"Security Agreement" means the security agreement on certain
of the Borrowers' assets and revenues from the Borrowers to the
Lender dated as of October 27, 1997, as amended and ratified.
"Taxes" means any present or future taxes, levies, imposts,
duties or other charges of whatsoever nature imposed by any
Governmental Agency or taxing authority thereof.
"Total Assets" means the value of all of the assets of the
Borrowers on a consolidated basis using book value except that
the Vessels shall be included in such valuation at their fair
market values as determined pursuant to Section 15.2 of this
Credit Agreement.
"Total Debt" means all Indebtedness of the Guarantor on a
consolidated basis including, but not limited to, obligations
under long term charters, capital leasing obligations, guaranties
of indebtedness, contingent liabilities and subordinated debt,
all in amounts, if any, required to be carried as liabilities
according to GAAP.
"Total Loss" means in respect of any Vessel (i) actual or
constructive or compromised or arranged total loss of such
Vessel; or (ii) requisition for title or other compulsory
acquisition of such Vessel otherwise than by requisition for
hire; or (iii) capture, seizure, arrest, detention or
confiscation of such Vessel by any government or by persons
acting or purporting to act on behalf of any government unless
such Vessel is released from such capture, seizure, arrest,
detention or confiscation within thirty (30) days of the
occurrence thereof. A Total Loss shall be deemed to have
occurred (a) in the event of an actual total loss of a Vessel, on
the date of such loss, (b) in the event of damage to a Vessel
which results in a constructive or compromised or arranged total
loss of such Vessel, on the date of the occurrence of the event
giving rise to such damage, or (c) in the case of any event
referred to in clauses (ii) or (iii) above, on the date of the
occurrence of such event.
"Vessels" means the four (4) U.S. flag barges, the three (3)
Vanuatu flag barges, and the one (1) Bahamas flag diving support
vessel listed on Schedule 1 attached hereto and any other vessel
mortgaged to the Lender pursuant to Section 12.11 below.
"Working Capital" means the excess of the Guarantor's
Current Assets over its Current Liabilities.
1.2 Accounting Terms. Except as expressly stated herein,
all accounting terms not specifically defined herein shall be
construed in accordance with GAAP consistent with those applied
in preparation of the consolidated financial statements of the
Borrowers referred to in Section 12.1 hereof.
Section 2. Facility A.
2.1 Reducing Revolving Loan.
(a) Upon the terms and subject to the conditions herein
set forth, the Lender agrees to make the senior secured
reducing revolving loan to the Borrowers by, from time to
time prior to the Facility A Maturity Date, making one or
more Advances to the Borrowers in a total principal amount
not to exceed the lesser of (i) USD 30,000,000.00 and (ii)
such amount as reduced pursuant to Sections 7.2(a).
(b) Facility A will be advanced in minimum increments
of USD 100,000.00.
(c) The Facility A Advances are subject to the
following further provisions:
(i) at no time shall Facility A Advances exceed
thirty-five percent (35%) of the appraised value of the
Vessels at any time; and
(ii) prior to the Facility A Maturity Date, the
Borrowers may borrow under Facility A, repay such
Facility A Advances in the manner provided for in
Section 7.3(a) below and reborrow such amounts.
Section 3. Facility B.
3.1 Revolving Credit. Upon the terms and subject to the
conditions herein set forth, the Lender agrees to make the senior
secured revolving credit available to the Borrowers by, from time
to time prior to the Facility B Maturity Date, making an Advance
or Advances to the Borrowers or issuing one or more Letters of
Credit for the account of the Borrowers, provided that the
aggregate face amount of all Letters of Credit outstanding
hereunder shall not at any time exceed USD 10,000,000, and
provided further that the principal amounts of all outstanding
Facility B Advances and the face amount of Letters of Credit
shall not exceed, in the aggregate, USD 20,000,000.00 at any one
time. No Letter of Credit shall have a duration in excess of two
(2) years and no Letter of Credit shall have a duration beyond
the Facility B Maturity Date. Within such limit, the Borrowers
may borrow, repay pursuant to Section 7.3(a) and reborrow under
this Section 3.1. Each borrowing by the Borrowers from the
Lender under this Section shall be in an aggregate principal
amount of at least USD 200,000.00 and in integral multiples of
USD 100,000.00.
3.2 Borrowing Base.
(a) Notwithstanding any other provision of this Credit
Agreement, the aggregate principal amount of Facility B
Advances and the face amount of Letters of Credit at any
time outstanding shall not be in excess of the Borrowing
Base.
(b) As an additional condition precedent to the initial
Advance, all subsequent Advances and any Letters of Credit
issued under Facility B, the Borrowers shall provide to the
Lender a Borrowing Base Report.
(c) If at any time the test of Section 3.2(a) above is
not met, the Borrowers shall at the Lender's direction
either (i) within ten (10) Business Days provide to the
Lender sufficient additional collateral in form and
substance satisfactory to the Lender as shall be necessary
to insure that the test of Section 3.2(a) above is satisfied
or (ii) within three (3) Business Days prepay pursuant to
Section 7.4 hereof an amount as may be necessary to reduce
the aggregate principal amount outstanding under Facility B
to an amount which will allow the test of Section 3.2(a)
above to be met. The cure periods listed above shall start
running on the date notice of the Lender's decision is given
to the Borrowers.
3.3 Counter Indemnity.
The Borrowers jointly and severally agree to make each
Indemnity Payment to the Lender immediately on demand of the
Lender.
3.4 Drawings Under Letters of Credit. The Lender shall not
concern itself with the regularity or propriety of any demand
made under any Letter of Credit, provided that such demand is
made in the manner called for in such Letter of Credit and
(subject to such proviso) it shall not be a defense to a claim of
the Lender under this Section 3.4 that the Lender could have
resisted the payment in respect of which such claim is made.
3.5 Variations. The Borrowers' obligations under this
Section 3 shall not be in any way discharged or impaired by any
variation of the terms of any Letter of Credit or this Credit
Agreement or any document executed pursuant hereto to which the
Borrowers have expressly consented in writing.
3.6 Security. The Borrowers' obligations under this
Section 3 shall be in addition to and not in substitution for any
security now or hereafter held by the Lender in respect of its
obligations under this Credit Agreement.
3.7 Certificates. A certificate together with evidence of
payment submitted by the Lender to the Borrowers as to the amount
of any Indemnity Payment owed to the Lender in respect of a
Letter of Credit shall (save for manifest error) be conclusive
and binding on the Borrowers for all purposes.
Section 4. The Notes.
(a) The Borrowers' joint and several obligations to pay
the principal of, and interest on, the Loan shall be
evidenced by the Notes.
(b) At the time of the making of each Advance, and upon
each payment of the principal of the Loan, the Lender shall,
and is hereby authorized to, make a notation on the Notes
specifying the date and the amount of such Advance or such
payment. Failure to make any such notation shall not limit
or otherwise affect the Borrowers' or any guarantor's
obligations in respect of this Credit Agreement or the
Notes.
Section 5. Manner of Drawdown and Issuance of Letters of Credit.
5.1 Manner of Drawdown or Issuance. The Borrowers may draw
an Advance or have a Letter of Credit issued upon:
(a) The Lender's prior satisfaction that the relevant
conditions set out in Section 9 herein have been complied
with;
(b) No event having occurred to the actual knowledge of
the Borrowers which, with or without notice or lapse of
time, would constitute an Event of Default;
(c) The Lender having received from the Borrowers, for
an Advance, an irrevocable Request for Borrowing (i) before
10:00 a.m. New York time at least three (3) and not more
than ten (10) Business Days in the case of a LIBOR Advance
and (ii) before 3:00 p.m. New York time at least one (1) and
not more than ten (10) Business Days in the case of a Prime
Advance prior to the Drawdown Date selected by the
Borrowers.
(d) The Lender having received from the Borrowers, for
the issuance of a Letter of Credit, an irrevocable Request
for Letter of Credit at least five (5) Business Days prior
to the Drawdown Date on which the Letter of Credit is to be
issued.
5.2 Disbursement of Funds. Disbursement of each Advance
proceeds shall be made by the Lender to the Borrowers as directed
by the Borrowers in the Request for Borrowing.
5.3 Failure to Borrow; Delay. If the borrowing described
in any Request for Borrowing or the issuance of a Letter of
Credit described in any Request for Letter of Credit fails to
take place or is delayed because any of the conditions specified
in Section 9 below are not satisfied, the Borrowers shall jointly
and severally indemnify the Lender against any loss incurred as a
result of the giving of such Request for Borrowing or Request for
Letter of Credit, including without limitation any loss resulting
from actions taken by the Lender to fund the requested Advance,
but excluding any loss resulting from the gross negligence or
willful misconduct of the Lender. A certificate of the Lender
stating in reasonable detail the amount of, and basis for, any
such loss incurred by the Lender shall be conclusive absent
manifest error.
Section 6. Interest.
6.1 Rate of Interest.
(a) The Borrowers agree to pay interest in respect of
all amounts outstanding under any LIBOR Advance at a rate
per annum of the LIBOR Rate plus 3%.
(b) The Borrowers agree to pay interest in respect of
all amounts outstanding under any Prime Advance at a rate
per annum of the Prime Rate plus 1/2%.
(c) Interest on unpaid principal amounts of LIBOR
Advances shall be computed on the basis of a year of 360
days and the actual number of days elapsed.
(d) Interest on unpaid principal amounts of Prime
Advances shall be computed on the basis of a year of 365
days or, when applicable, 366 days.
(e) The Borrowers agree to pay interest in respect of
all Indemnity Payments at a rate per annum equal to the
Prime Rate plus 2 and 1/2% from the date the obligation to
make an Indemnity Payment arises to the date of payment.
Interest on unpaid Indemnity Payments shall be computed on
the basis of a year of 365 days or, when applicable, 366
days.
6.2 Payment of Interest. Except as provided in Section
6.1(e) above with respect to interest on Indemnity Payments,
interest shall be paid by the Borrowers on each Interest Payment
Date.
6.3 Conversion of LIBOR Advance to Prime Advance.
(a) At the end of any Interest Period for a LIBOR
Advance, the Borrowers may, by irrevocable written notice to
the Lender received at least three (3) Business Days prior
to the end of such Interest Period, elect to convert such
Advance to a Prime Advance.
(b) The Borrowers shall notify the Lenders before 10:00
a.m. New York time three (3) Business Days prior to the end
of each Interest Period for any LIBOR Advance as to the
length selected by the Borrowers for the next Interest
Period. If no such notice is given, such LIBOR Advance
shall automatically convert to a Prime Advance.
6.4 Overdue Payment of Principal and Interest. Overdue
principal of, and (to the extent permitted by law) overdue
interest in respect of, amounts due under this Credit Agreement
shall bear interest, payable on demand, at a rate per annum which
shall be 2% in excess of the interest rate otherwise applicable
pursuant to Section 6.1 above.
6.5 Compliance with Law. Notwithstanding any provision of
this Credit Agreement or the Notes to the contrary, in no event
shall the aggregate amount of consideration which constitutes
interest under any applicable law which is contracted for,
charged or received hereunder or under this Credit Agreement or
the Notes ("Interest") exceed the maximum amount of nonusurious
interest allowed by law, and any excess shall be credited on this
Credit Agreement or the Notes (or if all obligations under this
Credit Agreement and the Notes shall have been paid in full,
refunded to the Borrowers). For purposes of the foregoing, the
maximum amount of interest allowed by law shall be calculated by
determining the amount of interest that could be contracted for,
charged or received during the term hereof at the maximum rate of
nonusurious interest allowed from time to time by applicable law
as is now or, to the extent allowed by law, as may hereafter be
in effect (the "maximum nonusurious interest rate") and, if at
any time the rate of Interest to accrue would exceed the maximum
nonusurious interest rate, the rate of Interest to accrue under
the Notes shall be limited to the maximum nonusurious interest
rate, but any subsequent reductions in the LIBOR Rate or the
Prime Rate shall not reduce the rate of Interest to accrue under
this Credit Agreement or on the Notes below the maximum
nonusurious interest rate until the total amount of Interest
accrued and paid under this Credit Agreement or on the Notes
equals the amount of Interest which could have accrued if a rate
per annum equal to the LIBOR Rate plus 3% or the Prime Rate plus
1/2% had at all times been in effect.
Section 7. Loan Payments
7.1 Payments on Non-Business Days. Whenever any payment to
be made hereunder or under the Notes shall be stated to be due on
a day which is not a Business Day, the due date thereof shall be
extended to the next succeeding Business Day; provided, however,
that if such next succeeding Business Day is in a new month, then
the payment required under this Credit Agreement or the Notes
shall be made on the first Business Day preceding the original
date on which payment was due. If a payment of principal has
been extended pursuant to this Section 7.1, interest shall be
payable on such principal at the applicable rate during such
extension.
