AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 30, 2000
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
----------------
COMMISSION FILE NUMBER 001-14135
OMI CORPORATION
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
MARSHALL ISLANDS 52-2098714
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
REGISTRANT'S ADDRESS:
ONE STATION PLACE
STAMFORD, CONNECTICUT 06902
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: (203) 602-6700
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
COMMON STOCK, PAR VALUE $.50 PER SHARE NEW YORK STOCK EXCHANGE
- -------------------------------------- ------------------------------------
Title of Class Name of Exchange on which Registered
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
----------------
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE 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 X NO
----- -----
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K.
YES X NO
----- -----
AGGREGATE MARKET VALUE OF REGISTRANT'S VOTING STOCK, HELD BY
NON-AFFILIATES, BASED ON THE CLOSING PRICE ON THE NEW YORK STOCK EXCHANGE AS OF
THE CLOSE OF BUSINESS ON MARCH 24, 2000:
$215,728,793
NUMBER OF SHARES OF THE REGISTRANT'S COMMON STOCK OUTSTANDING AS OF MARCH
24, 2000:
57,527,678
THE FOLLOWING DOCUMENT IS HEREBY INCORPORATED BY REFERENCE INTO PART III OF
THIS FORM 10-K:
(1) PORTIONS OF THE OMI CORPORATION 2000 PROXY STATEMENT TO BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
================================================================================
<PAGE>
INDEX
------------------
PART I
<TABLE>
<CAPTION>
ITEMS PAGE(S)
-------------
<S> <C> <C>
1. and 2. Business and Properties ........................................... 1
3. Legal Proceedings ................................................. 6
4. Submission of Matters to a Vote of Security Holders ............... 6
PART II
5. Market for OMI Corporation's Common Stock and Related
Stockholder Matters ............................................. 7
6. Selected Financial Data ........................................... 8
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations ........................................... 9
7A. Quantitative and Qualitative Disclosures about Market Risk ........ 22
8. Financial Statements and Supplementary Data ....................... 24
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure ............................................ 59
PART III
10. Directors and Executive Officers of OMI Corporation ............... 59
11. Executive Compensation ............................................ 59
12. Security Ownership of Certain Beneficial Owners and Management .... 59
13. Certain Relationships and Related Transactions .................... 59
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ... 59
SIGNATURES ........................................................ 61
</TABLE>
i
<PAGE>
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
GENERAL
OMI Corporation ("OMI" or the "Company"), organized under the laws of the
Republic of the Marshall Islands on January 9, 1998, is located at One Station
Place, Stamford, Connecticut. The telephone number is (203) 602-6700.
Prior to June 17, 1998, the Company was a subsidiary of OMI Corp., a
Delaware corporation ("Old OMI") and held the international assets of Old OMI.
Old OMI acquired Marine Transport Lines, Inc. ("MTL"), a privately owned company
specializing in marine and transportation services, principally to the energy
and chemical industries. In connection with the acquisition of MTL, Old OMI spun
off to its shareholders the Company. Subject to certain exceptions, the spin off
was tax free to Old OMI, its shareholders and the Company. The Company retained
the OMI name and Old OMI changed its name to Marine Transport Corporation
("MTC"). The previous management of Old OMI became the management of the Company
and the previous management of MTL became the management of MTC. For a more
complete description of the transaction, the conditions and certain other items
shareholders are referred to the Registration Statement on Form S-1 filed by the
Company with the Securities and Exchange Commission on May 15, 1998
(registration statement number 333-52771) which is hereby incorporated by
reference.
The Company provides seaborne transportation services for crude oil and
petroleum products in the international shipping markets. Its customers include
major independent and state-owned oil companies, major oil traders, government
entities and various other entities. OMI owns directly or indirectly four crude
oil tankers of approximately 150,000-160,000 dwt ("Suezmaxes"), twelve tankers
of approximately 30,000 dwt ("handysize product carriers") and three tankers of
approximately 65,000 dwt ("Panamaxes"). OMI has on order from a shipyard one
Suezmax expected to be delivered in May 2000. Through ownership of joint venture
companies, OMI owns approximately 50% interests in one 320,000 dwt crude oil
carrier. OMI also has one Suezmax on bareboat charter and two Suezmaxes on time
charter. The Company sold its joint venture interest in one Panamax dry bulk
carrier and its 1980 built aframax crude carrier during the first quarter of
2000 and recently entered into contracts to sell two handysize product carriers.
DEVELOPMENT OF OMI'S BUSINESS
In recent years, OMI has focused its fleet into Suezmaxes and handysize
product carriers, disposing of vessels not fitting into that profile. During
1999 and the first quarter of 2000, OMI disposed of its five older Suezmax crude
oil tankers (one of which was jointly owned), its joint venture interest in its
last remaining dry bulk carrier and its only aframax tanker. During the same
period, the fourth of five newbuilding Suezmax crude oil tankers was delivered
and was later sold and leased back. Two newbuilding product carriers were
delivered, as was a newbuilding Suezmax which the Company acquired from another
owner.
The Company's existing fleet as of March 24, 2000 is shown on the following
table:
<TABLE>
<CAPTION>
DEAD-
WEIGHT CHARTER
YEAR METRIC EXPIRA-
NAME OF VESSEL TYPE OF VESSEL BUILT(1) TONNAGE TION
- -------------- -------------- -------- -------- -------
<S> <C> <C> <C> <C>
SETTEBELLO(2) ...................... Crude Oil Tanker 1986 322,466 Spot
SACRAMENTO ......................... Crude Oil Tanker 1998 157,411 Spot
SABINE ............................. Crude Oil Tanker 1998 157,332 Spot
PECOS .............................. Crude Oil Tanker 1998 157,406 Spot
COLUMBIA(3) ........................ Crude Oil Tanker 1999 157,327 Spot
LOIRE .............................. Crude Oil Tanker 2000 153,074 Spot
ELBE(4) ............................ Product Carrier 1984 66,800 Spot
NILE(4) ............................ Product Carrier 1981 65,755 Spot
VOLGA(4) ........................... Product Carrier 1981 65,689 Spot
SEINE .............................. Product Carrier 1999 35,407 7/2001
ISERE .............................. Product Carrier 1999 35,438 9/2001
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
DEAD-
WEIGHT CHARTER
YEAR METRIC EXPIRA-
NAME OF VESSEL TYPE OF VESSEL BUILT(1) TONNAGE TION
- -------------- -------------- -------- -------- -------
<S> <C> <C> <C> <C>
LIMAR(5) ............................ Product Carrier 1988 29,999 Spot
SHANNON(5) .......................... Product Carrier 1991 29,999 Spot
DANUBE(5)(6) ........................ Product Carrier 1990 29,998 Spot
TRENT(5)(6) ......................... Product Carrier 1991 29,998 Spot
TIBER(5) ............................ Product Carrier 1989 29,996 Spot
SEVERN(5) ........................... Product Carrier 1988 29,998 Spot
PAGODA(5) ........................... Product Carrier 1988 29,996 Spot
ALMA(5) ............................. Product Carrier 1988 29,996 Spot
PAULINA(5) .......................... Product Carrier 1984 29,992 Spot
PATRICIA(5) ......................... Product Carrier 1984 29,974 Spot
---------
Total Owned Fleet: 20 Vessels ................................. 1,516,724
3 Chartered-in Crude Tankers (7) .......................... 449,762
---------
Total Foreign Flag Operating Fleet: 23 Vessels ............ 1,966,486
=========
</TABLE>
- --------------
(1) Weighted average age (based on carrying capacity) of the Company's
then-owned fleet (including jointly-owned) at year-end 1999 is 7.9 years.
(2) Joint ownership with Bergesen d.y. A/S, Oslo, Norway.
(3) Sold and leased back. The Company has options to reacquire the vessel.
Tonnage is included in "Chartered-in Crude Tankers."
(4) Time chartered into a pool operated by Heidenreich Marine Inc. While the
vessels are committed by time charter, the revenues are dependent on the
spot market.
(5) Time chartered into International Product Carriers Limited, a pooling
company jointly owned by the Company and Osprey Maritime Limited Company.
While the vessels are committed by time charter, the revenues are dependent
on the spot market.
(6) Under contract to be sold.
(7) Time chartered-in under charters expiring in 2001 and 2002.
A brief description of the functions of the various types and sizes of
vessels owned or operated by the Company and others is set forth below:
Product carrier--normally carries refined petroleum products such as
gasoline, heating oil, aviation fuel, naphtha and kerosene.
Crude oil tanker--normally carries crude oil and dirty products.
Dry bulk carrier--carries dry bulk products such as coal, ore, grain
and fertilizers.
Handysize--a ship of approximately 30,000 dwt.
Panamax--a ship of approximately 50,000 to 70,000 dwt.
Aframax--a tanker (which may be a crude oil tanker or product carrier)
of approximately 70,000 to 120,000 dwt.
Suezmax--a crude oil tanker of approximately 120,000 to 160,000 dwt.
VLCC--a very large crude oil tanker, of approximately 200,000--300,000
dwt.
ULCC--an ultra large crude oil tanker, of more than 300,000 dwt.
In recent years, OMI has sought to increase the size of, and modernize its
fleet. It consistently inspects Suezmaxes which are available for purchase and
investigates other opportunities to improve its fleet directly and through ship
brokers. While the Company has been successful in modernizing the fleet, due to
weak markets the Company has not had the resources to increase the size of its
fleet and has reduced the number of vessels and tonnage of its fleet.
OMI's Suezmax tankers principally trade from West Africa to the U.S.
Atlantic coast and from the North Sea to the U.S. Atlantic coast. The product
carrier fleet operates worldwide, with the majority now trading in the
2
<PAGE>
Caribbean to the U.S. Atlantic coast and the U.S. Gulf of Mexico. The handysize
product carriers are well suited to trade in the U.S. eastern seaboard due to
vessel cargo size and dimensions. However, other than the two newbuildings, the
product carriers are single hull and do not have segregated ballast, thereby
placing them at a competitive disadvantage with numerous vessels built in the
last half of the 1990's.
OMI's movement toward concentrations in specific vessel categories reflects
management's belief that large concentrated fleets create strategic advantages:
First, the fleet will be more attractive to large customers by providing
better scheduling opportunities through substitution. A large fleet also
provides opportunities to obtain contracts for large volume movements. These
both create the potential to increase vessel utilization. Second, large and
concentrated fleets create economies of scale to spread efficiently the overhead
costs associated with environmental regulations and inspections. Third,
operating expertise and efficiency are enhanced by concentration in certain
vessel classes. Fourth, OMI believes that large customers will prefer to deal
with a limited number of large shipping companies with fleets that they have
pre-vetted for quality, rather than smaller shipping companies characteristic of
the fragmented international tanker market.
Management believes that OMI maintains an ability to participate in
improvements in the international tanker markets with its Suezmax tankers. OMI
also believes that Suezmax tankers provide nearly the upside potential of larger
vessels such as VLCCs with less of the downside risk, primarily because
Suezmaxes have greater geographic flexibility than VLCCs. Product carriers
historically provided OMI with relatively more stable cash flows, even in weak
markets. However, weakness in the product carrier markets commencing during the
last portion of 1997 and in 1998, due to a mild winter and reduced Asian demand,
has resulted in unusually low rates which, due to continued mild winters and
substantial additional new tonnage entering into the market, has persisted.
Since May of 1998 Alliance Chartering LLC, a limited liability company
which is jointly owned with Frontline Ltd., a major international shipping
company has handled the chartering of OMI's and Frontline Ltd.'s Suezmaxes.
Alliance's current fleet stands at approximately 36 vessels.
In March of 1999 the Company agreed with Osprey Maritime Limited, a major
international shipping company based in Singapore, to consolidate their product
tanker operations, and in May 1999 that consolidation commenced establishing
International Product Carriers Limited ("IPC") in Bermuda to commercially
operate the product carriers of its parents. IPC is seeking other product
carrier owners for its pools in order to enhance its marketing abilities. IPC's
current fleet stands at approximately 28 vessels.