7.2 Reduction of Facility A.
(a) Following the Facility A Conversion Date, the
Facility A Commitment shall be permanently reduced by forty-
eight (48) consecutive monthly reductions on each Commitment
Reduction Date. Each reduction shall be in the amount of
USD 625,000, provided that the final reduction shall be in
the amount required to reduce Facility A to zero. Such
reductions in the Facility A Commitment shall be
irrespective of whether any amounts are outstanding under
Facility A and irrespective of whether any repayment is due
by the Borrower under Section 7.2(b) below.
(b) If the amount outstanding under Facility A on any
Commitment Reduction Date is greater than the Lender's
Facility A Commitment on such Commitment Reduction Date
(after taking into account any reduction under Section
7.2(a) above), the Borrower shall reduce the amount
outstanding under Facility A by a payment of such excess on
such Commitment Reduction Date together with any interest
accrued on such amount.
(c) The Borrowers shall have the right to permanently
reduce the Facility A Commitment in whole or in part,
without premium or penalty, from time to time pursuant to
this Section 7.2(c) on the following terms and conditions:
(i) the Borrowers shall give the Lender at least
four (4) Business Days' prior written notice of its
intent to reduce the Facility A Commitment, the amount
of such reduction and the date of such reduction;
(ii) each such reduction shall be in a principal
amount of at least USD 200,000.00 and in integral
amounts of USD 100,000.00; and
(iii) such reduction of the Facility A Commitment
shall be permanent and irrevocable.
(d) Within sixty (60) days after the end of each
quarter, commencing with the quarter ending June 30, 1999,
Facility A shall be reduced in an amount equal to fifty
percent (50%) of Excess Cash Flow for each such quarter.
If, after giving effect to such reduction, the principal
amount of Advances under Facility A exceeds the available
amount of Advances under Facility A, the Borrower shall
prepay the Loan in the amount of such excess. The Lender
shall apply payments received pursuant to this Section
7.2(d) in accordance with Section 7.5 below.
7.3 Repayment of Facility A and Facility B.
(a) The Borrowers may repay any amounts outstanding
under Facility A prior to the Facility A Maturity Date, and
Facility B prior to the Facility B Maturity Date, on the
following terms and conditions:
(i) any amounts outstanding as LIBOR Advances may
be repaid upon irrevocable written notice to the Lender
(3) days prior to the end of an Interest Period without
prepayment fee or penalty, but any repayment made
before the end of an Interest Period must be
accompanied by Breakage Costs;
(ii) any amounts outstanding as Prime Advances may
be repaid upon irrevocable written notice to the Lender
no later than 4:00 p.m. New York time on the day before
repayment and without prepayment fee or penalty.
(b) The Borrowers shall jointly and severally repay all
amounts outstanding under Facility A to the Lender in one
payment on the Facility A Maturity Date. The Borrowers
shall jointly and severally repay all amounts outstanding
under Facility B to the Lender in one payment on the
Facility B Maturity Date.
7.4 [Intentionally Omitted].
7.5 Mandatory Prepayment. If there shall have occurred a
sale or Total Loss of any Vessel, on the earlier of (x) the date
the sale or insurance proceeds are received or (y) ninety (90)
days after the date of occurrence of the sale or Total Loss, the
Borrowers shall (A) pay to the Lender an amount equal to the
insured value of such Vessel or the sale proceeds of such Vessel
as the case may be and (B) pay accrued interest thereon to the
date of such prepayment together with any Breakage Costs,
provided, that such prepayment shall not be required if, after
giving effect to such Total Loss, the total fair market value of
the remaining Vessels as determined under Section 15.2 is not
less than 285% of the amounts outstanding under Facility A. The
Lender shall apply payments received pursuant to this Section 7.5
to the outstanding interest on, and then principal of, Facility
A.
7.6 Payment Procedure. All payments and prepayments made
by the Borrowers under the Notes or this Credit Agreement shall
be made by wire transfer in immediately available funds before
12:00 noon, New York Time on the date such payment is required to
be made to the Lender pursuant to the Lender's written
instructions. Any payment received and accepted by the Lender
after such time shall be considered for all purposes (including
the calculation of interest, to the extent permitted by law) as
having been made on the next following Business Day. All
payments and prepayments received shall be applied first to
accrued interest and then to the reduction of principal.
7.7 Net Payments.
(a) All sums payable by the Borrowers under this Credit
Agreement, or the Notes, whether of principal, interest,
fees or otherwise, shall be paid in full without set-off or
counterclaim and in such amounts as may be necessary in
order that all such payments (after deduction or withholding
for or on account of any Taxes, other than any Tax, on or
measured by the income of the Lender) shall not be less than
the amounts otherwise specified to be paid under this Credit
Agreement or the Notes.
(b) A certificate as to any additional amounts payable
to the Lender under this Section 7.7 submitted to the
Borrowers by the Lender shall show in reasonable detail the
amount payable and the calculations used to determine in
good faith such amount and shall be conclusive absent
manifest error.
(c) With respect to each deduction or withholding for
or on account of any Taxes, the Borrowers shall promptly
furnish to the Lender such certificates, receipts and other
documents as may be required (in the reasonable judgment of
the Lender) to establish any income tax credit to which the
Lender may be entitled. In the event that such a deduction
or withholding for Taxes becomes so applicable, the Lender
and the Borrowers will use their best efforts to minimize
the effect of such Taxes.
7.8 Rights of Set-off. The Lender shall, with respect to
the Loan and all other amounts payable hereunder, have all rights
of set-off, banker's lien and counterclaim as it is entitled to
exercise under the law of the jurisdiction in which such rights
are exercised.
7.9 Changes in Circumstances.
(a) If, by reason of any change subsequent to the date
of this Credit Agreement in applicable law or regulation or
regulatory requirement or directive whether or not having
the force of law or in the interpretation or application
thereof by the governmental or quasi-governmental or
judicial authority or central bank charged with the
administration or interpretation of such law or regulation
(a "Change in Circumstance"), the Lender shall determine in
good faith that it has become unlawful or impossible for it
to perform its obligations hereunder, the Lender shall
immediately notify the Borrowers and, after such notice, the
liability of the Lender to advance or maintain the Advances
or issue Letters of Credit shall immediately cease or, (i)
if any Advance has been made, the Borrowers shall prepay to
the Lender such Advance, or (ii) if any Letter of Credit has
been issued, the Borrowers and the Lender shall use their
reasonable good faith efforts to secure a replacement letter
of credit at the sole expense of the Borrowers; provided
that if the Borrowers are unable to secure such replacement
letter of credit, the Borrowers shall deposit with the
Lender at an account designated by the Lender an amount
equal to the face amount of all then outstanding Letters of
Credit. In any such event, but without prejudice to the
aforesaid obligation of the Borrowers to prepay, the
Borrowers and the Lender shall negotiate in good faith for a
period not to exceed ninety (90) days commencing from the
date notice is given by the Lender as provided above, with a
view to agreeing to terms for making or continuing to make
available the Commitment from another jurisdiction or
funding of the affected Advance and issuing or reissuing the
affected Letters of Credit from alternative sources.
(b) If the effect of any Change in Circumstance having
effect after the date hereof, is to:
(i) change the basis of taxation to the Lender of
payment of principal or interest or any other payment
due pursuant to the terms of this Credit Agreement or
the Notes (other than an increase in the rate of
taxation on the Lender's overall net income); or
(ii) impose or modify or deem applicable any
reserve requirements or require the making of any
special deposits against or in respect of any assets or
liabilities of, deposits with or for the account of or
loans by the Lender; or
(iii) impose on the Lender any other condition
affecting the Commitment or the Loan or any part
thereof, the result of which is either to increase the
cost to the Lender of making available or maintaining
the Commitment or the Loan or any part thereof or to
reduce the amount of any payment received by the Lender
hereunder; then and in any such case if such increase
or reduction in the opinion of the Lender materially
affects the interests of the Lender;
(7) the Lender shall notify the Borrowers of
any of the above circumstances and the Lender
shall use all reasonable efforts (without any
financial commitment on its part) to avoid the
effects of any such change and in particular,
shall consider (without any commitment on its
part) fulfilling its obligations under this Credit
Agreement through another office or transferring
its interest in this Credit Agreement and the
Notes at par to one or more of its Affiliates not
affected by the Change in Circumstances if such
transfer can be accomplished without material
added cost to the Lender and in a manner
compatible with its operational procedures; or
(7) If the efforts referred to in (A) above
fail to have the effect of eliminating the
increased cost incurred by the Lender or the
reduction in the amount of any payment received,
the Borrowers shall within three (3) Business Days
following demand (whether made before or after any
repayment of the amounts outstanding under this
Credit Agreement and the Notes) pay to the Lender
such amount as the Lender shall certify to be
necessary to compensate the Lender for such
additional cost or reduction; provided, however,
that despite such payments, the Lender and the
Borrowers shall continue to use their best efforts
to reduce the effect of such Change in
Circumstance; and
(7) At any time thereafter, so long as the
Change in Circumstance giving rise to the
obligation to make the compensating payment
continues, the Borrowers may, upon giving the
Lender not less than ten (10) Business Days'
written notice which shall be irrevocable, prepay
to the Lender the Loan (except for outstanding
Letters of Credit) and shall deposit with the
Lender at an account designated by the Lender an
amount equal to the face amount of all then
outstanding Letters of Credit.
(c) If any amounts outstanding under this Credit
Agreement are to be prepaid by the Borrowers pursuant to any
of the provisions of this Section 7.9, the Borrowers shall
simultaneously with such prepayment pay to the Lender all
Breakage Costs and all accrued interest and fees on the
amounts to be prepaid.
(d) The certificate of determination of the Lender, as
to any matters referred to in this Section 7.9 shall show in
reasonable detail the amount payable and the calculations
used in good faith to determine such amount and shall, save
for any manifest error, be conclusive and binding on the
Borrowers.
7.10 Unavailability of Dollars.
(a) In the event that the Lender is not able to obtain
Dollars in the London Interbank Market, in the manner in
effect on the date of this Credit Agreement, the Dollars
required by the Lender to fund the Loan shall be made
available from such other financial sources as may be
available to the Lender. In such an event the rate of
interest applicable to the Loan for the relevant Interest
Period will be for LIBOR Advances, the aggregate of 3% and
for Prime Advances, 1/2% and the cost (expressed as a per
annum percentage) to the Lender from such financial sources
and for periods as may be elected by the Lender. Each
change in such cost in respect of funding the Loan will
cause an immediate corresponding change in the rate of
interest payable by the Borrowers. This arrangement shall
be temporary and should Dollars subsequently become
available to the Lender in the London Interbank Market, in
the manner in effect on the date of this Credit Agreement,
then from the conclusion of the then current Interest Period
for funding from alternative sources, the Loan will bear
interest at the rate detailed in Section 6.1(a) above.
(b) In the event that the Lender is unable (for any
reason whatsoever) to acquire the required Dollars from any
source, the parties hereto shall meet to discuss an
alternative arrangement. In the absence of mutual agreement
and at the end of ten (10) Business Days after the meeting
referred to above the obligation of the Lender hereunder to
make available the Loan shall be extinguished forthwith and
the Loan shall be repaid forthwith by the Borrowers to the
Lender along with all fees and Breakage Costs for the Loan.
7.11 Holding Account.
(a) On or before the first Drawdown Date, the Borrowers
shall cause to be established in the name of the Borrowers
for the benefit of the Lender an account and lock box (the
"Holding Account" and the "Lock Box") at the Houston, Texas
office of The Frost National Bank pursuant to the Holding
Account Agreement. The Borrowers shall instruct all of
their customers and account debtors to make all payments to
the Lock Box or the Holding Account of all accounts
receivable of the Borrowers, including but not limited to
Earnings as defined in the Security Agreement. Any payments
received directly by the Borrowers from their customers or
account debtors will be deposited immediately in the Holding
Account. Until an Event of Default shall have occurred, the
Borrowers shall have the right to transfer from the Holding
Account any amounts in the Holding Account. After an Event
of Default shall have occurred all amounts in the Holding
Account may be applied by the Lender in payment of any
amounts due and outstanding under this Credit Agreement or
the Notes.
(b) On each Interest Payment Date, the Facility A
Maturity Date, the Facility B Maturity Date and each day on
which commitment fee is payable and only in the event that
the Borrowers have failed to make a payment in accordance
with the terms of this Credit Agreement and the Notes, all
amounts in the Holding Account (including interest accrued),
shall be used first to pay interest due on such Interest
Payment Date, second to pay any commitment fee due on such
date and third to repay the principal amount outstanding on
the Notes which is due and payable to the Lender on such
date. After such payments have been made, all other funds
in the Holding Account shall be released to the Borrowers.
(c) The Holding Account shall terminate and any funds
remaining in it shall be paid the Borrowers upon the
fulfillment of all of the Borrowers' Obligations or upon the
prior written consent of the Lender.