During March 2000, the Company announced that it had made investments in
two business-to-business internet companies. One is MarineProvider ASA, a
Norwegian-based company which is to provide services such as electronic
acquisition of bunker and other supplies for ships. The Company owns
approximately 8% of MarineProvider. The other investment is in SeaLogistics Ltd.
which will offer on-line chartering and other services to shipowners and
charterers. The Company currently owns 50% of SeaLogistics but expects
substantial dilution as other entities invest in the project. The Company's
total expenditures to date on the investments total approximately $1,500,000. It
is committed to expend an additional $2,000,000.
NATURE OF BUSINESS
OMI is primarily engaged in the business of owning and operating tankers in
international markets. There are two aspects to vessel operation: (i) technical
operation, which involves maintaining, crewing and insuring the vessel, and (ii)
commercial operation, which involves arranging the business of the vessel. OMI
is the commercial operator of all its Suezmaxes and jointly markets those
vessels in Alliance Chartering LLC and is the commercial operator of the two
time chartered-out handysize product carriers. OMI has entered its Panamax
tankers in a pool and all of its other product carriers are commercially managed
by IPC. A subsidiary, OMI Marine Services LLC, is the technical operator of all
of the Company's vessels except its remaining jointly owned vessel, which is
commercially and technically managed by its partner.
OMI's vessels are available for charter on a voyage, time or bareboat
basis. Under a voyage charter, the operator of a vessel agrees to provide the
vessel for the transport of specific goods between specific ports in return for
the payment of an agreed upon freight per ton of cargo or, alternatively, for a
specified total amount. All operating costs are for the operator's account. A
single voyage (generally two to ten weeks) charter is often referred
3
<PAGE>
to as a "spot market" charter. Vessels in the spot market may also spend time
idle or laid up as they await business. A voyage charter involving more than one
voyage with the same charterer is commonly known as a "consecutive voyage"
charter.
A time charter involves the placing of a vessel at the charterer's disposal
for a set period of time during which the charterer may use the vessel in return
for the payment by the charterer of a specified daily or monthly hire rate. In
time charters, operating costs such as for crews, maintenance and insurance are
typically paid by the owner of the vessel and voyage costs such as fuel and port
charges are paid by the charterer.
Under a bareboat charter, the charterer takes possession of the vessel in
return for a specified amount payable to the owner of the vessel. The bareboat
charterer must provide its own crew, pay all operating and voyage expenses and
is responsible for the operation and management of the vessel.
Voyage, time and bareboat charters are available for varying periods,
ranging from a single trip to a long-term arrangement approximating the useful
life of the ship, to commercial firms (such as oil companies) and governmental
agencies (both foreign and domestic) on a worldwide basis. In general, a
long-term charter affords the vessel owner greater assurance that it will be
able to cover its costs, including depreciation, interest, and operating costs.
Operating the vessel in the spot market affords the owner greater speculative
opportunity, which may result in high rates when ships are in high demand or low
rates (possibly insufficient to cover costs) when ship availability exceeds
demand. Ship charter rates are affected by world economics, international
events, weather conditions, strikes, governmental policies, supply and demand,
and many other factors beyond the control of OMI. Currently all of OMI's fleet
except one Suezmax and two product carriers operate in the spot market.
CUSTOMERS
International Product Carriers Ltd., a company jointly owned by the Company
and Osprey Maritime Limtied accounted for $14,237,000 of the Company's revenues
in 1999, which is approximately 12%. The revenues are received by IPC from
numerous customers into a pool which is divided among the vessels in the pool.
REGULATIONS
The Company is required by various governmental and quasi-governmental
agencies to obtain certain permits, licenses and certificates with respect to
its vessels. The kinds of permits, licenses and certificates required depend
upon such factors as the country of registry, the commodity transported, the
waters in which the vessel operates, the nationality of the vessel's crew, the
age of the vessel and the status of the Company as owner or charterer. The
Company believes that is has or can readily obtain all permits, licenses and
certificates necessary to permit its vessels to operate.
OMI's operations are also affected by U.S. federal, state and foreign
environmental protection laws and regulations, particularly the U.S. Port and
Tanker Safety Act, the Act to Prevent Pollution from Ships, various volatile
organic compound emission requirements, the BCH Code for chemical carriers, the
IMO/USCG pollution regulations and various SOLAS amendments. Compliance with
such laws' regulations entails additional expense, including vessel
modifications and changes in operating procedures.
The Oil Pollution Act of 1990 ("OPA 90") affects all vessel owners shipping
oil or hazardous material to, from, or within the U.S. The law phases out the
use of tankers having single hulls, effectively imposes on vessel owners and
operators unlimited liability in the event of a castastrophic oil spill and
establishes the Oil Spill Liability Trust fund. OPA 90 requires that tankers
over 5,000 gross tons calling at U.S. ports have double hulls if contracted
after June 30, 1990, or delivered after January 1, 1994. Furthermore, it calls
for the elimination of all single hull vessels by the year 2010 on a phase-out
schedule that is based on size and age, unless the tankers are retrofitted with
double hulls. The law permits existing single hull tankers to operate until the
year 2015 if they discharge at deep water ports, such as the Louisiana Offshore
Oil Port ("LOOP"), or lighter more than 60 miles offshore. The International
Maritime Organization ("IMO") has adopted a regulation that requires tankers
5,000 dwt and over, contracted after July 6, 1993, to have double hull, mid-deck
or equivalent design. Existing single hull tankers will be phased out unless
they are retrofitted with double hull, mid-deck or equivalent design no later
than 30 years after delivery. Another IMO regulation mandates that existing
single hull crude oil tankers larger than 20,000 dwt and product tankers over
30,000 dwt without segregated ballast tanks ("SBT") must convert to SBT
operations using at least 30% of their wing tanks, or cargo tank bottom area,
for this purpose by the age of 25 or be
4
<PAGE>
hydrostatically-balance loaded in the wing tanks to provide equivalent oil
outflow abatement in the event of casualty. The U.S. has not accepted these IMO
regulations, as the IMO regulations recognize, in addition to double hull, other
designs as well as contain different phase out dates for existing single hull
tankers which are in conflict with provisions of OPA 90. As a result, some
vessels which are eligible to trade internationally will be unable to carry
cargo to or from the United States, except to LOOP or if lightered, and some
vessels which may trade in the U.S. will be unable to trade elsewhere. All of
the Company's vessels can trade to the U.S. at least until 2010 under current
rules.
In the U.S., liability for an oil spill is governed not only by OPA 90, but
also by the laws, rules and regulations established by every coastal and inland
waterway state. Federal law does not preempt such state laws and provides that
claims made by state governments and other affected parties are not subject to
limitation of liability if the oil spill results from gross negligence, willful
misconduct or violation of any federal operating or safety standard. One result
of OPA 90 has been a greater prominence for independent owners with a reputation
for high quality of technical management and well maintained physical assets.
Another effect of the law has been to increase the relative costs for liability
insurance for vessel owners trading to the U.S. While OMI maintains insurance at
levels it believes prudent, claims from a castastrophic spill could exceed the
insurance coverage available, in which event there could be a material adverse
effect on OMI.
Following the recent breakup of a tanker in Europe, there has been
significant publicity and political movement toward the creation of laws in
Europe at least as stringent as OPA 90. While nothing has to date gone into
effect, the Company expects significant legislation soon. The Company believes
that such legislation is likely to benefit owners such as the Company which have
modern fleets, by eliminating older vessels as competitors in European markets.
OMI believes that compliance with applicable environmental and pollution
laws and regulations has not had and is not expected to have a material adverse
effect upon its competitive position; however the financial position, value and
useful life of its vessels and results of operations may be affected as a result
of OPA 90 and other environmental laws and regulations.
COMPETITION
The Company competes with a large number of international fleets. The
international fleets include vessels owned by independent operators and major
oil companies; in addition, many international fleets are government owned. Some
of the Company's competitors have greater financial resources than the Company.
Competition in the ocean shipping industry varies primarily according to
the nature of the contractual relationship as well as with respect to the kind
of commodity being shipped. Competition in virtually all bulk trades, including
crude oil and petroleum products is intense.
EMPLOYEES AND LABOR RELATIONS
On December 31, 1999, the Company and its subsidiaries had approximately 60
office employees.
The Company primarily uses hiring agents to crew its vessels, one of which
recruits exclusively for the Company. Although agents sign labor contracts with
labor organizations in various foreign countries that represent seagoing
personnel from these countries, the Company is not a party to these contracts.
Some senior shipboard positions on foreign flag vessels are filled directly by
the Company.
The Company considers its relationship with its employees, including its
seagoing crews, to be satisfactory.
VALUE OF ASSETS AND CASH REQUIREMENTS
Although the replacement costs of comparable new vessels may be above the
book value of OMI's fleet, the market value of OMI's fleet may be below book
value when market conditions are weak. In common with other shipowners, OMI
continually considers asset redeployment which at times includes the sale of
vessels at less than their book value.
OMI's results of operations and cash flow may be significantly affected by
future charter markets since currently only three vessels are on charter
extending beyond year-end 2000.
5
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ITEM 3. LEGAL PROCEEDINGS
OMI and its subsidiaries are not parties to any material pending legal
proceedings or related group of such proceedings, other than ordinary routine
litigation incidental to the business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders of the Company
during the fourth quarter of 1999.
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is certain information with respect to the Company's
executive officers as of March 24, 2000.
<TABLE>
<CAPTION>
YEAR
APPOINTED
NAME AGE POSITION TO OFFICE
- ---- --- -------- ------------
<S> <C> <C> <C>
Craig H. Stevenson, Jr. ............... 46 Chief Executive Officer 1998
and President
Robert Bugbee ......................... 39 Senior Vice President and Chief 1998
Operating Officer
Vincent J. de Sostoa .................. 55 Senior Vice President, Chief 1998
Financial Officer and Treasurer
Fredric S. London ..................... 52 Senior Vice President, General 1998
Counsel and Secretary
Henry Blaustein ....................... 57 Senior Vice President, OMI Marine 1998
Services LLC
Kathleen C. Haines .................... 45 Vice President/Controller 1998
Thomas M. Scott ....................... 43 Vice President, OMI Marine 1998
Services LLC
Stavros Skopelitis .................... 53 Vice President 1998
</TABLE>
There is no family relationship by blood, marriage or adoption (not more
remote than first cousin) between any of the above individuals and any other
executive officer or any OMI director.
The term of office of each officer is until the first meeting of directors
after the annual stockholders' meeting next succeeding his election and until
his respective successor is chosen and qualified.
There are no arrangements or understandings between any of the above
officers and any other person pursuant to which any of the above was elected as
an officer.
The following descriptions of occupations or positions that the executive
officers of the Company have held during the last five years:
Craig H. Stevenson, Jr. was appointed President and Chief Executive Officer
of the Company in 1998. Mr. Stevenson had been Chief Executive Officer of Old
OMI since January 1997 and President of Old OMI since November 1995. He was
elected Chief Operating Officer of Old OMI in November 1994 and Senior Vice
President/Chartering in August 1993.
Robert Bugbee was elected Chief Operating Officer in March 2000 and Senior
Vice President of the Company in 1998. He had been Senior Vice President of Old
OMI since August 1995. Mr. Bugbee joined Old OMI in February 1995. Prior
thereto, he was Head of Business Development at Gotaas-Larsen Shipping
Corporation for more than three years.
Henry Blaustein was elected Senior Vice President of OMI Marine Services
LLC in 1998. He had been Senior Vice President/Technical of Old OMI since July
1997. Prior thereto he was an independent consultant.
6
<PAGE>
Vincent J. de Sostoa was elected Senior Vice President, Treasurer and Chief
Financial Officer of the Company in 1998. He had been Chief Financial Officer of
Old OMI since 1994.
Fredric S. London was elected Senior Vice President, Secretary and General
Counsel of the Company in 1998. He had been Senior Vice President, Secretary and
General Counsel of Old OMI since December 1991.
Kathleen C. Haines was elected Vice President and Controller of the Company
in 1998. She had been Vice President of Old OMI since January 1994.
Thomas M. Scott was elected Vice President of OMI Marine Services LLC in
1998. He had been Vice President of Old OMI since February 1995.
Stavros Skopelitis was elected Vice President and Economist of the Company
in 1998. He had been Vice President and Economist of Old OMI since May 1996. He
was elected Assistant Vice President and Economist of Old OMI in January 1994.
PART II
ITEM 5. MARKET FOR OMI CORPORATION'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
COMMON STOCK
Old OMI listed for trading on the New York Stock Exchange all of its common
stock on March 13, 1992 (NYSE-OMM) and the Company acceded to that listing on
June 18, 1998. As of March 24, 1999 the number of holders of OMI common stock
was approximately 3,424. The high and low sale prices of the common stock, as
reported by the New York Stock Exchange, were as follows:
1999 QUARTER 1ST 2ND 3RD 4TH
------------ ------- ------- ------- -------
High $3 7/16 $2 3/4 $2 3/4 $2 5/8
Low $1 1/2 $1 1/2 $1 7/8 $1 5/16
1998 QUARTER 1ST 2ND 3RD 4TH
------------ ------- ------- ------- -------
High N/A $8 11/16 $8 5/16 $4
Low N/A $6 7/8 $3 1/8 $2 5/8
PAYMENT OF DIVIDENDS TO STOCKHOLDERS
The Board has not declared dividends to this date. OMI's current policy is
not to pay dividends, but to retain cash for use in its business. Any
determination to pay dividends by OMI in the future will be at the discretion of
the Board of Directors and will depend upon OMI's results of operations,
financial condition, capital restrictions, covenants and other factors deemed
relevant by the Board of Directors. Payment of dividends is limited by the terms
of certain agreements to which OMI and its subsidiaries are party. (See Note 5
to Consolidated Financial Statements.)
7
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ITEM 6. SELECTED FINANCIAL DATA
OMI CORPORATION AND SUBSIDIARIES
(DOLLAR AND SHARES OUTSTANDING IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net voyage revenues(1) ........................... $ 33,916 $ 41,331 $ 55,393 $ 39,692 $ 27,301
======== ======== ======== ======== ========
Revenues ......................................... $115,992 $149,228 $141,985 $111,292 $ 91,819
-------- -------- -------- -------- --------
Operating expenses:
Vessel and voyage .............................. 66,842 82,368 77,686 67,008 64,518
Charter hire ................................... 15,234 25,529 8,906 4,592 --
Depreciation and amortization .................. 23,835 24,314 22,675 18,142 17,621
Provision for loss on lease obligations ........ 6,229 -- -- -- --
General and administrative ..................... 10,486 10,773 12,540 6,851 6,451
-------- -------- -------- -------- --------
Total operating expenses ......................... 122,626 142,984 121,807 96,593 88,590
-------- -------- -------- -------- --------
Operating (loss) income .......................... (6,634) 6,244 20,178 14,699 3,229
(Loss) gain on disposal/write down of
assets-net ..................................... (48,692) 6,485 885 4,078 (829)
Loss on disposal/write down of joint venture
investments .................................... (7,771) -- -- -- --
Interest expense ................................. 17,945 11,118 11,756 16,912 18,024
Provision (benefit) for income taxes ............. 475 (37,158) 5,407 876 (4,698)
Equity(loss) in operations of joint ventures ..... (510) 3,684 737 2,481 5,464
(Loss) income before extraordinary loss and
cumulative effect of change in accounting
principles ..................................... (81,781) 42,917 6,859 5,356 (4,493)
Extraordinary loss-net of tax benefit ............ (1,253) -- -- (1,663) --
Cumulative effect of change in accounting
principles-net of tax provision ................ 2,729 -- 10,063 -- --
Net (loss) income ................................ $(80,305) $ 42,917 $ 16,922 $ 3,693 $ (4,493)
==============================================================================================================
BASIC EARNINGS (LOSS) PER COMMON SHARE:
(Loss) income before extraordinary loss and
cumulative effect of change in accounting
principles ................................... $ (1.94) $ 1.01 $ 0.16 $ 0.16 $ (0.15)
Net (loss) income .............................. $ (1.90) $ 1.01 $ 0.39 $ 0.11 $ (0.15)
DILUTED EARNINGS (LOSS) PER COMMON SHARE:
(Loss) income before extraordinary loss and
cumulative effect of change in accounting
principles ................................... $ (1.94) $ 1.00 $ 0.16 $ 0.16 $ (0.15)
Net (loss) income .............................. $ (1.90) $ 1.00 $ 0.39 $ 0.11 $ (0.15)
Weighted average shares outstanding ............ 42,250 42,671 42,914 33,440 30,745
==============================================================================================================
BALANCE SHEET DATA:
Cash and cash equivalents ...................... $ 7,381 $ 22,698 $ 30,608 $ 16,056 $ 25,963
Assets to be disposed of ....................... 90,996 -- -- -- --
Vessels and other property-net ................. 291,416 393,862 286,996 394,423 241,821
Construction in progress (newbuildings) ........ 25,340 34,733 56,032 10,754 --
Total assets ................................... 472,415 530,127 440,708 439,463 377,049
Total debt ..................................... 267,747 247,147 53,999 125,171 92,842
Total stockholders' equity ..................... 171,766 245,183 283,558 250,402 221,677
==============================================================================================================
</TABLE>
(1) Voyage revenues less vessel and voyage expenses (including charter hire
expense)
See notes to consolidated financial statements.
8
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following presentation of management's discussion and analysis of the
OMI Corporation ("OMI" or the "Company") financial condition and results of
operations should be read in conjunction with the consolidated financial
statements, accompanying notes thereto and other financial information appearing
elsewhere in this Form 10-K.
The information below and elsewhere in this document contains certain
forward-looking statements which reflect the current view of the Company with
respect to future events and financial performance. Wherever used, the words
"believes," "estimates," "expects," "plan," "anticipates" and similar
expressions identify forward-looking statements. Any such forward-looking
statements are subject to risks and uncertainties that could cause the actual
results of the Company's results of operations to differ materially from
historical results or current expectations. The Company does not publicly update
its forward-looking statements even if experience or future changes make it
clear that any projected results expressed or implied therein will not be
realized. The information contained in the discussion of the "Year 2000" ("Y2K")
constitutes forward-looking information. The identification and redemption of
Y2K issues is a technological effort that has never been undertaken before and
estimates of the outcome, time and expense of this project are, for that reason,
particularly hard to make with any certainty.
GENERAL
Overview
OMI provides seaborne transportation services primarily for crude oil and
refined petroleum. The Company is the successor to Universal Bulk Carriers, Inc.
("UBC"), a Liberian corporation, which was a wholly owned subsidiary of OMI
Corp. ("Old OMI") until June 17, 1998 at which date the Company was separated
from Old OMI (renamed Marine Transport Corporation, "MTC") through a tax-free
distribution ("Distribution") of one share of the Company's common stock for
each share of Old OMI common stock. The distribution separated Old OMI into two
publicly owned companies. OMI Corporation operates what were Old OMI's foreign
shipping businesses under the management of certain of the officers formerly of
Old OMI who moved to the new company and certain former directors of Old OMI and
additional new directors. The Company continues to trade under the symbol "OMM"
on the New York Stock Exchange.
The Company's net loss was $80.3 million for the year ended December 31,
1999 or $1.90 basic loss per share, after the extraordinary loss of $1.3 million
or $0.03 basic loss per share and income from the cumulative effect of change in
accounting principle of $2.7 million or $0.07 basic earnings per share. The 1999
net loss includes loss on disposal/write down of assets of $48.7 million, loss
on disposal/write down of joint venture investments of $7.8 million and a
provision for loss on lease obligations of $6.2 million. Net income for the year
ended December 31, 1998 was $42.9 million or $1.01 basic earnings per share. The
1998 net income included a gain from the disposal of a vessel of $6.5 million
and net income for the reversal of deferred income taxes in the amount of $38.9
million. In connection with the Distribution described above, OMI became a
decontrolled corporation and its shipping income is no longer subject to United
States federal income tax. The provision for taxes for the year ended December
31, 1999, reflects adjustments to actual for 1998 taxes.
OMI's Fleet
OMI's fleet comprises 22 vessels, including three chartered-in vessels and
one jointly owned vessel, and excluding a jointly owned bulk carrier and an
aframax, both of which were sold in the first quarter of 2000. OMI has
concentrated its fleet in two classes of vessels, Suezmax and product tankers.
OMI has been implementing its plan for fleet renewal with the delivery of four
new Suezmax vessels in the summer of 1998 and January 1999, and two deliveries
in 2000 (including the Suezmax tanker described below). During July and
September 1999, two 35,000 deadweight tons ("dwt") product carrier newbuildings
were delivered.
The Company's fleet currently consists of three wholly owned Suezmax
tankers, three chartered-in Suezmaxes, one jointly owned Ultra Large Crude
Carrier ("ULCC"), three Panamax product tankers (currently carrying crude oil)
and twelve handysize product carriers transporting clean products.
9
<PAGE>
Recent Activities
On February 11, 2000, the Company finalized its refinancing of bank debt
with its lenders in the amount of $264.5 million. The effect of the refinancing
revises debt covenants, increases interest rate margins and reduces principle
amortization (see Financing Activities).
During February 2000, OMI agreed to sell in a private placement to four
unrelated investors, 9,583,000 shares of OMI common stock for $2.00 per share
($1.92 per share net of commissions). The funds raised will be used to partially
finance vessels delivered in 2000.
In October 1999, OMI agreed to acquire from Mega Tankers Newbuilding AS, a
Suezmax tanker, which was under construction. The purchase price of the vessel
is approximately $46.2 million. The Company issued 5,700,000 shares of common
stock in November 1999 and an additional 599,998 shares in February 2000 valued
at $2.50 per share. On March 15, 2000, OMI entered into an agreement for a $27.0
million credit facility to finance this vessel upon delivery from the yard. The
vessel was delivered on March 21, 2000 and the remaining balance of
approximately $3.4 million was paid by the Company.
During the first quarter 2000, OMI sold its investment in Geraldton
Navigation Company Inc. ("Geraldton") for approximately $2.7 million, after
receiving a dividend from the joint venture of $1.2 million. A loss of $6.6
million was recorded for the year ended December 31, 1999 relating to the
disposal of this venture.
On September 29, 1999, OMI sold its 49 percent share in its White Sea
Holdings, Inc. ("White Sea") joint venture for approximately $2.4 million. The
loss on the disposal of the joint venture of $0.9 million was recorded in 1999.
In addition, OMI agreed with its partner to terminate the OMI-Heidmar joint
venture in June 1999. This venture operated a pool of product tankers in which
OMI time chartered three of its vessels until September 1999. A write down of
$0.3 million was recognized in 1999 relating to OMI's portion of non-recoverable
investments in joint venture assets.
On July 19, 1999 and September 15, 1999, the SEINE and the ISERE, two
product tanker newbuildings, were delivered at an approximate cost of $28.5
million each. Both vessels were time chartered for two-year periods. During
January 1999, the Company took delivery of a Suezmax newbuilding, the COLUMBIA,
and on June 30, 1999, the Company completed a sale/leaseback of this vessel for
$54 million.
As a result of market conditions, OMI disposed of its older Suezmax vessels
and non-core vessels. By doing this, the Company is better able to focus its
capital where its resources can provide higher returns. During July, August and
November 1999, OMI sold four of its single hull Suezmax vessels built in the
mid-1970's. These vessels were held for sale at their net realizable values on
June 30, 1999 and adjusted to actual sales prices at their sale dates in 1999.
During December 1999, the Company entered into an agreement to sell OMI's 1980s
built aframax vessel which was also held for sale at its fair value at June 30,
1999. The aframax vessel was delivered to the new owners in March 2000. Nine
vessels (including the aframax vessel) have been classified as assets to be
disposed of at December 31, 1999. The disposal of these vessels are expected
during the next two years.
An additional non-recurring item included in the 1999 operating loss is the
provision for losses on the Company's chartered-in vessels. An accounting
adjustment was required because current lease obligations exceeded estimated
future cash flows.
In March 2000, the Company made an investment of $0.5 million to acquire
approximately 8 percent of the equity in MarineProvider ASA, a new Internet
business-to-business provider of marine services, which is based in Norway.
OMI announced on March 23, 2000, the creation of SeaLogistics.com a neutral
electronic exchange for the shipping industry. SeaLogistics will offer a broad
range of content and services for the entire shipping industry and will
initially focus on on-line chartering for the shipment of crude oil and
petroleum products. Having received positive responses from major charterers and
shipowners, SeaLogistics is in discussions with them to determine levels of
participation. It expects to be on-line during the fourth quarter of 2000.