7.12 Tax Treaty. The Lender is organized under the laws of
the Kingdom of Norway and agrees:
(a) To complete and deliver to the Borrowers on or
before the first Drawdown Date Internal Revenue Service Form
4224.
(b) To complete and deliver to the Borrowers from time
to time, provided the Lender is eligible to do so, any
successor or additional forms required in order to secure an
exemption from, or reduction in the rate of, income tax
withholding imposed by the United States of America. The
Lender shall amend or supplement any such form as required
and permitted by applicable law to insure that it is in full
force and effect, accurate and complete at all times.
Section 8. Security.
8.1 Mortgages. The Credit Facility and all other amounts
due under this Credit Agreement shall be secured in accordance
with the provisions of the Mortgages.
8.2 Security Agreement. The Credit Facility and all other
amounts due under this Credit Agreement shall be secured in
accordance with the provisions of the Security Agreement.
8.3 Guaranty. The Credit Facility and all other amounts
due under this Credit Agreement shall be secured in accordance
with the provisions of the Guaranty.
8.4 Holding Account Agreement. The Credit Facility and all
other amounts due under this Credit Agreement shall be secured in
accordance with the terms of the Holding Account Agreement.
8.5 Deed of Trust. The Credit Facility and all other
amounts due under this Credit Agreement shall be secured in
accordance with the terms of the Deed of Trust.
8.6 Further Assurances. The Borrowers agree to execute and
deliver to the Lender such financing statements or other
instruments or documents as the Lender may reasonably request in
order to perfect the security created by the Mortgage, the
Security Agreement, the Deed of Trust and the Holding Account
Agreement or otherwise required by this Credit Agreement.
Section 9. Conditions Precedent.
9.1 Documents Required as Conditions Precedent to the
Drawdown of the First Advance. The obligation of the Lender to
make the first Advance (or issue the first Letter of Credit,
whichever is earlier) is subject to the condition precedent that
the Lender shall have received at or prior to the first Drawdown
Date all of the following, each dated on or before the first
Drawdown Date and each in form and substance satisfactory to the
Lender.
(a) The executed Notes and the other Loan Documents.
(b) Certified copies of the resolutions of the Boards
of Directors of the Borrowers and the Guarantor authorizing
the execution and delivery by the Guarantor and the
Borrowers of the Loan Documents to which they are parties
and all documents evidencing other necessary corporate
action with respect to the Loan Documents.
(c) Certificates of the Secretaries or the Assistant
Secretaries of the Guarantor and the Borrowers certifying
the names and true signatures of the officers of the
Guarantor and the Borrowers authorized to sign the Loan
Documents on behalf of the Guarantor and the Borrowers and
the other documents or certificates to be executed by the
Guarantor and the Borrowers pursuant to this Credit
Agreement.
(d) Copies certified as of a recent date by the
Secretaries or the Assistant Secretaries of the Guarantor
and the Borrowers of their By-Laws.
(e) Copies of the Guarantor's and the Borrowers'
Certificates of Incorporation certified by the relevant
officials of their jurisdiction of incorporation within
thirty (30) days from the date of the first Drawdown Date
and certificates dated within thirty (30) days of the first
Drawdown Date of the relevant officials of their
jurisdiction of incorporation as to the existence and good
standing of the Guarantor and the Borrower.
(f) An opinion of Jones, Walker, Waechter, Poitevent,
Carrere & Denegre, counsel to the Guarantor and the
Borrowers, acceptable to the Lender.
(g) An opinion of Gardere Wynne Sewell & Riggs, L.L.P.,
special counsel to the Lender, acceptable to the Lender.
(h) The Borrowers shall have executed and delivered to
the Lender copies of all documents and filings and shall
have taken all actions necessary to perfect the security
interests created by the Mortgages, the Deed of Trust, the
Holding Account Agreement and the Security Agreement as
first priority perfected security interests.
(i) All orders, consents, approvals, licenses,
authorizations and validations of, and filings, recordings
and registrations with and exemptions by any Governmental
Agency or any Person (other than any routine filings which
may be required after the date hereof with appropriate
governmental authorities in connection with the operation of
the Vessels) required to (i) authorize the execution,
delivery and performance by the Borrowers and the Guarantor
of the Loan Documents to which they are parties or (ii)
prevent the execution, delivery and performance by the
Borrowers and the Guarantor of the Loan Documents to which
they are parties from resulting in a breach of any of the
terms or conditions of, or resulting in the imposition of
any lien, charge or encumbrance upon any properties of the
Borrowers or the Guarantor pursuant to, or constituting a
default (with due notice or lapse of time or both), or
resulting in an occurrence of any event for which any holder
or holders of Indebtedness may declare the same due and
payable under, any indenture, agreement, order, judgment or
instrument under which any Borrower or the Guarantor is a
party (other than the Mortgages, the Holding Account
Agreement or the Security Agreement) or to the Borrowers'
knowledge after due inquiry by which the Borrowers or the
Guarantor or their property may be bound or affected, or
under the Certificates of Incorporation or By-Laws of the
Borrowers or the Guarantor, shall have been obtained or
made.
(j) Evidence of the insurance required by Section 12.2
of this Credit Agreement, accompanied by a report of the
Borrower's insurance broker that such insurance complies
with the terms of the Mortgages and the Deed of Trust.
(k) Payment by the Borrowers of the fees referred to in
Section 10.1 below required to be paid on or before the
first Drawdown Date.
(l) Confirmation of class certificates for the Vessels
from the American Bureau of Shipping or similar
classification society showing the Vessels to be in class
with no recommendations affecting class.
(m) Copies of evaluations dated no earlier than
December 1, 1997 of the fair market value of the Vessels
without charter or other contractual commitments by an
independent ship broker or appraiser selected by the
Borrowers but acceptable to the Lender, or if unavailable on
the date of the first Advance, the Borrowers agree to
provide such evaluations no later than July 1, 1998.
(n) All of the Indebtedness of the Borrowers for
borrowed money arising in the future shall be fully
subordinated to the Obligations on terms and conditions
acceptable to the Lender.
(o) There shall have been no material adverse change in
the financial condition of any Borrower or the Guarantor
since the financial statements delivered to the Lender for
the period ending December 31, 1997.
(p) Evidence that the proceeds received by the
Guarantor from the IPO, after payment of underwriting
commissions, legal fees and other expenses in connection
therewith, equal USD 68,000,000.00 or more.
(q) The Lender shall have received a Phase I
Environmental report of the real estate covered by the Deed
of Trust and such report shall be satisfactory to the
Lender.
(r) If the first Drawdown Date is not the date hereof,
certificates dated the first Drawdown Date of an officer of
the Borrowers and the Guarantor, respectively, certifying
that:
(i) The representations and warranties contained
in Section 11 below and in Section 7 of the Guaranty
are correct on and as of the first Drawdown Date as
through made on and as of such date except those
expressly made as of another date; and
(ii) No event has occurred and is continuing, or
would result from the first Advance or first issuance
of a Letter of Credit which constitutes an Event of
Default or with the passing of time or the giving of
notice would constitute an Event of Default.
9.2 Additional Conditions Precedent to Subsequent Advances
and Letters of Credit. The obligation of the Lender to make each
subsequent Advance and to issue each subsequent Letter of Credit
shall be subject to the further condition precedent that the
Lender shall have received at or prior to the date of such
subsequent Advance or the date of issuance of such subsequent
Letter of Credit, each dated on or before the date of the
subsequent Advance or subsequent Letter of Credit and each in
form and substance satisfactory to the Lender:
(a) a certificate (dated the date of such Advance or
Letter of Credit) of an officer of the Borrowers and the
Guarantor, respectively, certifying that:
(i) The representations and warranties
contained in Section 11 below and in Section 7 of
the Guaranty are correct on and as of the date
such Advance is made or Letter of Credit is issued
as though made on and as of such date except those
expressly made as of another date; and
(ii) No event has occurred and is continuing,
or would result from such Advance, or from the
issuance of such Letter of Credit, which
constitutes an Event of Default or with the
passing of time or the giving of notice would
constitute an Event of Default.
(b) payment by the Borrowers of the fees required to be
paid on or before such date by Section 10.1 below.
9.3 Waiver of Conditions Precedent. All of the conditions
precedent contained in this Section 9 are for the sole benefit of
the Lender and the Lender may waive any or all of them in its
absolute discretion.
Section 10. Fees and Expenses.
10.1 Fees.
(a) The Borrowers shall jointly and severally pay to
the Lender an origination fee of USD 700,000, payable as
follows:
(i) USD 175,000.00 on the date of this Credit
Agreement;
(ii) USD 150,000.00 which has already been paid to
the Lender;
(iii) USD 125,000.00 on the earlier of (1) the
request by the Borrowers for the first Facility A
Advance hereunder or (2) September 1, 1998;
(iv) USD 125,000.00 on the earlier of (1) the
request by Borrowers for a Facility A Advance, after
which Advance is made the aggregate of Facility A
Advances shall for the first time exceed USD
10,000,000.00 or (2) December 1, 1998; and
(v) USD 125,000.00 on the earlier of (1) the
request by Borrowers for a Facility A Advance, after
which Advance is made the aggregate of Facility A
Advances shall for the first time exceed USD
20,000,000.00 or (2) February 1, 1999.
provided, however, that the origination fee amounts
described in (iii), (iv) and (v) above shall be immediately
due and payable upon the termination or refinancing of
Facility A.
(b) The Borrowers shall pay to the Lender an annual
administrative fee of USD 25,000.00 on each anniversary of
this Credit Agreement.
(c) The Borrowers shall pay to the Lender a commitment
fee of one-half of one percent (1/2%) per annum of (i) the
daily undrawn portion of the Facility B Commitment up to and
including the Facility B Maturity Date and (ii) the daily
undrawn portion of the Facility A Commitment up to and
including the Facility A Maturity Date. Such commitment fee
shall begin to accrue on the date of this Credit Agreement
and shall be payable quarterly in arrears, the first such
payment to be made on June 30, 1998 and quarterly
thereafter. The amount of the commitment fee shall be
computed on the basis of a year of 360 days and the actual
number of days elapsed.
(d) The Borrowers shall pay to the Lender a letter of
credit fee equal to one and one half percent (1 1/2%) per
annum on the face amount of each Letter of Credit
outstanding, payable quarterly in arrears.
10.2 Expenses. The Borrowers jointly and severally agree,
whether or not any Advance is made or Letter of Credit is issued,
to promptly pay or reimburse the Lender upon demand for all
reasonable fees and disbursement of the Lender, including, but
not limited to, travel and other out-of-pocket expenses of the
Lender and the reasonable fees and expenses of external counsel
and technical consultants to the Lender, incurred in connection
with (a) the preparation, execution and delivery of the Loan
Documents, the making of Advances and issuance of Letters of
Credit under this Credit Agreement and all other documents
referred to herein and any amendments, renegotiation, refinancing
or waivers to or termination of any thereof, (b) the recording,
filing and perfection of all security interests created by the
Loan Documents and (c) the protection of the rights of the Lender
under this Credit Agreement and all other documents referred to
herein and the enforcement of payment of the Obligations, whether
by judicial proceedings or otherwise.
10.3 General Indemnity. The Borrowers hereby jointly and
severally agree to:
(a) pay and hold the Lender harmless from and against
any and all present and future stamp and other similar Taxes
with respect to the Notes and the other Loan Documents and
save the Lender harmless from and against any and all
liabilities with respect to or resulting from any delay or
omission to pay such Taxes, and will indemnify the Lender
for the full amount of Taxes paid by the Lender in respect
of payments made or to be made hereunder and any liability
(including penalties, interest and expenses) arising
therefrom or with respect thereto, whether or not such Taxes
were correctly or legally asserted;
(b) indemnify the Lender, and its officers, directors,
employees, representatives, agents, attorneys and Affiliates
(an "Indemnitee") from and hold each of them harmless
against and promptly upon demand pay or reimburse each of
them for, any and all actions, suits, proceedings (including
any investigations, litigation or inquiries), claims,
demands and causes of action, and, in connection therewith,
all reasonable costs, losses, liabilities, damages or
expenses of any kind or nature whatsoever (collectively the
"Indemnity Matters") which may be incurred by or asserted
against or involve any of them (whether or not any of them
is designated a party thereto) as a result of, arising out
of or in any way related to (i) any actual or proposed use
by the Borrowers of the proceeds of the Loan, (ii) the
operations of the business of the Borrowers, (iii) any
bodily injury or death or property damage occurring in or
upon or in the vicinity of any Vessel or any other property
owned or operated by the Borrowers, (iv) the failure of the
Borrowers to comply with any requirement of any Government
Agency, or (v) any other aspect of this Credit Agreement,
the Notes and the other Loan Documents, including, without
limitation, the reasonable fees and disbursements of counsel
and all other expenses incurred in connection with
investigating, defending or preparing to defend any such
action, suit, proceeding (including any investigations,
litigation or inquiries) or claim and including all
Indemnity Matters arising by reason of the negligence of any
Indemnitee;
(c) In the case of any indemnification hereunder, the
Lender or other Person indemnified hereunder shall give
notice to the Borrowers within a reasonable period of time
of any such claim or demand being made against it and the
Borrower shall have the non-exclusive right to join in the
defense against any such claim or demand provided that if
the Borrowers provide a defense, the Indemnitee shall bear
its own cost of defense unless there is a conflict of
interest between the Borrowers and such Indemnitee.
(d) No Indemnitee may settle any claim to be
indemnified pursuant to this Section 10.3 without the
consent of the indemnitor, such consent not to be
unreasonably withheld; provided, that the indemnitor may not
reasonably withhold consent to any settlement that an
Indemnitee proposes, if the indemnitor does not have the
financial ability to pay all of its obligations outstanding
and asserted against the Indemnitee at that time, including
the maximum potential claims against the Indemnitee to be
indemnified pursuant to this Section 10.3.
(e) Notwithstanding anything to the contrary in this
Credit Agreement, the Borrowers shall have no indemnity
obligation with respect to any Indemnitee Matter caused by
or resulting from the gross negligence or willful misconduct
of the Lender or any other Indemnitee.
(f) It is the parties' understanding that neither the
Lender nor any other Indemnitee does now, has never and does
not intend in the future to exercise any operational control
or maintenance over the Vessels or any other properties and
operations owned or operated by the Borrowers, nor has any
of them in the past, presently, or intends in the future to,
maintain an ownership interest in the Vessels or any other
properties owned or operated by the Borrowers except as may
arise upon enforcement of the Lender's rights under the
Mortgages, the Deed of Trust or the Security Agreement.
(g) Should, however, the Lender or any other
Indemnitee hereafter exercise any ownership interest in or
operational control over the Vessels or any other properties
owned or operated by the Borrowers, e.g., including but not
limited to, through foreclosure, then the above stated
indemnity and hold harmless shall be limited with respect to
any actions or failures to act by the Lender or other
Indemnitee subsequent to exercising such interest or
operational control, to the extent such action or inaction
by the Lender or other Indemnitee is admitted by the Lender
or other Indemnitee or is found by a court of competent
jurisdiction to have caused or made worse any condition for
which liability is asserted.
(h) The indemnity and hold harmless contained in this
Section 10.3 shall not extend to the Lender or any other
Indemnitee in its or his capacity as an equity investor in
the Borrowers or as an owner of any property or interest as
to which the Borrowers are also an owner but only to the
Lender's capacity as a lender or a holder of security
interests.
10.4 Survival. The obligations of the Borrowers under this
Section 10 shall survive payment of all other amounts due under
this Credit Agreement.
Section 11. Representations and Warranties of Borrowers.
Each Borrower represents and warrants to the Lender as
follows:
11.1 Due Incorporation, Qualification, Etc. It is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and is duly qualified and
in good standing as a foreign corporation to do business in the
jurisdictions in which the failure to be so qualified would have
a material adverse effect on its business or financial condition,
and it has full corporate power and authority to own its
properties and assets and to conduct its business as presently
conducted.
11.2 Capacity. It has full corporate power and authority to
execute and deliver, and to perform and observe the provisions of
the Loan Documents to which it is a party and to carry out the
transactions contemplated hereby and thereby.
11.3 Authority and Enforceability. The execution, delivery
and performance by such Borrower of the Loan Documents to which
it is a party have been or will be duly authorized by all
necessary corporate action. This Credit Agreement (including the
New York choice of law) constitutes, and the other Loan Documents
to which it is a party constitute, or will constitute, legal,
valid and binding obligations of such Borrowers enforceable
against it in accordance with their respective terms, subject to
laws affecting creditors' rights generally and applicable
equitable principles. The Mortgages, the Deed of Trust, the
Security Agreement and the Holding Account Agreement shall on the
first Drawdown Date create and constitute valid and perfected
security interests in and to the properties covered thereby,
subject to the exceptions contained therein, enforceable against
all third parties, subject to laws affecting creditors' rights
generally and applicable equitable principles, and shall secure
the Credit Facility.
11.4 Governmental Approvals. No order, consent, approval,
license, authorization, or validation of, or filing, recording or
registration with (other than any routine filings which may be
required after the date hereof with appropriate governmental
authorities in connection with the operation of the Vessels or
required in connection with the perfection of the security
interests created by any of the Loan Documents), or exemption by,
any Governmental Agency, is required to authorize the execution,
delivery and performance by such Borrower of the Loan Documents
to which it is a party.
11.5 Compliance with Other Instruments. The execution and
delivery of this Credit Agreement and compliance with its terms,
the issuance of the Notes and the execution and delivery of the
Mortgages, the Deed of Trust, the Security Agreement and the
Holding Account Agreement and the compliance with their terms as
contemplated herein, do not result in a breach of any of the
terms or conditions of, or result in the imposition of any lien,
charge or encumbrance (except those contemplated by this Credit
Agreement) upon any properties of such Borrower pursuant to, or
constitute a default (with due notice or lapse of time or both),
or result in an occurrence of any event for which any holder or
holders of Indebtedness may declare the same due and payable
under any indenture, agreement, order, judgment or instrument
under which such Borrower is a party or to such Borrower's
knowledge, after due inquiry, by which such Borrower or its
property may be bound or affected, or under the Certificate of
Incorporation or By-Laws of such Borrower, and, to such
Borrower's knowledge, after due inquiry, do not violate any
provision of applicable law.
11.6 Financial Statements.
(a) The consolidated balance sheets of the Borrowers
and the Guarantor as of December 31, 1997 and the related
consolidated statements of income and cash flow of the
Borrowers and the Guarantor for the month and year to date
period ended on that date, copies of which have been
furnished to the Lender, have been prepared in accordance
with GAAP and fairly present the financial conditions of the
Borrowers and the Guarantor as of such date and the results
of the operations of the Borrowers and the Guarantor for the
period ended on such date.
(b) As of December 31, 1997 the Borrowers and the
Guarantor have no contingent liabilities which, if
determined adversely to them (either singly or in the
aggregate), would have a material adverse effect.
11.7 Material Adverse Events. Since December 31, 1997
neither the business, the prospects, the properties nor the
condition (financial or otherwise) of any Borrower or the
Guarantor have been materially adversely affected.
11.8 Litigation, Etc. Except as disclosed in writing to the
Lender, there are no actions, suits or proceedings pending, or to
the knowledge of the Borrowers threatened, against or affecting
the Borrowers or the Guarantor, at law or in equity which, if
adversely determined, would have a material adverse effect on the
Borrowers or the Guarantor. To the Borrowers' knowledge, as of
December 31, 1997, neither Borrower or the Guarantor was in
violation with respect to any applicable laws or regulations
which non-compliance would have a material adverse effect nor is
any Borrower or the Guarantor in violation or default with
respect to any order, writ, injunction, demand or decree of any
court or any Person or in violation or default (nor is there any
waiver in effect which, if not in effect, would result in a
violation or default) in any material respect under any
indenture, agreement or other instrument under which any Borrower
or the Guarantor is a party or may be bound, default under which
would have a material adverse effect.
11.9 Principal Place of Business. The chief executive
office and principal place of business of the Borrowers and the
Guarantor is located at 2500 CityWest Boulevard, Suite 2200,
Houston, Texas 77042.
11.10 Patent and Other Rights. The Borrowers and the
Guarantor have the right to use all patents, licenses,
trademarks, trade names, trade secrets, copyrights and all rights
with respect thereto, which are required to conduct their
businesses as now conducted without known conflict with the
rights of others which would materially and adversely affect such
businesses.
11.11 Taxes. The Borrowers and the Guarantor have filed or
caused to be filed all tax returns which are required to be filed
by them, pursuant to the laws, regulations or orders of each
Person with taxing power over the Borrowers and the Guarantor or
their assets. The Borrower and the Guarantor have paid, or made
provision for the payment of, all Taxes which have or may have
become due pursuant to said returns, or otherwise, or pursuant to
any assessment received by the Borrowers and the Guarantor,
except such Taxes, if any, as are being contested in good faith
and as to which adequate reserves (determined in accordance with
GAAP) have been provided. The charges, accruals and reserves in
respect of Taxes on the books of the Borrowers and the Guarantor
are adequate (determined in accordance with GAAP). There are no
proposed material tax assessments against any Borrower or the
Guarantor and no extension of time for the assessment of federal,
state or local Taxes of the Borrowers or the Guarantor is in
effect or has been requested.
11.12 Employee Retirement Income Security Act of 1974. No
Reportable Event has occurred and is continuing with respect to
any Plan.
11.13 Investment Company Act of 1940. Neither Borrower is
an "investment company" within the meaning of the Investment
Company Act of 1940.
11.14 Subsidiaries. As of the date of this Credit
Agreement, the Borrowers have no subsidiaries.
11.15 Environmental Compliance.
(a) The Borrowers have duly complied in all material
respects with, and the Vessels and their other properties
and operations are in compliance in all material respects
with, the provisions of all applicable environmental, health
and safety laws, codes and ordinances and all rules and
regulations promulgated thereunder of all Governmental
Agencies unless such compliance would violate the laws or
regulations of the jurisdiction in which a Vessel is located
or operating.
(b) As of the date of this Credit Agreement, the
Borrowers have received no notice from any Governmental
Agency, and have no knowledge, of any fact(s) which
constitute a violation of any applicable environmental,
health or safety laws, codes or ordinances, and any rules or
regulations promulgated thereunder of all Governmental
Agencies, which relate to the use or ownership of any Vessel
or other properties owned or operated by the Borrowers.
(c) The Borrowers have been issued all required
permits, licenses, certificates and approvals of all
Governmental Agencies relating to (i) air emissions, (ii)
discharges to surface water of ground water, (iii) noise
emissions, (iv) solid or liquid waste disposal, (v) the use,
generation, storage, transportation, treatment, recycling or
disposal of Hazardous Substances or (vi) other
environmental, health or safety matters necessary for the
ownership or operation of the Vessels or other properties
owned or operated by the Borrowers and such permits,
licenses, certificates and approvals are in full force and
effect on the date of this Credit Agreement.
(d) To the best of the Borrowers' knowledge, except in
accordance with a valid governmental permit, license,
certificate or approval, there has been no spill or
unauthorized discharge or release of any Hazardous Substance
to the environment at, from or as a result of any operations
on any Vessel or other properties and operations owned or
operated by the Borrowers required to be reported to any
Governmental Agency.
(e) There has been no material complaint, compliance
order, compliance schedule, notice letter, notice of
citation or other similar notice from any applicable
environmental agency which concerns the operations of the
Vessels or other properties owned or operated by the
Borrowers.
11.16 Indebtedness. The Borrowers have no indebtedness for
borrowed money other than the Indebtedness hereunder and a loan
of approximately USD 500,000.00 secured by real property located
in Houma, Louisiana.
Section 12. Affirmative Covenants of Borrowers.
Until the payment in full of all amounts due under this
Credit Agreement and the Notes by the Borrowers, unless
compliance shall have been waived by the Lender, the Borrowers
and the Guarantor agree that:
12.1 Financial Statements, Reports and Inspection.
(a) The Borrowers and the Guarantor will furnish to
the Lender:
(i) as soon as possible and in any event within
two (2) Business Days after an officer of the Borrowers
has knowledge of the occurrence of any Event of Default
or of any default in the performance of the Loan
Documents, or any event which with the giving of notice
or lapse of time, or both, would constitute an Event of
Default or such a default, which is continuing on the
date of such statement, the statement of the chief
financial officer of the Borrowers setting forth the
details of such Event of Default or event or default
and the action which the Borrowers propose to take with
respect thereto;
(ii) as soon as available and in any event within
forty-five (45) days after the close of each month of
the Guarantor's fiscal years, a copy of monthly
consolidated financial statements for the Guarantor
prepared in accordance with GAAP and certified by the
chief financial officer or chief accounting officer of
the Guarantor together with consolidating statements of
each Borrower;
(iii) as soon as available and in any event within
ninety (90) days after the close of the Guarantor's
fiscal years, a copy of the consolidated annual audited
financial statements for such year for the Guarantor
certified by Arthur Andersen, LLP or other independent
public accountants of recognized standing acceptable to
the Lender;
(iv) as soon as available and in any event within
forty-five (45) days after the end of each month, an
operations report in form and substance satisfactory to
the Lender;
(v) a Barge Activity Schedule as often it is
produced for the Borrowers' management, but in any
event, not less than every two weeks.