Market Alliances
OMI has planned to concentrate its fleet in two classes of vessels, Suezmax
and product tankers. By concentrating on these two fleets, OMI is implementing
its plan to consolidate shipping activities by the formation of
10
<PAGE>
alliances and pools with other owners. Rates for both classes of vessels were
historically low because of the imbalance of the supply and demand for crude oil
and refined products and various factors detailed in the Market Overview.
The Company has identified the advantages of owning a large modern Suezmax
fleet and has been implementing strategies to maximize earnings. First, the
fleet will be more attractive to large customers by providing better scheduling
opportunities. A large fleet also provides opportunities to obtain contracts for
large volume movements and creates the potential to increase vessel utilization.
Second, large and concentrated fleets create economies of scale to spread
efficiently the overhead costs associated with environmental regulations and
inspections. Third, operating expertise and efficiency are enhanced by
concentration in certain vessel classes. Fourth, OMI believes that large
customers will prefer to deal with a limited number of large shipping companies
with fleets that they have inspected for quality, rather than smaller shipping
companies characteristic of the fragmented international tanker market.
In 1998, in order to increase the Company's market opportunities in the
Suezmax trades in the Atlantic Basin, OMI and Frontline Ltd., a Norwegian owner
of the world's largest Suezmax fleet, combined Suezmax tanker fleets for
commercial purposes and created Alliance Chartering LLC ("Alliance"). Alliance's
control of the largest modern fleet of Suezmaxes has enabled it to strengthen
relationships and obtain contracts with customers. These contracts may allow
Alliance the opportunity to increase its Suezmax fleet utilization through
backhauls, when cargo is available, which can improve vessel earnings.
OMI's strategy for its handysize fleet is to increase market share by
consolidating commercial operations of vessels through marketing joint ventures
and through concentrating trading in selected areas. In March 1999, the Company
agreed with Osprey Maritime Limited, a major international shipping company
based in Singapore, to consolidate their product tanker operations, establishing
International Product Carriers Limited ("IPC") to form a mid-size product tanker
venture. The joint venture began operating effective May 1, 1999. IPC is
expanding the pool to include other product carrier owners to enhance its
marketing capacity. Currently all of OMI product carriers except the two new
product carriers (which are on time charter) are operating under adjustable rate
time charters with IPC.
MARKET OVERVIEW
Suezmax Tanker Overview
Average time charter equivalents ("TCE") in the Suezmax market fell in 1999
to their lowest level since 1995. This was the result of substantially lower
volumes of oil transported due to the adherence by OPEC and some non-OPEC oil
producers to their agreed oil production cuts, the fact that a high proportion
of these cuts involved long-haul Middle East oil, substantially higher bunker
prices and the draw down of oil inventories at the same time the tanker fleet
continued to grow.
Freight rates for Suezmax tankers have improved in early 2000. The crude
tanker market is expected to benefit this year as a result of the need to
transport substantially more oil to satisfy considerable oil demand, at a time
that oil inventories are at very low levels. However, a sustained improvement of
freight rates in the tanker markets will be largely dependent upon the
continuous improvement of economic activity in the Pacific region, as well as
the increase in the rate of tanker scrapings, in view of the relatively high
tanker newbuilding deliveries in the last two years and the substantial
deliveries expected in the year 2000.
The world tanker fleet grew and totaled approximately 276.7 million dwt at
the end of 1999, up by 3.9 million dwt or 1.4 % from the year-end 1998 level,
due to substantial newbuilding deliveries, offset in part by increasing
scrapping activity. At the same time, the tanker orderbook stood at 39.1 million
dwt, or 14.1% of the existing fleet. Approximately 21.5 million dwt is scheduled
for delivery in 2000, 12.0 million dwt in the year 2001 and most of the balance
in 2002. The tanker orderbook includes 44 Suezmaxes of about 6.7 million dwt, or
20.5% of the existing Suezmax fleet, and 74 VLCCs of 22.0 million dwt, or 18.1%
of the existing VLCC fleet.
However, approximately 91.8 million dwt, or one third of the total tanker
fleet, was 20 or more years old at the end of 1999. In addition, 75 Suezmax
tankers of 10.4 million dwt, or about 32% of the existing Suezmax tanker fleet,
and 10.0 million dwt, or 20.9% of the existing product tanker fleet, were 20 or
more years old.
The fall in tanker freight rates has led to increasing scrapping activity
as well as restraint in ordering new tonnage as compared to the previous two
years. Tanker sales for scrap totaled about 16.7 million dwt in 1999, more than
double
11
<PAGE>
the amount sold for scrap in 1998, while new orders totaled 14.9 million dwt.
The sales for scrap include 36 VLCCs and 22 Suezmaxes. Tanker scrapping activity
has been strong in the first two months of 2000 as about 6.0 million dwt of
tonnage was sold for scrap, including 8 Suezmaxes and 15 VLCCs. Tanker scrapping
activity should continue at high levels given the relatively high orderbook, the
tanker fleet age, high bunker prices which penalize fuel inefficient old
tonnage, an expensive fifth special survey and stricter environmental
regulations.
World oil demand increased by about 0.9 million barrels per day (b/d) in
1999, and is expected to grow by about 2.0 million b/d in 2000. The expected
increases reflect further oil demand growth in industrialized areas and the
Pacific region as economic activity is recovering from the recent financial
crisis. World oil inventories increased substantially in 1998, especially in the
first half of the year, but fell for most of 1999 and currently are at very low
levels. World commercial oil stocks at the end of 1999 are at the low level
prevailing at the end of 1996. As a result of the current very low oil inventory
levels and the expected considerable world oil demand gains in 2000, a
substantial increase of oil production by OPEC and non-OPEC producers will be
necessary this year. Most of the oil production gains are expected in West
Africa, Latin America and the long-haul Middle East.
Product Tanker Overview
Freight rates in the product tanker market fell throughout 1999 and in the
fourth quarter were at the lowest level since the same period in 1992. This was
the result of product tanker fleet expansion, product inventory reductions, and
moderate world oil demand growth as the economies of western Europe slowed down
and oil demand in southeast Asia, though improving, was still below the level
prevailing prior to the recent economic crisis.
The world product tanker fleet increased and totaled 48.1 million dwt at
the end of 1999, up by 2.9 million dwt or 6.4% from the year-end 1998 level,
while tonne-mile demand for product tankers increased by only 2.0%. The product
tanker orderbook stood at 4.3 million dwt or 8.9% of the existing product tanker
fleet. Approximately 3.0 million dwt are scheduled for delivery in 2000, 1.0
million dwt in 2001 and the balance in the year 2002 and beyond.
Following large OPEC and non-OPEC oil production cuts, world commercial oil
inventories at year-end 1999 have fallen to the low levels prevailing at the end
of 1996. At the same time, oil inventories in the three major markets--United
States, Europe and Japan--are at the lowest levels in over ten years.
Oil stocks are expected to decrease further in the first quarter of 2000
with the fall expected to be larger than the same period last year. The stock
declines are expected to be more concentrated in the Atlantic region and mostly
in products (distillate and gasoline). As a result, tight distillate and
gasoline markets in the U.S. and Western Europe will create opportunities for
more oil product cargoes from the long-haul Middle East as well as more cargoes
from Asia to U.S. West Coast.
The supply/demand imbalance prevailing in the product tanker trades is
expected to persist in the short-term given the relatively high newbuilding
deliveries this year. However, prospects for recovery in the product tanker
sector may be enhanced given the relatively low total orderbook for delivery in
the next few years, and some fundamental changes in the pattern of product
trades.
Furthermore, oil product import requirements are expected to increase in
the three major world oil consuming areas (North America, Western Europe and the
Pacific region) in the next few years, as oil demand growth is expected to
exceed refinery capacity in these areas. In addition, a substantial amount of
new refinery capacity in South and Southeast Asia in the next few years will
cover part of the increasing oil demand in this area, lowering product import
requirements from the Middle East. This will increase oil product exports from
the Middle East to longer haul Western destinations, namely the U.S. and Western
Europe, increasing product tanker tonne-mile demand.
RESULTS OF OPERATIONS
Results of operations of OMI Corporation include operating activities of
the Company's vessels. The discussion that follows explains the Company's
operating results in terms of net voyage revenues and TCE. Net voyage revenues
are voyage revenues minus vessel and voyage expenses (including charter hire
expense). TCE are voyage revenues less voyage expenses in a spot charter or
voyage revenues in a time charter because fluctuations in voyage revenues and
expenses occur based on the nature of a charter. The Company's vessels currently
operate, or have operated in
12
<PAGE>
prior years, on time, bareboat or voyage ("spot") charters. Each type of charter
denotes a method by which revenues are recorded and expenses are allocated.
Under a time charter, revenue is measured based on a daily or monthly rate and
the charterer assumes certain voyage expenses, such as fuel and port charges.
Under a bareboat charter, the charterer assumes all voyage and operating
expenses; therefore, the revenue rate is likely to be lower than for a time
charter. Under a voyage, or spot charter, revenue is calculated based on the
amount of cargo carried, most expenses are for the shipowner's account and the
length of the charter is one voyage. Revenue may be higher in the spot market,
as the owner is responsible for most of the costs of the voyage. Other factors
affecting net voyage revenues for voyage charters are waiting time between
cargoes, port costs, and bunker prices.
Vessel expenses included in net voyage revenue discussed above include
operating expenses such as crew payroll/benefits/travel, stores, maintenance and
repairs, drydock, insurance and miscellaneous. These expenses are a function of
the fleet size, utilization levels for certain expenses, requirements under
laws, by charterers and Company standards. Insurance expense varies with the
overall insurance market conditions as well as the insured's loss record, level
of insurance and desired coverage.
VOYAGE REVENUES LESS VESSEL AND VOYAGE EXPENSES.
FOR THE YEARS ENDED DECEMBER 31, 1999 VERSUS DECEMBER 31, 1998
Net voyage revenues of $33.9 million for the year ended December 31, 1999
decreased by a net $7.4 million from $41.3 million for the year ended December
31, 1998. Net voyage revenues of $41.3 million for the year ended December 31,
1998 decreased by a net $14.1 million from $55.4 million for the year ended
December 31, 1997. Net voyage revenues for the years ended December 31, 1999,
1998 and 1997 are as follows by market segments in which OMI primarily operates.
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------
1999 1998 1997
------ ------ ------
(IN MILLIONS)
VOYAGE REVENUES:
Crude Oil Fleet ......................... $ 78.1 $ 98.5 $ 72.7
Product Carrier Fleet ................... 37.5 50.6 67.9
All Other ............................... 0.3 0.1 1.4
------ ------ ------
Total ............................... $115.9 $149.2 $142.0
====== ====== ======
VESSEL AND VOYAGE EXPENSES: (1)
Crude Oil Fleet (2) ..................... $ 59.1 $ 72.8 $ 51.5
Product Carrier Fleet ................... 22.6 34.6 34.2
All Other ............................... 0.3 0.5 0.9
------ ------ ------
Total ............................... $ 82.0 $107.9 $ 86.6
====== ====== ======
NET VOYAGE REVENUES:
Crude Oil Fleet ......................... $ 19.0 $ 25.7 $ 21.2
Product Carrier Fleet ................... 14.9 16.0 33.7
All Other ............................... (0.0) (0.4) 0.5
------ ------ ------
Total ............................... $ 33.9 $ 41.3 $ 55.4
====== ====== ======
- ----------
(1) Includes charter hire expenses.
(2) Excludes provision for loss on lease obligations of $6.2 million.
Net changes are discussed as follows according to the two market segments
(crude oil and product carrier) in which OMI primarily operates.
Crude Oil Tanker Fleet
At December 31, 1999, the crude fleet consisted of three wholly owned
Suezmaxes, one aframax vessel and three chartered-in Suezmaxes; one vessel is on
time charter and the remaining vessels are currently operating in the
13
<PAGE>
spot market. During 1999, five wholly owned vessels were classified on the
Balance Sheet as held for sale at June 30, 1999, of which four vessels were sold
and one (aframax) vessel was contracted to be sold in December 1999.