(vi) as soon as possible and in any event by
December 1 of each year an annual business plan for the
Borrowers for the coming year, including projections of
utilization of the Vessels, expenses and revenues; and
(vii) (A) as soon as possible, and in any event,
within thirty (30) days after either Borrower or the
Guarantor knows that any Reportable Event with respect
to any Plan has occurred, a statement of an officer of
the Borrowers or the Guarantor setting forth details as
to such Reportable Event and the action which the
Borrowers or the Guarantor propose to take with respect
thereto, together with a copy of the notice of such
Reportable Event given to the Pension Benefit Guaranty
Corporation if a copy of such notice is available to
the Borrowers or the Guarantor and (B) promptly after
receipt thereof a copy of any notice relating to a
Reportable Event having a material adverse effect, the
Borrowers, or the Guarantor or any member of the
Controlled Group may receive from the Pension Benefit
Guaranty Corporation or the Internal Revenue Service
with respect to any Plan; provided, however, this
Section 10.1(a)(vii)(B) shall not apply to notice of
general application promulgated by the Department of
Labor.
(b) The Borrowers or the Guarantor will, upon request,
furnish to the Lender such information as the Lender may
reasonably request with respect to the business, affairs or
condition (financial or otherwise) of the Borrowers or the
Guarantor and will permit the Lender or its representatives
at any reasonable time or times during normal business hours
upon three (3) Business Days' prior notice, to inspect the
properties of the Borrowers or the Guarantor, to inspect,
audit and examine the books or records of the Borrowers or
the Guarantor and to take extracts therefrom and will
reimburse the Lender for all reasonable expenses incurred in
connection therewith.
(c) Within forty-five (45) days of the close of the
first three quarters of the Guarantor's fiscal year and on
the dates that the annual reports required pursuant to
Section 10.1(a)(iii) above are provided to the Lender, the
Guarantor shall furnish to the Lender a certificate signed
by the chief financial officer or chief accounting officer
of the Guarantor certifying that (A) the representations and
warranties contained in Section 11 of this Credit Agreement
are correct on and as of the date of such certificate as
though made on and as of such date except those expressly
made as of another date and (B) the Guarantor is in
compliance with all of the covenants contained in Sections
13.14, 13.15, 13.16 and 13.17 of this Credit Agreement, such
certificates showing the relevant computations for such
compliance.
(d) As soon as possible and in any event within ninety
(90) days of the end of each of the Guarantor's fiscal
years, a certificate from the Guarantor's auditors referred
to in Section 12.1(a)(iii) above, certifying that (A) such
auditor is not aware of any Events of Default and (B) the
Guarantor is in compliance with the covenants contained in
Sections 13.14, 13.15, 13.16 and 13.17 of this Credit
Agreement, such certificates showing the relevant
computations for such compliance.
(e) In addition to the right of inspection referred to
in Section 12.1(b) above, the Lender may call for up to four
audits of the accounts receivable of the Borrowers annually,
or more if the Lender has reasonable cause to believe that
the value of such accounts receivable or the Borrowers'
accounting practices are in doubt. The costs of any such
audits shall be for the account of the Borrowers and the
Borrowers shall cooperate with the Lenders and its agents in
connection with such audits.
(f) In addition to the requirements of Section 3.2(b)
above, the Borrowers shall provide to the Lender a Borrowing
Base Report each Friday, or the next succeeding Business
Day, if any Friday is not a Business Day.
12.2 Insurance. The Borrowers shall insure, or cause to be
insured, the Vessels pursuant to the terms of Article I, Section
15 of the Mortgages and the real estate and improvements covered
by the Deed of Trust pursuant to the terms of Section 19 of the
Deed of Trust. The Borrowers will promptly notify the Lender of
any material changes in such insurances or any change in the
underwriters or clubs providing such insurances. The Borrowers
shall annually but no later than the anniversary of the date of
this Credit Agreement furnish the Lender with evidence of all
such insurance policies currently in force.
12.3 Other Debt. The Borrowers will promptly pay and
discharge any and all Indebtedness, liens, charges, and all Taxes
imposed upon them or upon their income or profits, or upon any of
their properties prior to the date on which penalties accrue
thereon, and lawful claims which, if unpaid, might become a lien
or charge upon the property of the Borrowers, except such as may
in good faith be contested or disputed, provided appropriate
reserves are maintained in accordance with GAAP.
12.4 Maintenance of Existence; Conduct of Business. The
Borrowers and the Guarantor will preserve and maintain their
corporate existence, their business as presently conducted, and
all of their rights, privileges and franchises necessary or
desirable in the normal conduct of said business, and will
conduct their businesses in an orderly, efficient and regular
manner.
12.5 Financial Records. The Borrowers and the Guarantor
will keep books of record and account in which proper entries
will be made of their transactions in accordance with GAAP.
12.6 Maintenance of Vessels. The Borrowers will maintain,
or cause to be maintained, the Vessels in the highest
classification for such vessels with the American Bureau of
Shipping or such other classification society as the Lender may
approve.
12.7 Environmental Compliance.
(a) The Borrowers will comply with and will use their
best efforts to cause their agents, contractors and sub-
contractors (while such Persons are acting within the scope
of their contractual relationship with the Borrowers) to so
comply with (i) all applicable environmental, health and
safety laws, codes and ordinances, and all rules and
regulations promulgated thereunder of all Governmental
Agencies and (ii) the terms and conditions of all applicable
permits, licenses, certificates and approvals of all
Governmental Agencies now or hereafter granted or obtained
with respect to the Vessels or other properties owned or
operated by the Borrowers unless such compliance would
violate the laws or regulations of the jurisdictions in
which the Vessels are located or operating.
(b) The Borrowers will use their best efforts and
safety practices to prevent the unauthorized release,
discharge, disposal, escape or spill of Hazardous Substances
on or about the Vessels or other properties owned or
operated by the Borrowers.
12.8 Environmental Notifications. The Borrowers shall
notify the Lender, in writing, within five (5) Business Days of
any of the following events occurring after the date of this
Credit Agreement:
(a) Any written notification made by the Borrowers to
any U.S. or foreign federal, state or local environmental
agency required under any federal, state or local
environmental statute, regulation or ordinance relating to a
spill or unauthorized discharge or release of any Hazardous
Substance to the environment at, from, or as a result of any
operations on, the Vessels or other properties and
operations owned or operated by the Borrowers;
(b) Knowledge by an officer of the Borrowers of
receipt of service by the Borrowers of any complaint,
compliance order, compliance schedule, notice letter, notice
of violation, citation or other similar notice or any
judicial demand by any U.S. or foreign court, federal, state
or local environmental agency, alleging (i) any spill,
unauthorized discharge or release of any Hazardous Substance
to the environment from, or as a result of the operations
on, the Vessels or other properties owned or operated by the
Borrowers or (ii) violations of applicable laws, regulations
or permits regarding the generation, storage, handling,
treatment, transportation, recycling, release or disposal of
Hazardous Substances on or as a result of operations on the
Vessels or other properties and operations owned or operated
by the Borrowers.
(c) It is understood by the parties hereto that the
above mentioned notices are solely for the Lender's
information, may not otherwise be required by any U.S. or
foreign federal, state or local environmental laws,
regulations or ordinances, and are to be considered
confidential information by the Lender.
(d) The term "environmental agency" as used herein
shall include, but not be limited to, the United States
Environmental Protection Agency, the United States Coast
Guard, the United States Minerals Management Service, the
United States Department of Transportation (in its
administration of the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801, et seq.) and other analogous or
similar Governmental Agencies regulating or administering
statutes, regulations or ordinances relating to or imposing
liability or standards of conduct concerning the generation,
storage, use, production, transportation, handling,
treatment, recycling, release or disposal of any Hazardous
Substance.
12.9 Environmental Indemnification.
(a) The Borrowers hereby agree to indemnify and hold
the Indemnitees harmless from and against any and all
claims, losses, liability, damages and injuries of any kind
whatsoever asserted against any Indemnitee with respect to
or as a direct result of the presence, escape, seepage,
spillage, release, leaking, discharge or migration from the
Vessels or other properties owned or operated by the
Borrowers of any Hazardous Substance, including without
limitation, any claims asserted or arising under any
applicable environmental, health and safety laws, codes and
ordinances, and all rules and regulations promulgated
thereunder of all Governmental Agencies, regardless of
whether or not caused by or within the control of the
Borrowers.
(b) It is the parties' understanding that neither the
Lender nor any other Indemnitee does now, has never and does
not intend in the future to exercise any operational control
or maintenance over the Vessels or any other properties and
operations owned or operated by the Borrowers, nor has any
of them in the past, presently, or intends in the future to,
maintain an ownership interest in the Vessels or any other
properties owned or operated by the Borrowers except as may
arise upon enforcement of the Lender's rights under the
Mortgages or the Security Agreement.
(c) Should, however, the Lender or any other
Indemnitee hereafter exercise any ownership interest in or
operational control over the Vessels or any other properties
owned or operated by the Borrowers, e.g., including but not
limited to, through foreclosure, then the above stated
indemnity and hold harmless shall be limited with respect to
any actions or failures to act by the Lender or other
Indemnitee subsequent to exercising such interest or
operational control, to the extent such action or inaction
by the Lender or other Indemnitee is admitted by the Lender
or other Indemnitee or is found by a court of competent
jurisdiction to have caused or made worse any condition for
which liability is asserted, including but not limited to,
the presence, escape, seepage, spillage, leaking, discharge
or migration on or from the Vessels or other properties
owned or operated by the Borrowers of any Hazardous
Substance.
(d) The indemnity and hold harmless contained in this
Section 12.9 shall not extend to the Lender or any other
Indemnitee in its or his capacity as an equity investor in
the Borrowers or as an owner of any property or interest as
to which the Borrowers are also an owner but only to the
Lender's capacity as a lender or a holder of security
interests.
12.10 Notification of Total Loss. In the event of any Total
Loss or requisition of any Vessel, the Borrowers shall give
written or telegraphic notice to the Lender not later than ten
(10) days after they have actual knowledge of such occurrence.
12.11 Additional Security. The Borrowers shall, at such
time as either Borrower or the Guarantor becomes the owner of any
vessel, grant, or have such owner grant, a first preferred ship
mortgage (or equivalent) to the Lender covering such vessel and
securing the Borrowers' obligations hereunder.
12.12 Year 2000 Compliance. On or prior to March 31, 1999
(the "Compliance Date"), the Borrowers and the Guarantor shall
take all actions necessary to insure that the automated systems
used by the Borrowers and the Guarantor that are material to
their operations (collectively, "Mission-Critical Systems"),
including without limitation, software, hardware and other data
processing devices, shall not fail, malfunction or produce
incorrect results with respect to data, calculations and other
processing involving dates before, as of or after December 31,
1999, regardless of the form of the date data is received or
processed (collectively "Year 2000 Compliant" or "Year 2000
Compliance"). Without limiting the generality of the foregoing,
on or prior to the Compliance Date, the Borrowers and the
Guarantor shall test and certify that their Mission-Critical
Systems are Year 2000 Compliant in accordance with commercially
reasonable practices and industry standards. The Borrowers and
the Guarantor agree that upon the reasonable request of the
Lender, the Borrowers and the Guarantor will make their
employees, consultants, premises, records and documentation
available to the Lender with respect to their Year 2000
Compliance efforts.
Section 13. Negative Covenants of Borrowers. Until the payment in
full of all amounts due under this Credit Agreement and the Notes
by the Borrowers, the Borrowers and the Guarantor agree that they
will not without the prior written consent of the Lender:
13.1 Liens. Create, incur, assume or suffer to exist any
lien (including any encumbrance or security interest) of any kind
upon the Vessels or any of their other assets, revenues or right
to receive revenue whether now owned or hereafter acquired,
except for the liens and other encumbrances set forth below (the
"Permitted Liens"):
(a) liens for Taxes not at the time delinquent or
thereafter payable without penalty or being contested in
good faith, provided provision is made to the extent
required by GAAP for the eventual payment thereof in the
event it is found that such are payable by the Borrowers;
(b) liens of carriers, warehousemen, mechanics,
materialmen and landlords incurred in the ordinary course of
business for sums not overdue or being contested in good
faith, provided provision is made to the extent required by
GAAP for the eventual payment thereof in the event it is
found that such sums are payable by the Borrowers;
(c) maritime liens:
(i) arising in the ordinary course of business by
operation of law that are being contested in good faith
by appropriate proceedings and for which reserves have
been made to the reasonable satisfaction of the Lender
or
(ii) arising in connection with salvage and
general average; or
(iii) arising in connection with crew wages claimed
but not paid;
(d) liens incurred in the ordinary course of business
in connection with workmen's compensation, unemployment
insurance or other forms of governmental insurance or
benefits, or to secure performance of tenders and statutory
obligations entered into in the ordinary course of business
or to secure obligations on surety or appeal bonds in the
ordinary course of business or easements, rights of way and
similar encumbrances incurred in the ordinary course of
business and not interfering with the ordinary conduct of
the business of the Borrowers;
(e) judgment liens in existence less than thirty (30)
days after the entry thereof or with respect to which
execution has been stayed or the payment of which is covered
in full by insurance;
(f) liens required by the terms of this Credit
Agreement; and
(g) purchase money security interests in connection
with Indebtedness referred to in Section 13.5(e) below.
13.2 Line of Business. Enter into any new line of business
unrelated to their present activities after the date of this
Credit Agreement.
13.3 Consolidation, Merger, Etc. Consolidate with or merge
with, or sell (whether in one transaction or in a series of
transactions) all or substantially all of their assets to any
Person.
13.4 Modification of Agreements. Amend, modify or otherwise
change any of the Loan Documents.
13.5 Indebtedness. Incur any Indebtedness, except:
(a) the Advances and the Letters of Credit;
(b) accounts payable and accrued liabilities incurred
in the ordinary course of business;
(c) letters of credit, performance and bid bonds
obtained by the Borrowers in the ordinary course of their
business, other than the Letters of Credit, up to an
aggregate amount of USD 15,000,000.00 at any time;
(d) supersedes bonds obtained by the Borrowers in the
ordinary course of their business; and
(e) purchase money indebtedness in connection with
capital expenditures but with no more than USD 500,000.00 of
such debt being outstanding at any time.
13.6 Reportable Event. Cause or allow to occur a Reportable
Event.
13.7 Change of Legal Structure. Cause or allow to occur any
material change in their present Certificate of Incorporation or
By-Laws or change their jurisdiction of incorporation.
13.8 Change of Place of Business. Make any change in the
address of their principal place of business or their chief
executive office except upon thirty (30) days' prior written
notice to the Lender.
13.9 Management of Vessels. Change the flag, class,
ownership, management or control of the Vessels except for
changes disclosed to the Lender prior to the date of this Credit
Agreement.
13.10 Subsidiaries. Create or acquire any subsidiaries,
unless the Borrowers notify the Lender of the creation or the
acquisition of such subsidiary and such subsidiary, at the
Lender's request, guarantees the Borrowers' obligations hereunder
in form and substance satisfactory to the Lender.
13.11 Charter. Cause or allow any Vessel to be bareboat
chartered to any party for a period longer than six (6) months
without the prior written consent of the Lender, which consent
shall not be unreasonably withheld, or cause or allow any vessels
to be chartered in for a term in excess of twelve (12) months.
13.12 Modifications to Vessels. Other than the upgrades and
modifications commenced on or before the date of this Credit
Agreement and those made in the ordinary course of Borrowers'
business, cause or allow any change in the physical
characteristics of any Vessel that would, in the reasonable
judgment of the Lender, materially interfere with the suitability
of such Vessel for normal commercial offshore construction
operations; the consent of the Lender to any such modification
not to be unreasonably withheld.
13.13 Sale of Vessel, Etc. Sell, transfer or assign any
Vessel or Equipment, or any right to receive the revenue from any
Vessel provided, however, that:
(a) the Borrowers may sell, transfer or assign any
surplus or scrap equipment from the Vessels or Equipment in
the ordinary course of business in an amount of up to USD
500,000.00 annually; and
(b) the Borrowers may sell, transfer or assign any
Equipment or any other equipment from the Vessels if they
first replace such items with equipment of equal or greater
value.
13.14 Current Ratio. Permit the Current Ratio to be less
than 1.1 to 1 at any time.
13.15 Working Capital. Permit its consolidated Working
Capital to be less than USD 3,000,000.00 at any time.
13.16 Fixed Charge Coverage Ratio. Permit its Fixed Charge
Coverage Ratio to be less than 1.7 to 1.0 during any quarter and
on a rolling four quarter basis.
13.17 Interest Coverage Ratio. Permit its Interest Coverage
Ratio to be less than 4.0 to 1.0 during any quarter and on a
rolling four quarter basis.
13.18 Debt Ratio. Permit its Debt Ratio at any time to be
greater than 35%.
13.19 Net Worth. Permit its Net Worth to be less than the
aggregate of (a) USD 85,000,000, (b) seventy-five percent (75%)
of positive net income for each fiscal quarter, on a cumulative
basis commencing with the quarter beginning January 1, 1998, and
(c) seventy-five percent (75%) of future offerings by the
Guarantor of common stock or other equity of the Guarantor.
13.20 Compliance with Federal Reserve Board Regulations. No
part of the proceeds of any Advance, and no Letter of Credit,
will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security within the meaning of
Regulation U of the Board of Governors of the Federal Reserve
System, or for the purpose of purchasing or carrying or trading
in any securities under such circumstances as to involve the
Borrowers or the Guarantor in a violation of Regulation X of said
Board or the Lender in a violation of Regulation U of said Board.
In particular, without limitation of the foregoing, neither the
Borrowers nor the Guarantor will use any part of the proceeds of
any Advance to be made hereunder to acquire for itself or for any
other person any publicly-held securities of any kind. The
assets of the Borrowers and the Guarantor do not and will not
include any margin securities, and the Borrowers and the
Guarantor have no present intention of acquiring any margin
securities. As used in this Section 13.20, the terms "margin
security" and "purpose of purchasing or carrying" shall have the
meanings assigned to them in the aforesaid Regulation U, and the
term "publicly-held", in respect of securities, shall have the
meaning assigned to it in Section 220.7(a) of Regulation T of
said Board. If requested by the Lender, the Borrowers will
furnish to the Lender a statement or statements in conformity
with the requirements of Federal Reserve Form U-1 referred to in
said Regulation U.
13.21 Loans and Investments. Advance funds to, or make
investments in, (whether by way of loan, stock purchase or
capital contribution) any Person other than in Cash Equivalents.
13.22 Contracts with Affiliates. Enter into any transaction
with any director, officer, employee, shareholder or Affiliate of
the Borrowers or the Guarantor except on terms no less favorable
to the Borrowers than the Borrowers could obtain in an arms
length transaction with Persons not affiliated with the
Borrowers.
13.23 Change of Management. Cause or allow to occur any
material change in their present executive management.
13.24 Lease Expense. Incur or pay more than USD 5,000,000
per year for the lease or rental of equipment, vessels or real
property other than rental for their principal place of business
referred to in Section 11.9 above.
13.25 Dividends. Make any dividend payments or other
distributions to their stockholders or redeem or otherwise
acquire any of their stock.
13.26 Use of Vessels. Cause or allow any Vessel to be used
outside of U.S. territorial waters, the Gulf of Mexico or
Venezuelan or Brazilian territorial waters.
13.27 Fiscal Years. Change or allow to change, the fiscal
year of either Borrower or the Guarantor from one ending on
December 31.
Section 14. Events of Default.
14.1 Events. An "Event of Default" shall exist if any of
the following events shall occur and be continuing:
(a) The Borrowers shall default in the payment or
prepayment when due of any principal or interest on the Loan
or any fees or other amount payable by them hereunder or
under any other Loan Document and such default shall
continue for three (3) Business Days after such amount is
due; or
(b) The Borrowers or the Guarantor shall default in
the payment when due of any principal of or interest on any
of their other Indebtedness in an aggregate amount in excess
of USD 100,000.00; or any event specified in any note,
agreement, indenture or other document evidencing or
relating to any such Indebtedness shall occur if the effect
of such event is to cause, or (with the giving of any notice
or the lapse of time or both) to permit the holder or
holders of such Indebtedness (or a trustee or agent on
behalf of such holder or holders) to cause, such
Indebtedness to become due prior to its stated maturity; or
(c) Any representation, warranty or certification made
or deemed made herein or in any other Loan Document by the
Borrowers or the Guarantor or any certificate furnished to
the Lender pursuant to the provisions hereof or any other
Loan Document, shall prove to have been false or misleading
as of the time made or furnished in any material respect; or
(d) The Borrowers or the Guarantor shall fail to
perform or observe any provision of the Loan Documents to
which they are parties and such failure shall continue
unremedied for a period of ten (10) Business Days after (i)
the failure arises and (ii) the Borrowers or the Guarantor
have knowledge of such failure, or ten (10) Business Days
after the Lender gives the Borrowers notice of such failure;
or
(e) The Borrowers or the Guarantor shall admit in
writing its inability to, or be generally unable to, pay its
debts as such debts become due; or
(f) The Borrowers or the Guarantor shall (i) apply for
or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator
of itself or of all or a substantial part of its property,
(ii) make a general assignment for the benefit of its
creditors, (iii) commence a voluntary case under the U.S.
Bankruptcy Code (as now or hereafter in effect), (iv) file a
petition seeking to take advantage of any other law relating
to bankruptcy, insolvency, reorganization, winding-up, or
composition or readjustment of debts, (v) fail to controvert
in a timely and appropriate manner, or acquiesce in writing
to, any petition filed against it in an involuntary case
under the U.S. Bankruptcy Code, or (vi) take any corporate
action for the purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without
the application or consent of the Borrowers or the Guarantor
in any court of competent jurisdiction, seeking (i) its
liquidation, reorganization, dissolution or winding-up, or
the composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or
the like of the Borrowers or the Guarantor or of all or any
substantial part of the assets of any of them, or (iii)
similar relief in respect of the Borrowers or the Guarantor
under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of
debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of sixty (60) days; or
an order for relief against the Borrowers or the Guarantor
shall be entered in an involuntary case under the U.S.
Bankruptcy Code; or
(h) A judgment for the payment of money in excess of
USD 150,000.00 shall be rendered by a court against any of
the Borrowers or the Guarantor and the same shall not be
discharged (or provision shall not be made for such
discharge), or a stay of execution thereof shall not be
procured, within thirty (30) days from the date of entry
thereof and the Borrowers or the Guarantor, respectively,
shall not, within said period of thirty (30) days, or such
longer period during which execution of the same shall have
been stayed, appeal therefrom and cause the execution
thereof to be stayed during such appeal; or
(i) The Guaranty shall cease to be in full force and
effect.
THEN, or at any time thereafter, while any such event remains
unremedied or uncured:
The Lender may, upon written notice to the Borrowers,
terminate the Commitment to make Advances or to issue Letters of
Credit and/or declare the entire outstanding unpaid principal
amount of the Notes, all Breakage Costs and all interest accrued
and unpaid thereon and all other amounts payable hereunder and
thereunder to be forthwith due and payable, whereupon the same
shall become immediately due and payable, without presentment,
demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Borrowers and also demand that the
Borrowers cooperate with it in order to permit any outstanding
Letters of Credit to be terminated, or if such termination cannot
be accomplished, the Borrowers shall deposit with the Lender an
amount equal to the aggregate amounts of any outstanding Letters
of Credit which deposit shall be held by the Lender as security
until all of the Letters of Credit are terminated or expire..
The Lender may immediately and without expiration of any
additional period of grace, enforce payment of all obligations of
the Borrowers under this Credit Agreement and under the Notes.
In addition, the Lender may exercise any or all of such remedies
as may be available to it under applicable law or granted
pursuant to the Loan Documents.
Any declaration made pursuant to this Section 14.1 is
subject to the condition that, if at any time after the
outstanding principal of the Notes shall have become due and
payable, and before any foreclosure action has been taken by the
Lender under any of the Loan Documents to realize upon the
security provided by such documents, all Breakage Costs and all
arrears of interest upon the Notes and all other obligations owed
to the Lender (except that principal of the Notes which by such
declaration shall have become payable) shall have been duly paid,
and every other default and Event of Default shall have been made
good waived or cured, then the Lender may, by written notice to
the Borrowers, rescind and annul such declaration and its
consequences; but no such rescission or annulment shall extend to
or affect any subsequent default or Event of Default or impair
any right consequent thereon.
14.2 Change of Control. If at any time while any amount is
outstanding under this Credit Agreement or the Lender has a
Commitment hereunder, any Person other than DSND Sondenfjeldske
ASA shall acquire after the date hereof more than thirty percent
(30%) of the then outstanding stock of the Guarantor having
ordinary voting power, a "Change of Control" shall be deemed to
have occurred. The Borrowers shall promptly, but in any event
within ten (10) days give written notice to the Lender upon
obtaining knowledge of an event which is or would constitute a
Change of Control. The Lender shall, upon the happening of a
Change of Control, have the privilege of declaring all amounts
outstanding under this Credit Agreement to be due and payable on
a date not earlier than ten (10) days from the date of the
exercise of said privilege. All amounts outstanding under this
Credit Agreement shall thereupon become due and payable on the
date specified in the notice sent to the Borrowers by the Lender
including the principal amount thereof plus accrued interest
thereon to the accelerated maturity date and any amounts owed by
the Borrowers or the Guarantor to the Lender pursuant to this
Credit Agreement.
Section 15. Minimum Value, Evaluation and Additional Security.
15.1 Minimum Value. The total fair market value of the
Vessels as determined pursuant to Section 15.2 below shall not be
less than 285% of the principal amounts outstanding under
Facility A at any time.