Additionally, one of OMI's three wholly owned Panamax vessels carried crude oil
in both 1999 and 1998 and the other two Panamax vessels began carrying crude oil
in May 1998 and July 1998. At December 31, 1998, OMI owned seven Suezmaxes, one
aframax and chartered-in two Suezmax vessels. During 1998 and January 1999, four
new Suezmax vessels were delivered (the first one June 1998), a vessel was sold
in August 1998 and two chartered-in vessels were redelivered to their owners in
July and December 1998.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998
----- -----
(IN MILLIONS)
<S> <C> <C>
CRUDE FLEET:
NEW SUEZMAXES:
TCE revenues .............................. $34.8 $36.6
Operating expenses ........................ 7.0 3.9
Charter hire expense ...................... 15.2 22.2
----- -----
Net voyage revenues ....................... $12.6 $10.5
===== =====
AFRAMAX/PANAMAXES:
TCE revenues .............................. $15.5 $14.9
Operating expenses ........................ 8.7 6.7
Charter hire expense ...................... 0.0 0.0
----- -----
Net voyage revenues ....................... $ 6.8 $ 8.2
===== =====
OLD SUEZMAXES: (1)
TCE revenues .............................. $ 6.6 $21.6
Operating expenses ........................ 7.0 11.3
Charter hire expense ...................... 0.0 3.3
----- -----
Net voyage revenues ....................... $(0.4) $ 7.0
===== =====
Total Crude Fleet Net Voyage Revenues ..... $19.0 $25.7
===== =====
</TABLE>
- ----------
(1) Four vessels included in this category in 1998 and 1999 were sold during
1999. One vessel chartered-in in 1998 was redelivered December 1998.
The COLUMBIA, a newly built Suezmax tanker, was delivered to the Company in
January 1999. The vessel operated in the spot market during the six months ended
June 30, 1999 and at that date was sold in a sale/leaseback transaction. The
COLUMBIA was bareboat chartered back to OMI and continues to operate in the spot
market.
Net voyage revenues for the crude oil fleet of $19.0 million for the year
ended December 31, 1999 decreased a net of $6.7 million from net voyage revenues
of $25.7 million for the year ended December 31, 1998. Decreases in net voyage
revenues in the crude fleet of approximately $14.9 million were primarily
attributable to lower earnings from the four vessels sold in 1999, in addition
to lower earnings from a vessel sold in August 1998, lower earnings in 1999 for
the aframax vessel operating in the spot market and two Panamax vessels with
higher operating expenses in 1999, and lower earnings from chartered-in vessels,
particularly one which was drydocked in 1999 and earned a lower TCE compared to
1998.
Decreases in the crude oil fleets's net voyage revenue were offset in part
by increases aggregating $8.2 million from primarily three items. First, the
earnings of four new Suezmax vessels delivered in 1998 and 1999. Second, the
increase in time charter revenue from a Panamax vessel operating in a marketing
pool in 1999 and 1998. The final item was the redelivery in December 1998 of a
chartered-in vessel, which incurred losses last year.
Product Carrier Fleet
The product carrier fleet consisted of twelve handysize vessels at December
31, 1999 and ten handysize vessels in 1998. In November 1997, May 1998 and July
1998 OMI placed its three Panamax vessels which previously carried
14
<PAGE>
clean products, into a marketing pool. Decreases in the product carrier fleet in
the first half of 1999 pertain in part to two of the Panamaxes which were
carrying clean products in the first half 1998 and thereafter carried crude oil
(included in the crude oil fleet's operating results) in 1999.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1999 1998
----- -----
(IN MILLIONS)
<S> <C> <C>
CLEAN FLEET:
PRODUCTS (IPC POOL IN 1999):
TCE revenues ..................................... $29.9 $38.5
Operating expenses ............................... 17.5 22.5
Charter hire expense ............................. 0.0 0.0
----- -----
Net voyage revenues .............................. $12.4 $16.0
===== =====
PRODUCTS-ON TIME CHARTER (DELIVERED IN 1999):
TCE revenues ..................................... $ 3.4 $ 0.0
Operating expenses ............................... 0.9 0.0
Charter hire expense ............................. 0.0 0.0
----- -----
Net voyage revenues .............................. $ 2.5 $ 0.0
===== =====
TOTAL CLEAN FLEET NET VOYAGE REVENUE ............. $14.9 $16.0
===== =====
</TABLE>
During the year ended December 31, 1999, seven of the Company's handysize
product tankers were employed in the spot market and three were on time charter.
However, since May 1, 1999, these vessels have been time chartered (at the
conclusion of their previous charters) to a newly formed joint venture, IPC,
described in the Market Alliance section above. Time charter rates from this
venture reflect spot market charter rates since they are adjusted periodically
with pool profits.
Net voyage revenues of $14.9 million for the year ended December 31, 1999
decreased a net of $1.1 million from net voyage revenues of $16.0 million for
the year ended December 31, 1998. Decreases in net voyage revenues in 1999
resulted primarily from lower TCE's for three vessels previously time chartered
from 1998 until August 1999 when they began operating in the IPC pool. This
decrease in net voyage revenues was partially offset by increased earnings from
the two new product carriers delivered July and September 1999 which began
operating on profitable time charters beginning from their delivery dates.
OTHER OPERATING EXPENSES.
The Company's operating expenses, other than vessel, voyage and charter
hire expenses consist of provision for loss on lease obligations, depreciation
and amortization and general and administrative ("G & A") expenses. For the year
ended December 31, 1999, these expenses increased $5.5 million to $40.6 million,
from $35.1 million for the year ended December 31, 1998.
The provision for loss on lease obligations of $6.2 million was recorded at
June 30, 1999 and relates to OMI's chartered-in vessels. As part of OMI's
periodic review, the Company evaluated the forecasted future net cash flows for
vessels with lease obligations. The Company determined that its current lease
obligations for the vessels exceeded their undiscounted forecasted future net
cash flows. The loss was measured by the excess of the future lease payments, as
set forth in the lease agreement, over the vessels' estimated forecasted future
cash flows over the lease terms.
Increases in operating expenses for the year ended 1999 were partially
offset by net decreases of $0.5 million in depreciation expense from the sale of
four vessels in 1999 and the sale of a Suezmax tanker in August 1998. Increases
offsetting decreases in depreciation expense related to depreciation for three
Suezmax tankers delivered in 1998 and two product carriers delivered in 1999. G
& A expense decreased by $0.2 million during the year ended December 31, 1999
compared to the year ended December 31, 1998.
OTHER (EXPENSE) INCOME.
Other (expense) income consists of (loss) gain on disposal/write down of
assets-net, loss on disposal/write down of joint venture investments, interest
expense, interest income and other-net. Net other expense increased by $70.0
million from $4.2 million for the year ended December 31, 1998 to $74.2 million
for the year ended December 31, 1999.
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(Loss) gain on disposal/write down of assets-net was a loss of $48.7
million for the year ended December 31, 1999 compared to a gain on sale of a
vessel in August 1998 of $6.5 million during the year ended December 31, 1998.
Losses due to the sale of five vessels in 1999 aggregated $17.3 million, which
included four older Suezmax vessels (built in 1974 and 1975) that were sold for
scrap and the COLUMBIA which was sold in a sale/leaseback transaction on June
30, 1999 at a loss of $2.0 million. Vessels to be disposed of at December 31,
1999, resulted in a loss of $31.4 million. The write down of vessels includes
the realization of the cumulative translation adjustment for $7.4 million. The
adjustment relates to two vessels whose functional currency until July 1990 was
not U.S. dollars.
Loss on disposal/write down of joint venture investments was $7.8 million
for the year ended December 31, 1999. As mentioned in the Recent Activities
section, OMI disposed of its White Sea joint venture effective September 29,
1999 at a loss of approximately $0.9 million and wrote down another joint
venture investment, which was terminated in 1999 by $0.3 million also in
September 1999. OMI's investment in Geraldton was written down to its net
realizable value of $2.7 million and is included in Assets to be disposed of on
the Consolidated Balance Sheet. A loss on disposal of OMI's investment in
Geraldton of $6.6 million was recorded at December 31, 1999.
Interest expense increased $6.8 million for the year ended December 31,
1999 in comparison to the year ended December 31, 1998. The additional interest
expense was primarily due to additional borrowings to finance six newbuildings
(including one which was delivered and $37.5 million financed during January
1999 and subsequently sold and repaid June 30, 1999 in a sale /leaseback
transaction) and correspondingly a decrease in the capitalization of interest on
construction in progress. (See Financing Activities).
During February 2000, MTC paid OMI $5.1 million in full settlement of a
note which was due in November 2003. At December 31, 1999, the note receivable
of $5.1 million was included with Other receivables in current assets. A loss of
$1.2 million was recorded in the Consolidated Statements of Operations included
in Other-net for the year ended December 31, 1999.
EQUITY (LOSS) IN OPERATIONS OF JOINT VENTURES.
Equity in operations of joint ventures decreased $4.2 million for the year
ended December 31, 1999 compared to the year ended December 31, 1998. The
decrease in 1999 was primarily attributable to lower earnings from two joint
ventures, one which operates one ULCC vessel that was in drydock during the
first half of 1999 and earned lower revenues due to declines in TCE rates in
1999 and the other joint venture owning one Suezmax vessel also experienced a
decline in spot rates and was sold on September 29, 1999.
During 1999, the Company received an aggregate of $2.5 million in dividends
from joint ventures, $2.0 million from Amazon Transport, Inc. and $0.5 million
from White Sea. During 1999, OMI paid $0.6 million in capital contributions to
one of its joint ventures.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
During the second quarter 1999, OMI changed its method of accounting for
freight on voyage charters. The accounting change is effective for the period
beginning January 1, 1999 and income of $2.7 million was recorded for the year
ended December 31, 1999 as a cumulative effect of change in accounting
principle. The change in the Company's method of revenue recognition for voyages
from the load-to-load basis to the discharge-to-discharge basis is a more
reliable method in recognizing voyage revenue as it eliminates the uncertainty
associated with estimating location of the next load port under the load-to-load
basis. Voyage revenue is recognized evenly over the period from the departure of
a vessel from its original discharge port to departure at the next discharge
port.
BALANCE SHEET
In January 1999, the Company took delivery of a newly constructed
double-hulled Suezmax tanker, the COLUMBIA. At December 31, 1998, there was a
balance in Construction in Progress of $17.7 million relating to the COLUMBIA
which was recorded to Vessels upon delivery in 1999. The COLUMBIA was then sold
June 30, 1999 for $54.0 million in a sale/leaseback transaction. The $54.0
million proceeds reduced debt incurred in January 1999 of $35.0 million and OMI
has a long-term note receivable for $6.0 million from the sale of the vessel.
Additionally, the
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Company maintains $2.0 million in escrow and $5.5 million in cash as collateral
for a standby letter of credit as required by the lease agreement (see
Commitments). The aggregate $7.5 million is included in Other assets and
deferred charges.
Decreases in Other assets and deferred charges resulted in part from an
extraordinary loss of $1.3 million, which was recorded for the year ended
December 31, 1999 and relates to the write-off of the balance of unamortized
finance fees on debt that was refinanced in February 2000.
The delivery of the two new product tankers during 1999 increased Vessels
by an aggregate of approximately $57.0 million, decreased Construction in
progress by $11.9 million, increased Long-term debt by $36.4 million and
decreased cash by approximately $8.7 million.
Assets to be disposed of, aggregating $91.0 million, include nine vessels
with an aggregate net realizable value of $88.3 million and an investment in a
joint venture of $2.7 million at December 31, 1999. The effects of the write
down of the nine vessels in 1999 were as follows: decreases to Vessels of $216.4
million, Accumulated depreciation of $98.6 million, Other assets and deferred
charges of $9.2 million related to the write-off of the remaining balances for
vessels prepaid drydock and goodwill, cumulative translation adjustment of $7.4
million and decreases in retained earnings for the loss on disposal/write down
of assets of $31.4 million. The effects of the adjustment to $2.7 million net
realizable value for the Geraldton investment, which was to be disposed of, was
a decrease in Investment in, and advances to joint ventures of $10.5 million, an
increase in Other receivables of $1.2 million relating to a dividend received
from the venture and decreases in retained earnings for the loss on write down
of Geraldton of $6.6 million.