15.2 Evaluation. On two occasions annually, or at any other
additional time when, in the reasonable judgment of the Lender
there has been an adverse development in the fair market value of
any Vessel, upon the written request of the Lender, the Borrowers
will promptly obtain at the Borrowers' expense an evaluation of
the Vessels by a reputable independent ship broker or appraiser
selected by the Borrowers but acceptable to the Lender. In the
event that any such evaluation establishes that the fair market
value of the Vessels is less than the amount required by Section
15.1 above at the time of the evaluation, the Borrowers shall
within twenty (20) days of such shortfall (but at the Borrowers'
option) either:
(a) provide additional collateral acceptable to the
Lender to insure that the fair market value of the Vessels
as determined pursuant to this Section 15.2 and such
additional collateral is equal to at least the amount
required by Section 15.1(a) above; or
(b) prepay the Loan in the manner provided for in
Section 7.5 above in an amount as is necessary to insure
that the fair market value of the Vessels as determined
pursuant to this Section 15.2 is at least the amount
required by Section 15.1(a) above after such reductions have
been made; or
(c) a combination of (a) and (b) above which shall
result in the fair market value of the Vessels and
additional collateral as determined pursuant to this Section
15.2 being at least the amount required by Section 15.1(a)
above.
15.3 Failure to Maintain Minimum Value. The failure of the
Borrowers to take action under Section 15.2(a), (b) or (c) above
after being required to do so under Section 15.2 above which
failure shall result in the fair market value of Vessels and any
additional collateral as determined pursuant to Section 15.2
above remaining below the amount required by Section 15.1(a)
above for twenty (20) or more days after the date of the
shortfall shall constitute an immediate Event of Default under
Section 14.1 of this Credit Agreement and shall give the Lender
the right to immediately exercise any or all of its rights under
such Section.
Section 16. [Intentionally Omitted].
Section 17. Miscellaneous.
17.1 Entire Agreement. This Credit Agreement with its
Schedule and Exhibits embodies the entire agreement and
understanding between the parties hereto and supersedes all prior
agreements and understandings relating to the subject matter
hereof.
17.2 No Waiver. No failure to exercise, and no delay in
exercising any right, power or remedy hereunder or under any
document delivered pursuant hereto shall impair any right, power
or remedy which the Lender may have, nor shall any such delay be
construed to be a waiver of any of such rights, powers or
remedies, or an acquiescence in any breach or default under this
Credit Agreement or any document delivered pursuant hereto, nor
shall any waiver of any breach or default of the Borrowers
hereunder be deemed a waiver of any default or breach
subsequently occurring. The rights and remedies herein specified
are cumulative and not exclusive of any rights or remedies which
the Lender would otherwise have.
17.3 Survival. All representations, warranties and
agreements herein contained on the part of the Borrowers shall
survive the making of the Advances or the issuance of the Letters
of Credit hereunder and all such representations, warranties, and
agreements shall be effective as long as any amount arising
pursuant to the terms of this Credit Agreement or the Notes
remains unpaid.
17.4 Notices.
(a) All notices, requests, consents, demands, and other
communications provided for or permitted hereunder shall be
effective three (3) days after being duly deposited in the
mails, certified, return receipt requested, or upon receipt
if delivered to Federal Express or similar courier company
or transmitted by telefax, addressed to the respective party
at the address set forth below.
Borrowers and Guarantor: Horizon Offshore, Inc.
Horizon Vessels, Inc.
Horizon Offshore Contractors, Inc.
2500 CityWest Boulevard, Suite 2200
Houston, Texas 77042
Attention:Chief Financial Officer
Telefax No.: (713) 361-2677
Lender: Den norske Bank ASA
200 Park Avenue
New York, N.Y. 10166-0396
Attention: Customer Service Telefax No.:
(212) 681-4123
with copies to: Den norske Bank ASA, Representative
Office
333 Clay, Suite 4890
Houston, Texas 77002
Attention: Byron L. Cooley Telefax No.:
(713) 757-1167
17.5 Termination. This Credit Agreement shall terminate
when all obligations of the Borrowers incurred under the Loan
Documents shall have been discharged in full.
17.6 Severability of Provisions. In case any one or more of
the provisions contained in this Credit Agreement should be
invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
17.7 Successors and Assigns. This Credit Agreement shall be
binding upon and inure to the benefit of the Borrowers and the
Lender and their respective successors and permitted assigns;
provided, however, that the Borrowers may not transfer their
rights to borrow under this Credit Agreement without the prior
written consent of the Lender.
17.8 Assignment and Participation.
(a) Subject to compliance with the provisions of this
Section 17.8, the Lender shall have the right to assign or
grant participations in all or part of the obligations of
the Borrowers outstanding under this Credit Agreement or the
Notes evidencing such obligations to Affiliates of the
Lender or to any foreign, federal or state banking
institution, savings and loan association or finance
company.
(b) The Lender shall inform the Borrowers in advance
as to any proposed assignment by the Lender and the identity
of the prospective assignee. The consent of the Borrowers
shall not be necessary for any assignment of all or any part
of the Lender's interest under this Credit Agreement to any
Affiliate of the Lender, any foreign, federal or state
banking institution, savings and loan association or finance
company or for any participation. As to any other
assignment the consent of the Borrowers shall be required.
(c) The Lender may sell participations (without the
consent of the Borrowers) to one or more parties, in or to
all or a portion of its rights and obligations under this
Credit Agreement, the Notes and the other Loan Documents;
provided, that (i) the Lender"s obligations under this
Credit Agreement shall remain unchanged, (ii) the Lender
shall remain solely responsible to the other parties hereto
for the performance of such obligations and (iii) the
Borrowers and the Guarantor shall continue to deal solely
and directly with the Lender in connection with this Credit
Agreement, the Notes and the other Loan Documents.
(d) The Borrowers hereby agree to assist with any
assignment made pursuant to this Section 17.8 by executing
and delivering any documents or instruments reasonably
requested by the Lender in connection with any such
assignment, including but not limited to, amendments to this
Credit Agreement, consents to assignments or new promissory
notes.
17.9 Counterparts. This Credit Agreement may be executed in
any number of counterparts, all of which taken together shall
constitute one agreement, and any party hereto may execute this
Credit Agreement by signing any such counterpart.
17.10 Jurisdiction. ALL ACTIONS OR PROCEEDINGS WITH RESPECT
TO THIS CREDIT AGREEMENT AND THE NOTES MAY BE INSTITUTED IN THE
COURTS OF THE STATE OF NEW YORK OR THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. BY EXECUTION AND
DELIVERY OF THIS CREDIT AGREEMENT THE LENDER, THE BORROWERS AND
THE GUARANTOR IRREVOCABLY AND UNCONDITIONALLY SUBMIT TO THE
JURISDICTION OF EACH SUCH COURT, AND IRREVOCABLY AND
UNCONDITIONALLY WAIVE (i) ANY OBJECTION THE BORROWERS, THE
GUARANTOR, OR THE LENDER MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE IN ANY OF SUCH COURTS, AND (ii) ANY CLAIMS THAT ANY
ACTION OR PROCEEDING BROUGHT IN ANY OF SUCH COURTS HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. PROVIDED, HOWEVER, THAT
NOTHING IN THIS SECTION 17.10 SHALL LIMIT OR RESTRICT THE RIGHT
OF THE LENDER TO BRING SUIT AGAINST THE BORROWERS, THE GUARANTOR,
THE VESSELS OR ANY EARNINGS OR REVENUES OF THE VESSELS ANYWHERE
IN THE WORLD TO ENFORCE THE SECURITY PROVIDED IN THE MORTGAGE AND
THE SECURITY AGREEMENT.
17.11 Choice of Law. THIS CREDIT AGREEMENT AND THE NOTES
ISSUED HEREUNDER AND ALL ISSUES ARISING IN CONNECTION WITH THIS
CREDIT AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS
OF THE STATE OF NEW YORK, EXCEPT THAT (i) WITH RESPECT TO THE
PROVISIONS OF THIS CREDIT AGREEMENT AND THE NOTES WHICH PROVIDE
FOR OR RELATE TO THE PAYMENT OF INTEREST, PROVISIONS OF
APPLICABLE FEDERAL LAW WHICH PERMIT THE LENDER TO CHARGE THE
HIGHER OF THE RATE PERMITTED BY SUCH APPLICABLE LAW OR BY THE
LAWS OF THE STATE IN WHICH THE LENDER IS LOCATED SHALL BE DEEMED
GOVERNING AND CONTROLLING, AND (ii) THE LENDER'S RIGHTS AND
REMEDIES WITH RESPECT TO THE REAL PROPERTY SECURING THE
INDEBTEDNESS AND OBLIGATIONS SHALL BE GOVERNED BY THE LAWS OF THE
JURISDICTION IN WHICH SUCH REAL PROPERTY IS LOCATED.
17.12 Waiver of Jury Trial. THE BORROWERS, THE GUARANTOR
AND THE LENDER HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING TO WHICH THEY ARE PARTIES INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT, RELATED TO, OR CONNECTED WITH
THIS CREDIT AGREEMENT, ANY OF THE LOAN DOCUMENTS OR THE
RELATIONSHIP ESTABLISHED HEREUNDER.
17.13 Amendment and Waiver. Except as otherwise provided
herein, no provision of this Credit Agreement may be amended,
modified, supplemented, changed, waived, discharged or
terminated, unless all parties hereto consent in writing.
17.14 No Oral Agreements. THIS WRITTEN CREDIT AGREEMENT
WITH ITS SCHEDULE AND EXHIBITS REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES CONCERNING THE SUBJECT MATTER HEREOF AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
17.15 Headings, Etc. The table of contents of this Credit
Agreement and the headings of various sections and subsections
herein are for convenience of reference only and shall not
modify, define, expand or limit any of the terms or provisions
hereof. References to sections or subsections without reference
to the document in which they are contained are references to
this Credit Agreement.
17.16 Taxes. Any Taxes payable or ruled payable by any
Government Agency in respect of this Credit Agreement, the Notes
or any other Loan Document, other than any Tax on or measured by
the income of the Lender, shall be paid by the Borrowers,
together with any interest and penalties.
17.17 Controlling Agreement. In the event of a conflict
between the provisions of this Credit Agreement and those of any
other Loan Document, the provisions of this Credit Agreement
shall control.
IN WITNESS WHEREOF, the parties hereto have caused this
Credit Agreement to be executed as of the day and year first
above written.
HORIZON VESSELS, INC.
By:
Name: /s/ David W. Sharp
Title: Executive Vice President
and Chief Financial Officer
HORIZON OFFSHORE CONTRACTORS, INC.
By:
Name: /s/ David W. Sharp
Title: Executive Vice President
and Chief Financial Officer
HORIZON OFFSHORE, INC.
By:
Name: /s/ David W. Sharp
Title: Executive Vice President
and Chief Financial Officer
DEN NORSKE BANK ASA
By:
Name: /s/ Morten Bjornsen
Title:
By:
Name: /s/ Byron Cooley
Title:
SCHEDULE 1
VESSELS
----------------------------------------------------------------
Official
Name Flag No. Type Owner
----------------------------------------------------------------
CAJUN HORIZON U.S.A. |620491 Pipelay Horizon
| Barge Vessels, Inc.
----------------------------------------------------------------
PHOENIX HORIZON Vanuatu |1037 Pipelay Horizon
| Barge Vessels, Inc.
----------------------------------------------------------------
AMERICAN HORIZON U.S.A. 294383 Pipelay Horizon
Barge Vessels, Inc.
----------------------------------------------------------------
GULF HORIZON U.S.A. 514595 Pipelay Horizon
Barge Vessels, Inc.
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LONE STAR HORIZON U.S.A. |285456 Pipelay Horizon
| Barge Vessels, Inc.
----------------------------------------------------------------
CANYON HORIZON Vanuatu |1093 Bury Barge Horizon
| Vessels, Inc.
----------------------------------------------------------------
DSND STEPHANITURM Bahamas |725330 Diving Horizon
| Support Vessels, Inc.
| Vessel
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PACIFIC HORIZON U.S.A. |1100 Derrick Horizon
| Barge Vessels, Inc.
----------------------------------------------------------------
Exhibit A-1 to
Credit Agreement
AMENDED AND RESTATED PROMISSORY NOTE
Facility A
USD 30,000,000.00 May ___, 1998
FOR VALUE RECEIVED, HORIZON VESSELS, INC., a corporation
organized and existing under the laws of the State of Delaware
and HORIZON OFFSHORE CONTRACTORS, INC., a corporation organized
and existing under the laws of the State of Delaware
(collectively, the "Borrowers") hereby jointly and severally
promise to pay to DEN NORSKE BANK ASA (the "Payee"), or order, on
or before July 31, 2003, or otherwise, as hereinafter provided,
THIRTY MILLION AND NO/100 DOLLARS OF THE UNITED STATES OF AMERICA
(USD 30,000,000.00) and to pay interest on the unpaid portion of
said principal sum outstanding from time to time, as hereinafter
provided.