The effects of the disposal of four older Suezmax vessels in 1999 were as
follows: cash proceeds of $11.0 million, decreases to Vessels of $52.3 million,
Accumulated depreciation of $32.3 million, Other assets and deferred charges of
$6.3 million related to the write-off of the remaining balances for vessels
prepaid drydock and goodwill, and decreases in retained earnings for the loss on
disposal of assets of $15.3 million.
Decreases in Investments in, and advances to joint ventures, other than
from the disposal of Geraldton, primarily relate to decreases in Investments in
two joint ventures that paid dividends of $2.5 million, as a return on
investment in 1999 offset partially by additional investment in joint ventures
of $0.6 million. Additionally, the disposal/ write down of two ventures
decreased Investment in joint ventures by $3.6 million.
Increases in the Current portion of long-term debt at December 31, 1999,
includes $46.5 million related to debt associated with assets to be disposed of
in accordance with the refinancing agreement with banks completed in February
2000 (see Liquidity and Capital Resources).
The cumulative effect of the change in accounting principle for freight on
voyage charters as of January 1, 1999 on the Company's Consolidated Balance
Sheets was to increase Current assets by $1.5 million, decrease Other
liabilities by $1.2 million and increase total Stockholders' equity by $2.7
million.
FOR THE YEARS ENDED DECEMBER 31, 1998 VERSUS DECEMBER 31, 1997
VOYAGE REVENUES LESS VESSEL AND VOYAGE EXPENSES
Net voyage revenues of $41.3 million for the year ended December 31, 1998
decreased by a net of $14.1 million from $55.4 million for the year ended
December 31, 1997.
Product Carrier Fleet
The product carrier fleet consisted of thirteen vessels (ten handysize and
three Panamaxes) at December 31, 1998 and 1997. Rates in the product market
began to decline in the second half of 1997, and to minimize decreases due to
rate declines in the short-term, OMI placed three Panamaxes which previously
carried clean products, into a marketing pool. Decreases in the product carrier
fleet in 1998 pertaining to the Panamaxes relate to a part of the year in which
two of the vessels were carrying clean products and the remainder of the
decrease relates to decreased rates earned for these vessels in 1998 in
comparison to 1997.
Net voyage revenues decreased by $17.7 million for the year ended December
31, 1998 compared to the year ended December 31, 1997. The decreases were due
primarily to the market declines. Other decreases in this fleet
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relate to the three Panamaxes with decreases in net voyage revenue of
approximately $4.4 million which were included in the crude oil fleet's earnings
for the entire 1998 year for one vessel and approximately twelve months in
aggregate for the other two vessels. Additionally, aggregate net voyage revenues
decreased approximately $2.7 million in the first half of 1998 compared to 1997
for the two Panamax vessels when they were operating as "clean" product
carriers. Additional decreases in 1998 net voyage revenues were related to six
product carriers drydocked for an aggregate of 138 days in 1998 versus four
vessels for an aggregate of 89 days in 1997.
Crude Oil Tanker Fleet
At December 31, 1998, the crude fleet consisted of eight wholly owned
vessels (seven Suezmaxes, and one aframax) and two chartered-in Suezmaxes; all
but one of the vessels were operating in the spot market. In 1997, OMI owned six
Suezmaxes, one aframax and chartered-in four vessels (one beginning in May 1997
as part of a sale/leaseback transaction and the other three beginning in the
fourth quarter of 1997). During 1998, three new Suezmax vessels were delivered
and operated an aggregate of 511 days, a vessel was sold in August 1998 and two
chartered-in vessels were redelivered to their owners in July and December 1998.
Net voyage revenues of $25.7 million generated by the crude tanker fleet
increased a net of $4.5 million for the year ended December 31, 1998 from $21.2
million for the year ended December 31, 1997. The net increase in net voyage
revenues can be attributed to three reasons: three Panamaxes with net voyage
revenue of $4.4 million which had been carrying clean products in 1997, net
voyage revenues of approximately $6.8 million from three Suezmax vessels
delivered in the summer of 1998 and an increase in the net voyage revenues due
to higher freight rates in 1998 earned by the aframax vessel (which also
incurred 22 days offhire in 1997). Net voyage revenues were reduced by decreases
in revenues for the remainder of the fleet as a result of: lower rates in the
spot market in 1998 due to the lower demand for oil, decreases of $3.8 million
in net voyage revenues earned from three of the four vessels chartered-in during
1998, decreases of $2.0 million from the sale of the Suezmax vessel in August
1998 and decreased revenue due to an aggregate of 77 more offhire days in 1998
compared to 1997 primarily relating to drydocking. The net voyage revenues
earned by the vessels chartered-in were substantially less due to lower current
market rates than those prevailing when the leases were fixed.
OTHER OPERATING EXPENSES
For the year ended December 31, 1998, operating expenses decreased $0.1
million to $35.1 million, from $35.2 million for the year ended December 31,
1997. The net decrease was due to a decline in G & A expenses of $1.7 million
primarily because of relocation accruals and additional professional fees for
the anticipated spin off of the Company included in the 1997 expenses. The
decrease in G & A expenses was offset by a net increase of $1.6 million in
depreciation expense from the delivery of three Suezmax tankers in 1998, offset
by the sale of a Suezmax tanker in August 1998 and a liquid petroleum gas
carrier ("LPG") vessel in May 1997.
OTHER (EXPENSE) INCOME
Net other expense decreased by $4.4 million (51 percent decrease) from $8.6
million to $4.2 million for the year ended December 31, 1998 compared to the
year ended December 31, 1997. Gain on sale of assets-net increased $5.6 million
due to the gain on the sale of a Suezmax tanker in August 1998 compared to the
gain on sale in March 1997 of an LPG vessel. Interest expense decreased by $0.7
million for the year ended December 31, 1998 compared to 1997. The decrease in
interest expense was primarily due to increases in the capitalization of
interest on construction in progress and less interest expense from repayment of
debt for the vessel sold in August 1998 offset by interest expense on additional
borrowings upon delivery of three newbuildings. Other-net of $0.9 million
expense for the year 1998 represents a litigation settlement for a vessel which
was sold in 1996.
(BENEFITS) PROVISION FOR INCOME TAXES
The income tax benefit of $37.2 million includes a provision for federal
income taxes of $1.7 million for the period from January 1, 1998 through June
17, 1998 (the date of the Distribution), net of the benefit of $38.9 million
representing the reversal of deferred income taxes at the distribution date, as
the Company became a decontrolled corporation.
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EQUITY IN OPERATIONS OF JOINT VENTURES.
Equity in operations of joint ventures increased by $2.9 million to $3.7
million for the year ended December 31, 1998 compared to $0.8 million for the
year ended 1997. The net increase was primarily attributed to better operating
results for a vessel operating in a 49.0 percent owned venture, in addition to
increase earnings in 1998 due to a loss on sale of a vessel in 1997 owned by a
49.9 percent joint venture of approximately $10.5 million (OMI's portion of the
loss was approximately $5.1 million) offset in part by the gain on the sale of a
vessel in the same venture of $1.9 million (OMI's portion of the gain was
approximately $0.9 million).
During 1998, the Company received an aggregate of $3.4 million in dividends
from joint ventures, $2.0 million from Amazon Transport, Inc. ("Amazon") and
$1.4 million from White Sea Holdings, Ltd. ("White Sea"). Additionally, during
November 1998, OMI received cash of $3.0 million upon dissolution of a 49
percent owned joint venture and recorded a loss of $0.7 million from the
dissolution of a 25 percent equity interest in a joint venture.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Cash and cash equivalents of $7.4 million at December 31, 1999 decreased
$15.3 million from cash and cash equivalents of $22.7 million at December 31,
1998. The Company's working capital of $43.9 million at December 31, 1999
increased $42.0 million from working capital of $1.9 million at December 31,
1998. Current assets increased $74.1 million and current liabilities increased
$32.1 million. Current assets increased by $91.0 million for Assets to be
disposed of at December 31, 1999, and decreased $15.3 million in cash and cash
equivalents. Current liabilities increased primarily in current portion of
long-term debt associated with assets to be disposed of at December 31, 1999.
Net cash provided by operating activities decreased $9.6 million to $8.1 million
for the year ended December 31, 1999 compared to net cash provided by operating
activities of $17.7 million for the year ended December 31, 1998 (see Results of
Operations).
The Company operates in a capital-intensive industry and augments cash
generated by operating activities with debt and sales of vessels that no longer
fit the Company's strategy. Cash used by investing activities was $43.7 million
for the year ended December 31, 1999, a decrease of $56.1 million from cash used
by investing activities of $99.8 million for the year ended December 31, 1998.
Cash used by investing activities decreased in 1999 primarily due to decreases
in additions to vessels of $56.4 million resulting from the delivery of the
three new Suezmax vessels in 1998 aggregating $138.9 million, compared to the
1999 additions aggregating $90.9 million. The 1999 additions to vessels
primarily were due to payments relating to the delivery of the COLUMBIA of $38.3
million, the delivery of two product carriers for $45.2 million and construction
in progress for a Suezmax tanker of $5.9 million (other increases of $14.3
million in construction in progress were non monetary, OMI issued stock).
Proceeds from disposal of assets increased $20.4 million relating to the sale of
a Suezmax vessel in August 1998 compared to the disposal of four 1970's built
vessels for scrap in 1999. Decreases in investing activities were partially
offset by increases relating to notes receivable of $9.0 million, cash paid to
escrow of $7.5 million and other increases in 1999.
Financing Activities
Cash provided by financing activities was $20.3 million for the year ended
December 31, 1999, compared to cash provided by financing activities of $74.2
million for the year ended December 31, 1998. In 1999, there were $113.1 million
in principal payments on long-term and short-term debt and $133.7 million in
proceeds from borrowings. The payments in 1999 included $69.6 million for
short-term financing and working capital borrowings; $37.5 million for the
COLUMBIA (delivered in January and sale/leaseback in June 1999) and $6.0 million
for required payments on three credit facilities and the 7% Convertible Note.
The proceeds in 1999 included $37.5 million for the COLUMBIA, $21.2 million for
the SEINE (delivered in July), $16.0 million for ISERE (delivered in September)
and $59.0 million for short-term financing and working capital borrowings.
As of December 31, 1999, OMI had an aggregate of $260.6 million in floating
rate credit facilities and revolving lines of credit. The following paragraphs
below describe these facilities and revolving lines of credit that OMI used
during 1999, which were refinanced in February 2000. On February 11, 2000, OMI
completed its refinancing with its
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previous lenders for a credit agreement in the amount of $264.5 million. Prior
to the refinancing and at December 31, 1999, OMI was not in compliance with
certain of its covenants under previous credit agreements. The effect of the
refinancing revises debt covenants, interest rate margins and principle
amortization. There are two primary facilities under the new agreement. Facility
A is in the amount of $218.0 million and matures five years from the drawdown
date. It will be repaid in ten semi-annual installments commencing six months
from the drawdown date, the first four installments in the amount of $5.0
million and the remaining six installments in the amount of $12.5 million, in
addition to a balloon payment in the amount of $123.0 million as the last
installment on maturity. The outstanding balance of this Facility bears interest
at LIBOR plus a margin of 1.75% and is secured by thirteen vessels. Facility B
is in the amount of $46.5 million and is a short-term facility which matures two
years after the drawdown date. The principle of this Facility will be repaid
with proceeds on the sale of vessels secured by this facility which are vessels
to be disposed of on the Consolidated Balance Sheets at December 31, 1999. The
outstanding balance of this Facility bears interest at LIBOR plus a margin of 2%
and is secured by six vessels and OMI's interest in its 49 percent owned joint
venture. A third facility provides for certain lenders to repay a portion of
Facility A in the event certain mortgage insurance is not obtained.
At December 31, 1999, vessels and shares in a joint venture with a net book
value of $385.4 million have been pledged as collateral (under the new credit
agreement) on long-term debt issues.
An extraordinary loss of $1.3 million was recorded for the year ended
December 31, 1999. This loss relates to the write-off of the balance of
unamortized finance fees on debt which was refinanced in February 2000.
Certain of the loan agreements, including the new credit agreement, of the
Company contain restrictive covenants requiring minimum levels of cash or cash
equivalents, working capital and net worth, maintenance of specified financial
ratios and collateral values, and restrict the ability of the Company to pay
dividends. These loan agreements also contain various provisions restricting the
right of OMI and/or its subsidiaries to make certain investments, to place
additional liens on the property of certain of OMI's subsidiaries, to incur
additional long-term debt, to make certain payments, to merge or to undergo a
similar corporate reorganization, and to enter into transactions with affiliated
companies.
On February 28, 1999, the Company obtained a $25.0 million revolving line
of credit secured by five vessels, four of which were sold during the year, and
shares in a joint venture company. The revolving credit facility was used for
working capital and other general corporate purposes, and bore interest at LIBOR
plus a margin ranging from 1.375%-1.75%. The facility had a balance of $6.5
million at December 31, 1999.
The Company had a credit facility, which was assumed from Old OMI
(currently MTC), that provided for a line of credit amounting to $99.1 million
at December 31, 1999. The credit facility was secured by eleven vessels. The
Notes under the credit facility bore interest at LIBOR plus a margin ranging
from 0.60%-0.95%, which was computed based on OMI's funded debt to equity ratio
and interest coverage ratio.
On June 4, 1998, the Company entered into a secured revolving credit
agreement to refinance two Panamax tankers and to finance a new product carrier
upon delivery. On June 9, 1998, the Company drew down $16.0 million to refinance
the two Panamax tankers. The $16.0 million was to be repaid in quarterly
installments of $0.8 million over the next five years and bore interest at LIBOR
plus a margin ranging from 0.65%- 0.95%, which was computed based on the
Company's funded debt to capitalization ratio. On September 15,1999, $16.0
million was drawn down to finance a new product carrier. The balance of the loan
at December 31, 1999 was $26.8 million.
On June 4, 1998, the Company entered into a $71.5 million secured revolving
credit facility to finance two Suezmax tankers upon their delivery from the
yard. On June 9, 1998, $35.8 million was drawn to finance the first vessel, and
on August 7, 1998, $35.8 million was drawn to finance the second vessel. Each
drawdown was to be repaid by semi-annual payments of $1.3 million beginning 18
months after the initial drawdown and a balloon of $13.8 million ten years after
the initial drawdown date. The facility bore interest at LIBOR plus a margin
ranging from 0.85%- 0.95%. At December 31, 1999, the outstanding loan balance
was $70.2 million.
On July 6, 1998, the Company entered into an agreement, as amended, for a
$37.8 million secured reducing revolving credit facility to finance a Suezmax
tanker upon its delivery from the yard. The Company drew down $37.8 million on
July 20, 1998 to finance the newbuilding. The availability under this facility
was to be reduced by 14
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semi-annual reductions of 3.9% of the original facility, and the remaining
balance is due at maturity, which is ten years after the initial drawdown. The
facility bore interest at LIBOR plus a margin ranging from 0.60%-1.05%. At
December 31, 1999 the outstanding loan balance was $36.9 million.
During December 1998, the Company entered into an agreement with a lender
for a $60.0 million revolving credit facility. The revolving credit facility was
to be used to finance, on an interim basis, the acquisition of vessels and would
be secured by such vessels. Amounts drawn on the revolving credit facility was
to be repaid no later than six months after drawdown. The facility bore interest
at LIBOR plus a margin ranging from 1.00%- 1.75% which is computed based on the
Company's funded debt to total capitalization ratio and interest coverage ratio.
On January 14, 1999, the Company drew down $37.5 million under this facility to
finance the acquisition of a Suezmax newbuilding, which was repaid in June 1999.
On July 15, 1999, $21.2 million was drawn down to finance a new product carrier,
and this balance remained at December 31, 1999.
COMMITMENTS
At December 31, 1999, the Company had two remaining construction contracts
for two Suezmax tankers with capitalized costs at delivery for the first vessel
in March 2000 of approximately $46.2 million and expected capitalized costs at
delivery in May 2000 of $51.0 million. As of December 31, 1999, total
capitalized costs for these vessels aggregated $25.3 million.
The sale/leaseback of the COLUMBIA on June 30, 1999 resulted in a three
year operating lease with the purchaser. The Company is responsible for
operating expenses of the vessel and is required to maintain $2.0 million in
escrow over the lease term, and a cash collateral account initially of $4.0
million. The cash collateral account was replaced by a standby letter of credit
in September 1999, which will increase by $750,000 per quarter in the first year
and by $500,000 per quarter in the second year to a maximum of $9.0 million. The
letter of credit will serve as additional collateral for the Company's
obligation under the lease. OMI has guaranteed a minimum resale or residual
value for this vessel at the end of the lease. At December 31, 1999, the impact
of the guarantee is not expected to be material.
In May 1997, the Company sold the ALTA (a Suezmax crude oil carrier) for
approximately $39.9 million and leased back the vessel for five years. The gain
on the sale of approximately $15.7 million has been deferred and is being
credited to income as an adjustment to lease expense over the term of the lease.
As of December 31, 1999, the deferred gain on sale was $7.5 million.
OMI was a guarantor for a portion of the debt incurred by a joint venture
with affiliates of its joint venture partner until the sale of OMI's interest in
the venture during the first quarter 2000. Such debt was approximately $13.5
million at December 31, 1999; OMI's guaranty of such debt was approximately $6.7
million.
The Company and its joint venture partners have committed to fund any
working capital deficiencies that may be incurred by their joint venture
investments. As of December 31, 1999, no such deficiencies have been funded.
EFFECTS OF INFLATION
The Company does not consider inflation to be a significant risk to the
cost of doing business in the current or foreseeable future. Inflation has a
moderate impact on operating expenses, drydocking expenses and corporate
overhead.
NEWLY ISSUED ACCOUNTING STANDARDS
In June 1999, the Financial Accounting Standards Board Statement ("FASB")
issued Statement of Financial Accounting Standards No. 137 ("SFAS 137"),
"Accounting for Derivative Instruments and Hedging Activities-Deferral of the
Effective Date of FASB No. 133", which defers the effective date of SFAS 133 to
fiscal years beginning after June 15, 2000. SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities", establishes accounting and reporting
standards for derivative instruments and for hedging activities. Generally, it
requires that an entity recognizes all derivatives as either assets or
liabilities in the statement of financial position and
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measure those instruments at fair value, as well as identifies the conditions
for which a derivative may be specifically designated as a hedge. The accounting
for changes in the fair value of a derivative depends on the intended use of the
derivative and the resulting designation. This Statement amends and supercedes
Statements previously issued. The Company does not expect that the adoption of
SFAS 133 will have a material effect on the Company's financial condition or
results of operations.
YEAR 2000
OMI successfully transitioned into the Year 2000 without any Y2K-related
service disruptions. Although considered unlikely, the Company could be affected
by Y2K problems by the Company's customers, suppliers and other third parties.
OMI will continue to monitor the situation and take action as necessary to
remedy any problems, which might occur and ensure all processes continue to
function properly. As of December 31, 1999, the Y2K Project cost approximately
$0.2 million related to financial systems. The cost that relates to fixture of
ships software and hardware has been minimal. Additionally, the Company paid
$0.3 million, not included in the estimated budget for financial systems,
towards new financial applications implementation which included the hardware,
software and support fees. Based on responses received from vendors, to date,
the Company is not aware of any significant investments in assets that are not
Y2K compliant.
To date, OMI has not identified any material risks of not being year 2000
compliant. However, if a risk should subsequently arise, the Company would
remedy it. The Company relies on vendor guarantees that critical systems are Y2K
compliant and has not had any noncompliance thus far. OMI has full maintenance
contracts with all its vendors in the case of any system problem they are
required to resolve such problems within a reasonable amount of time.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Market Risk
The Company is exposed to various market risks, including interest rates.
The exposure to interest rate risk relates primarily to the debt and related
interest rate swaps. At December 31, 1999, the majority of the $267.7 million
debt was floating rate debt, which totaled $260.6 million. A one percent
increase in the floating rate would increase interest expense by $2.6 million
per year.
The fixed rate debt on the balance sheet and the fair market value were
$7.1 million as of December 31, 1999. If interest rates were to increase
(decrease) by one percent with all other variables remaining constant, the
market value of the fixed rate debt would decrease (increase) by approximately
$0.1 million.
The Company has an interest rate swap agreement to manage its exposure with
interest rates by locking in fixed interest rate from floating rates. At
December 31, 1999, there was one swap with at notional principal of $10.0
million, which matures in June 2000. The Company would have had to pay $0.1
million to terminate the agreement as of December 31, 1999. Since the agreement
matures in 2000 and the terms of the contract are known, the maximum exposure to
the interest rate swap is $0.1 million.
22
<PAGE>
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
PAGE
----
<S> <C>
OMI CORPORATION AND SUBSIDIARIES:
Consolidated Statements of Operations and Comprehensive Income
for the three years ended December 31, 1999 ........................................................ 24
Consolidated Balance Sheets as of December 31, 1999 and 1998 ......................................... 25
Consolidated Statements of Cash Flows for the three years ended December 31, 1999 .................... 27
Consolidated Statements of Changes in Stockholders' Equity for the
three years ended December 31, 1999 ................................................................ 28
Notes to Consolidated Financial Statements ........................................................... 29
Independent Auditors' Report ........................................................................ 46
Quarterly Results of Operations (unaudited) .......................................................... 47
FINANCIAL STATEMENTS OF SIGNIFICANT INVESTEES OF OMI CORPORATION AND SUBSIDIARIES:
AMAZON TRANSPORT, INC.
Balance Sheets as of December 31, 1999 and 1998 ...................................................... 48
Statements of Income for the three years ended December 31, 1999 ..................................... 49
Statements of Cash Flows for the three years ended December 31, 1999 ................................. 50
Notes to Financial Statements ........................................................................ 51
Independent Auditors' Report ......................................................................... 52
WHITE SEA HOLDINGS LTD.