PRINCIPAL AND INTEREST
1.1 (a) Interest on this Note shall be payable at the
times and the rates as provided in Section 6.1 of the Amended and
Restated Credit Agreement (the "Credit Agreement") dated as of
May ___, 1998, among the Borrowers, Horizon Offshore, Inc. and
the Payee.
(b) In case any payment of principal or interest is
not paid when due, additional interest at the rate determined as
provided in Section 6.4 of the Credit Agreement shall be payable
on all overdue principal and, to the extent that the same may be
lawful, on all overdue interest.
1.2 Interest shall be calculated on the outstanding
principal amounts as provided in Section 6.1(c) and 6.1(d) of the
Credit Agreement.
1.3 The principal of this Note shall be payable as provided
in Section 7.3 of the Credit Agreement.
1.4 Notwithstanding any provision of this Note to the
contrary, in no event shall the aggregate amount of consideration
which constitutes interest under any applicable law which is
contracted for, charged or received hereunder or under this Note
("Interest") exceed the maximum amount of nonusurious interest
allowed by law, and any excess shall be credited on this Note (or
if all obligations under this Note shall have been paid in full,
refunded to the Borrowers). For purposes of the foregoing, the
maximum amount of interest allowed by law shall be calculated by
determining the amount of interest that could be contracted for,
charged or received during the term hereof at the maximum rate of
nonusurious interest allowed from time to time by applicable law
as is now or, to the extent allowed by law, as may hereafter be
in effect (the "maximum nonusurious interest rate") and, if at
any time the rate of Interest to accrue would exceed the maximum
nonusurious interest rate, the rate of Interest to accrue under
this Note shall be limited to the maximum nonusurious interest
rate, but any subsequent reductions in the LIBOR Rate (as defined
in the Credit Agreement) shall not reduce the rate of Interest to
accrue on this Note below the maximum nonusurious interest rate
until the total amount of Interest accrued and paid on this Note
equals the amount of Interest which could have accrued if a rate
per annum equal to the LIBOR Rate plus 3% or the Prime Rate plus
1/2% had at all times been in effect.
SECURITY
2.1 This Note is issued under and pursuant to the Credit
Agreement and is secured by, among other things, ship mortgages
on various vessels owned by the Borrowers (the "Mortgages"), a
Deed of Trust on certain real estate and improvements located in
Port Arthur, Jefferson County, Texas (the "Deed of Trust") and a
Security Agreement on certain other assets and revenues of the
Borrowers (the "Security Agreement"). Reference is hereby made
to the Credit Agreement, the Mortgages, the Deed of Trust and the
Security Agreement for a description of the property thereby
mortgaged, the nature and extent of the security afforded thereby
and the rights of the Borrowers and the Payee with respect to
such security as provided in the Mortgages, the Deed of Trust and
the Security Agreement. Payment of this Note may be demanded by
the holder hereof prior to the maturity of this Note under
certain circumstances and conditions, in the manner, and with the
effect, provided in the Credit Agreement.
2.2 This Note evidences the advances made by the Payee
under Facility A of the Credit Agreement. This Note is given in
amendment, restatement and extension of that certain Amended and
Restated Promissory Note dated December 30, 1997 of the Borrower
to the Payee in the original principal amount of USD
20,000,000.00 and the indebtedness evidenced thereby and liens
securing such Promissory Note are not extinguished hereby but
carried forward.
MISCELLANEOUS
3.1 All parties hereto, including endorsers hereof, hereby
waive presentment for payment, demand, protest and notice of
protest and non-payment hereof and hereby consent that any and
all securities or other property, if any, held by or for the
holders hereof at any time as security for this Note may be
exchanged, released or surrendered and that the time of payment
of this Note may be extended, all in the sole discretion of the
holder hereof and without notice and without affecting in any
manner the liability of the parties hereto.
3.2 No course of dealing between the Borrowers and the
Payee in exercising any rights hereunder shall operate as a
waiver of any right of any holder except to the extent expressly
waived in writing by such holder.
3.3 Whenever any payment to be made hereunder shall be due
on a day which is not a Business Day, the due date thereof shall
be extended to the next succeeding Business Day; provided,
however, that if such next succeeding Business Day is in a new
calendar month, then the payment
required hereunder shall be made on the last Business Day
preceding the original date on which payment was due. If a
payment of principal has been extended pursuant to this Section
3.3, interest shall be payable on such principal at the
applicable rate during such extension.
3.4 Any notice to be given pursuant to this Note shall be
given in accordance with Section 17.4 of the Credit Agreement.
3.5 THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK EXCEPT
THAT WITH RESPECT TO THE PROVISIONS OF THIS NOTE WHICH PROVIDE
FOR OR RELATE TO THE PAYMENT OF INTEREST, ANY PROVISIONS OF
APPLICABLE FEDERAL LAW WHICH PERMIT THE PAYEE TO CHARGE THE
HIGHER OF THE RATE PERMITTED BY SUCH APPLICABLE LAW OR BY THE
LAWS OF THE STATE IN WHICH THE PAYEE IS LOCATED SHALL BE DEEMED
GOVERNING AND CONTROLLING.
3.6 THE BORROWERS HEREBY WAIVE TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING TO WHICH THEY ARE A PARTY INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH THIS NOTE OR ANY OF THE LOAN DOCUMENTS.
3.7 Capitalized terms used in this Note but not defined
herein shall have the meanings given to them in the Credit
Agreement.
IN WITNESS WHEREOF, the Borrowers have caused this Note to
be duly executed the day and year first above written.
HORIZON VESSELS, INC.
By:
Name:
Title:
HORIZON OFFSHORE CONTRACTORS, INC.
By:
Name:
Title:
Exhibit A-2 to
Credit Agreement
AMENDED AND RESTATED PROMISSORY NOTE
Facility B
USD 20,000,000.00 May ___, 1998
FOR VALUE RECEIVED, HORIZON VESSELS, INC., a corporation
organized and existing under the laws of the State of Delaware
and HORIZON OFFSHORE CONTRACTORS, INC., a corporation organized
and existing under the laws of the State of Delaware
(collectively, the "Borrowers") hereby jointly and severally
promise to pay to DEN NORSKE BANK ASA (the "Payee"), or order, on
or before July 31, 2000, or otherwise, as hereinafter provided,
TWENTY MILLION AND NO/100 DOLLARS OF THE UNITED STATES OF AMERICA
(USD 20,000,000.00) and to pay interest on the unpaid portion of
said principal sum outstanding from time to time, as hereinafter
provided.
PRINCIPAL AND INTEREST
1.1 (a) Interest on this Note shall be payable at the
times and the rates as provided in Section 6.1 of the Amended and
Restated Credit Agreement (the "Credit Agreement") dated as of
May ___, 1998, among the Borrowers, Horizon Offshore, Inc. and
the Payee.
(b) In case any payment of principal or interest is
not paid when due, additional interest at the rate determined as
provided in Section 6.4 of the Credit Agreement shall be payable
on all overdue principal and, to the extent that the same may be
lawful, on all overdue interest.
1.2 Interest shall be calculated on the outstanding
principal amounts as provided in Section 6.1(c) and 6.1(d) of the
Credit Agreement.
1.3 The principal of this Note shall be payable as provided
in Section 7.3 of the Credit Agreement.
1.4 Notwithstanding any provision of this Note to the
contrary, in no event shall the aggregate amount of consideration
which constitutes interest under any applicable law which is
contracted for, charged or received hereunder or under this Note
("Interest") exceed the maximum amount of nonusurious interest
allowed by law, and any excess shall be credited on this Note (or
if all obligations under this Note shall have been paid in full,
refunded to the Borrowers). For purposes of the foregoing, the
maximum amount of interest allowed by law shall be calculated by
determining the amount of interest that could be contracted for,
charged or received during the term hereof at the maximum rate of
nonusurious interest allowed from time to time by applicable law
as is now or, to the extent allowed by law, as may hereafter be
in effect (the "maximum nonusurious interest rate") and, if at
any time the rate of Interest to accrue would exceed the maximum
nonusurious interest rate, the rate of Interest to accrue under
this Note shall be limited to the maximum nonusurious interest
rate, but any subsequent reductions in the LIBOR Rate (as defined
in the Credit Agreement) shall not reduce the rate of Interest to
accrue on this Note below the maximum nonusurious interest rate
until the total amount of Interest accrued and paid on this Note
equals the amount of Interest which could have accrued if a rate
per annum equal to the LIBOR Rate plus 3% or the Prime Rate plus
1/2% or the Prime Rate plus 2 and 1/2% had at all times been in
effect.
SECURITY
2.1 This Note is issued under and pursuant to the Credit
Agreement and is secured by, among other things, ship mortgages
on various vessels owned by the Borrowers (the "Mortgages"), a
Deed of Trust on certain real estate and improvements located in
Port Arthur, Jefferson County, Texas (the "Deed of Trust") and a
Security Agreement on certain other assets and revenues of the
Borrowers (the "Security Agreement"). Reference is hereby made
to the Credit Agreement, the Deed of Trust, the Mortgages and the
Security Agreement for a description of the property thereby
mortgaged, the nature and extent of the security afforded thereby
and the rights of the Borrowers and the Payee with respect to
such security as provided in the Mortgages, the Deed of Trust and
the Security Agreement. Payment of this Note may be demanded by
the holder hereof prior to the maturity of this Note under
certain circumstances and conditions, in the manner, and with the
effect, provided in the Credit Agreement.
2.2 This Note evidences the advances made by the Payee, and
the Borrowers' obligations to make Indemnity Payments, under
Facility B of the Credit Agreement. This Note is given in
amendment, restatement and extension of that certain Amended and
Restated Promissory Note dated December 30, 1997 of the Borrower
to the Payee in the original principal amount of USD
20,000,000.00 and the indebtedness evidenced thereby and liens
securing such Promissory Note are not extinguished hereby but
carried forward.
MISCELLANEOUS
3.1 All parties hereto, including endorsers hereof, hereby
waive presentment for payment, demand, protest and notice of
protest and non-payment hereof and hereby consent that any and
all securities or other property, if any, held by or for the
holders hereof at any time as security for this Note may be
exchanged, released or surrendered and that the time of payment
of this Note may be extended, all in the sole discretion of the
holder hereof and without notice and without affecting in any
manner the liability of the parties hereto.
3.2 No course of dealing between the Borrowers and the
Payee in exercising any rights hereunder shall operate as a
waiver of any right of any holder except to the extent expressly
waived in writing by such holder.
3.3 Whenever any payment to be made hereunder shall be due
on a day which is not a Business Day, the due date thereof shall
be extended to the next succeeding Business Day; provided,
however, that if such next succeeding Business Day is in a new
calendar month, then the payment
required hereunder shall be made on the last Business Day
preceding the original date on which payment was due. If a
payment of principal has been extended pursuant to this Section
3.3, interest shall be payable on such principal at the
applicable rate during such extension.
3.4 Any notice to be given pursuant to this Note shall be
given in accordance with Section 17.4 of the Credit Agreement.
3.5 THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK EXCEPT
THAT WITH RESPECT TO THE PROVISIONS OF THIS NOTE WHICH PROVIDE
FOR OR RELATE TO THE PAYMENT OF INTEREST, ANY PROVISIONS OF
APPLICABLE FEDERAL LAW WHICH PERMIT THE PAYEE TO CHARGE THE
HIGHER OF THE RATE PERMITTED BY SUCH APPLICABLE LAW OR BY THE
LAWS OF THE STATE IN WHICH THE PAYEE IS LOCATED SHALL BE DEEMED
GOVERNING AND CONTROLLING.
3.6 THE BORROWERS HEREBY WAIVE TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING TO WHICH THEY ARE A PARTY INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH THIS NOTE OR ANY OF THE LOAN DOCUMENTS.
3.7 Capitalized terms used in this Note but not defined
herein shall have the meanings given to them in the Credit
Agreement.
IN WITNESS WHEREOF, the Borrowers have caused this Note to
be duly executed the day and year first above written.
HORIZON VESSELS, INC.
By:
Name:
Title:
HORIZON OFFSHORE CONTRACTORS, INC.
By:
Name:
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED BALANCE SHEET OF HORIZON OFFSHORE, INC. AND SUBSIDIARIES
AS OF MARCH 31, 1998 AND THE RELATED UNAUDITED CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 134
<SECURITIES> 0
<RECEIVABLES> 16,165
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,842
<PP&E> 71,270
<DEPRECIATION> (1,686)
<TOTAL-ASSETS> 88,972
<CURRENT-LIABILITIES> 21,756
<BONDS> 0
0
0
<COMMON> 3,369
<OTHER-SE> 20,285
<TOTAL-LIABILITY-AND-EQUITY> 88,972
<SALES> 18,611
<TOTAL-REVENUES> 18,611
<CGS> 13,227
<TOTAL-COSTS> 1,939
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 801
<INCOME-PRETAX> 2,644
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,644
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,644
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