Balance Sheets at September 29, 1999 (unaudited) and December 31, 1998 ............................... 53
Statements of Income and Retained Earnings for the period January 1, 1999 to September 29, 1999
(unaudited) and for the years ended December 31, 1998 and December 31, 1997 ....................... 54
Statements of Cash Flows for the period January 1, 1999 to September 29, 1999
(unaudited) and for the years ended December 31, 1998 and December 31, 1997 ....................... 55
Notes to Financial Statements ........................................................................ 56
Independent Auditors' Report ......................................................................... 58
</TABLE>
23
<PAGE>
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
OMI CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
REVENUES (Note 4) .................................................................. $ 115,992 $ 149,228 $ 141,985
--------- --------- ---------
OPERATING EXPENSES:
Vessel and voyage ................................................................ 66,842 82,368 77,686
Charter hire ..................................................................... 15,234 25,529 8,906
Depreciation and amortization .................................................... 23,835 24,314 22,675
Provision for loss on lease obligations (Note 10) ................................ 6,229 -- --
General and administrative ....................................................... 10,486 10,773 12,540
--------- --------- ---------
Total operating expenses ........................................................... 122,626 142,984 121,807
--------- --------- ---------
OPERATING (LOSS) INCOME ............................................................ (6,634) 6,244 20,178
--------- --------- ---------
OTHER (EXPENSE) INCOME:
(Loss) gain on disposal/write down of assets-net (Notes 9, 11, 12) ............... (48,692) 6,485 885
Loss on disposal/write down of joint venture investments (Note 4) ................ (7,771) -- --
Interest expense ................................................................. (17,945) (11,118) (11,756)
Interest income .................................................................. 1,455 1,346 2,222
Other-net (Note 2) ............................................................... (1,209) (882) --
--------- --------- --------
Net other expense ................................................................ (74,162) (4,169) (8,649)
--------- --------- ---------
(Loss) income before income taxes, equity in operations of joint ventures,
extraordinary loss and cumulative effect of
change in accounting principles ................................................ (80,796) 2,075 11,529
Provision (benefit) for income taxes (Note 13) ................................... 475 (37,158) 5,407
--------- --------- ---------
(Loss) income before equity in operations of joint ventures,
extraordinary loss and cumulative effect of change in
accounting principles .......................................................... (81,271) 39,233 6,122
Equity (loss) in operations of joint ventures (Note 4) ........................... (510) 3,684 737
--------- --------- ---------
(Loss) income before extraordinary loss and cumulative effect
of change in accounting principles ............................................... (81,781) 42,917 6,859
Extraordinary loss (Note 5) ........................................................ (1,253) -- --
--------- --------- ---------
(Loss) income before cumulative effect of change in accounting
principles ....................................................................... (83,034) 42,917 6,859
Cumulative effect of change in accounting principles, net of
income tax provision (Notes 7, 8) ................................................ 2,729 -- 10,063
--------- --------- ---------
NET (LOSS) INCOME .................................................................. (80,305) 42,917 16,922
OTHER COMPREHENSIVE INCOME:
Realization of cumulative translation adjustment (Note 12) ....................... (7,442) -- --
Reversal of deferred income taxes on cumulative translation
adjustment ..................................................................... -- 2,530 --
--------- --------- ---------
COMPREHENSIVE (LOSS) INCOME ...................................................... $ (87,747) $ 45,447 $ 16,922
========= ========= =========
BASIC (LOSS) EARNINGS PER COMMON SHARE:
(Loss) income before extraordinary loss and cumulative effect
of change in accounting principles ............................................. $ (1.94) $ 1.01 $ 0.16
Extraordinary loss ............................................................... (0.03) -- --
Cumulative effect of change in accounting principles ............................. 0.07 -- 0.23
--------- --------- ---------
NET (LOSS) INCOME .................................................................. $ (1.90) $ 1.01 $ 0.39
========= ========= =========
DILUTED (LOSS) EARNINGS PER COMMON SHARE:
(Loss) income before extraordinary loss and cumulative effect
of change in accounting principles ............................................. $ (1.94) $ 1.00 $ 0.16
Extraordinary loss ............................................................... (0.03) -- --
Cumulative effect of change in accounting principles ............................. 0.07 -- 0.23
--------- --------- ---------
NET (LOSS) INCOME .................................................................. $ (1.90) $ 1.00 $ 0.39
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
24
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash, including cash equivalents of:
1999-$5,172; 1998-$10,166 ...................................... $ 7,381 $ 22,698
Receivables:
Traffic ........................................................ 9,245 12,842
Other (Note 2) ................................................. 9,136 2,733
Assets to be disposed of (Notes 4, 12) ............................. 90,996 --
Prepaid drydock expense (Note 8) ................................... 250 3,550
Other prepaid expenses and other current assets .................... 4,187 5,272
-------- --------
Total current assets ....................................... 121,195 47,095
-------- --------
VESSELS, CONSTRUCTION IN PROGRESS AND OTHER PROPERTY
Vessels (Note 5) ................................................... 331,988 543,040
Construction in progress (Note 19) ................................. 25,340 34,733
Other property ..................................................... 2,354 1,407
-------- --------
Total vessels, construction in progress and other property ... 359,682 579,180
Less accumulated depreciation ................................ 42,926 150,585
-------- --------
Vessels, construction in progress and other property-net ..... 316,756 428,595
-------- --------
INVESTMENTS IN, AND ADVANCES TO JOINT VENTURES (Note 4) ............ 11,519 25,507
NOTES RECEIVABLE (Note 9) .......................................... 9,262 6,604
OTHER ASSETS AND DEFERRED CHARGES (Note 8) ......................... 13,683 22,326
-------- --------
TOTAL ............................................................ $472,415 $530,127
======== ========
</TABLE>
See notes to consolidated financial statements.
25
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARES)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
-------- --------
1999 1998
-------- --------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable ................................................. $ 7,017 $ 2,520
Accrued liabilities:
Voyage and vessel .............................................. 4,285 11,438
Interest ....................................................... 2,762 4,007
Other .......................................................... 5,190 2,571
Deferred gain on sale of vessel (Note 9) ......................... 3,151 3,151
Current portion of long-term debt (Notes 5, 6) ................... 54,834 21,494
-------- --------
Total current liabilities .................................. 77,239 45,181
-------- --------
OTHER LIABILITIES .................................................. 3,034 3,496
LONG-TERM DEBT (Notes 2, 5, 6) ..................................... 212,913 225,653
DEFERRED GAIN ON SALE OF VESSEL (Note 9) ........................... 4,363 7,514
DEFERRED INCOME TAXES (Note 13) .................................... 3,100 3,100
COMMITMENTS AND CONTINGENCIES (Note 19)
STOCKHOLDERS' EQUITY:
Common stock, $0.50 par value; 150,000,000 shares
authorized; shares issued and outstanding: 1999-49,394,000
1998-43,694,000 (Notes 3, 7, 16, 18) ........................... 24,697 21,847
Capital surplus (Note 2) ......................................... 218,869 207,469
Retained (deficit) earnings (Note 2) ............................. (62,966) 17,465
Cumulative translation adjustment (Note 12) ...................... -- 7,442
Treasury stock (Note 18) ......................................... (8,834) (9,040)
-------- --------
Total stockholders' equity ................................. 171,766 245,183
-------- --------
TOTAL ............................................................ $472,415 $530,127
======== ========
</TABLE>
See notes to consolidated financial statements.
26
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net (loss) income ............................................ $ (80,305) $ 42,917 $ 16,922
Adjustments to reconcile net (loss) income to net
cash (used) provided by operating activities:
Extraordinary loss ....................................... 1,253 -- --
Cumulative effect of change in accounting
principles, net of tax ................................. (2,729) -- (10,063)
Decrease in deferred income taxes ........................ -- (39,850) (2,314)
Depreciation and amortization ............................ 23,835 24,314 22,675
Loss (gain) on disposal/write down of assets--net ........ 48,692 (6,485) (885)
Loss on disposal/write down of joint venture
investments ............................................ 7,771 -- --
Net intercompany transactions ............................ -- 1,337 11,357
Amortization of deferred gain on sale of vessel .......... (3,151) (3,151) (1,940)
Provision for loss on lease obligations--net of
amortization ........................................... 4,845 -- --
Loss (equity) in operations of joint ventures--net
of dividends received .................................. 1,940 (254) (2)
Changes in assets and liabilities:
Decrease (increase) in receivables and other
current assets ......................................... 8,664 (2,460) (4,532)
(Decrease) increase in accounts payable and
accrued liabilities .................................... (4,087) 8,292 2,508
Advances from joint ventures--net ........................ 2,665 (185) (254)
(Increase) decrease in other assets and deferred
charges ................................................ (95) (3,347) 4,092
Decrease in other liabilities ............................ (1,299) (240) (1,220)
Payable to parent--net ................................... -- (3,217) (16,687)
Other .................................................... 80 -- --
--------- --------- ---------
Net cash provided by operating activities ............ 8,079 17,671 19,657
--------- --------- ---------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
Proceeds from disposition of vessels and other
property ............................................... 65,250 44,877 38,977
Additions to vessels and other property .................. (90,999) (147,407) (55,285)
Proceeds from dispositions of joint ventures ............. 1,561 2,989 32,301
Issuance of notes receivable ............................. (9,000) -- --
Investments in joint venture ............................. (637) (247) (343)
Escrow of funds .......................................... (7,548) -- --
Proceeds from notes receivable ........................... 424 -- --
Other .................................................... (2,769) -- --
--------- --------- ---------
Net cash (used) provided by investing activities ..... (43,718) (99,788) 15,650
--------- --------- ---------
CASH FLOWS (USED) PROVIDED BY FINANCING ACTIVITIES:
Proceeds from issuance of long-term and
short-term debt ........................................ 133,698 171,300 --
Payments on long-term and short-term debt ................ (113,098) (87,070) (24,732)
Purchase of treasury stock ............................... -- (9,040) --
Capital contribution from Old OMI ........................ -- -- 4,100
Payments for debt issue costs ............................ (278) (983) (123)
--------- --------- ---------
Net cash provided (used) by financing activities ..... 20,322 74,207 (20,755)
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ........... (15,317) (7,910) 14,552
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ................. 22,698 30,608 16,056
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR ....................... $ 7,381 $ 22,698 $ 30,608
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
27
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER COMPRE- TOTAL
COMMON STOCK RETAINED NET COMPRE- HENSIVE- STOCK-
----------------- CAPITAL EARNING INTERCOMPANY TREASURY HENSIVE INCOME HOLDERS'
SHARES AMOUNT SURPLUS (DEFICIT) TRANSLATIONS STOCK INCOME (LOSS) EQUITY
------ -------- -------- -------- -------- ------ ------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1997 ...... 42,709 $ 21,355 $238,363 $(42,374) $ 28,146 $4,912 $250,402
Comprehensive income:
Net income .................... 16,922 $ 16,922 16,922
Net change in valuation --
account ..................... --------
Comprehensive income ............ $ 16,922
========
Capital contribution of
intercompany account balance
with parent ................... 4,100 4,100
Retirement of partner's equity
interest in joint venture ..... 777 777
Net intercompany transactions ... 11,357 11,357
Issuance of common stock ........ 375 187 (187) --
------ -------- -------- -------- ------- ------ --------
BALANCE AT DECEMBER 31, 1997 .... 43,084 21,542 243,053 (25,452) 39,503 4,912 283,558
Comprehensive Income:
Net Income .................... 42,917 $ 42,917 42,917
Reversal of deferred income
taxes on cumulative
translation adjustment ...... 2,530 2,530 2,530
--------
Comprehensive income ............ $ 45,447
========
Capital distribution of net
intercompany account balance
with parent (Note 2) .......... (76,119) (76,119)
Net intercompany transactions ... 1,337 1,337
Capital distribution of net
intercompany transactions
with parent (Note 2) .......... 40,840 (40,840) --
Exercise of stock options ....... 50 25 (25) --
Issuance of common stock ........ 560 280 (280) --
Purchase of treasury stock
(Note 18) ..................... $(9,040) (9,040)
------ ------ ------- ------ ------- ------ ------ -------
BALANCE AT DECEMBER 31, 1998 .... 43,694 21,847 207,469 17,465 -- (9,040) 7,442 245,183
Comprehensive loss:
Net loss ...................... (80,305) $(80,305) (80,305)
Realization of cumulative
translation adjustment
(Note 12) ................... (7,442) (7,442) (7,442)
--------
Comprehensive loss .............. $(87,747)
========
Issuance of common stock
(Note 11) ..................... 5,700 2,850 11,400 14,250
Issuance of treasury stock
(Note 18) ..................... (126) 206 80
------ ------- -------- -------- ------- ------- ------ --------
BALANCE AT DECEMBER 31, 1999 .... 49,394 $24,697 $218,869 $(62,966) $ -- $(8,834) $ -- $171,766
====== ======= ======== ======== ======= ======= ====== ========
</TABLE>
See notes to consolidated financial statements.
28
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
(ALL TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business--OMI Corporation ("OMI" or the "Company"), is a bulk shipping
company incorporated in the Republic of the Marshall Islands, which provides
seaborne transportation services primarily of crude oil and refined petroleum
products. The Company is a successor to Universal Bulk Carriers, Inc. ("UBC"), a
Liberian corporation, which was a wholly-owned subsidiary of OMI Corp. until
June 17, 1998 at which date the Company was separated from OMI Corp. (renamed
Marine Transport Corporation "MTC") through a tax-free distribution
("Distribution") to OMI Corp.'s shareholders of one share of UBC common stock
for each share of OMI Corp. ("Old OMI") common stock. The Distribution separated
Old OMI into two publicly-owned companies. In connection with the Distribution,
the Company's common stock was recapitalized with 150,000,0000 shares authorized
(par value 50 cents), with 43,084,000 shares outstanding. This recapitalization
has been reflected for the earliest year presented. OMI Corporation operates
what was OMI Corp.'s foreign shipping businesses under the management of certain
officers formerly of Old OMI who moved to the new company and certain former
directors of Old OMI and additional new directors. The Company continues to
trade under the symbol "OMM" on the New York Stock Exchange.
Basis of Presentation--The accompanying consolidated financial statements
reflect the results of operations, financial position, changes in stockholders'
equity and cash flows of OMI and subsidiaries.
The financial statements have been prepared using the historical basis in
the assets and liabilities and the historical results of operations directly
attributable to OMI and all intercompany accounts and transactions between OMI
and its subsidiaries have been eliminated.
The financial statements and computations of basic and diluted earnings per
share (See Note 3) have been presented giving effect to the Distribution as
though it occurred at the beginning of the earliest year presented.
Reclassifications--Certain reclassifications have been made to the 1998 and
1997 financial statements to conform to the 1999 presentation.
Principles of Consolidation--The consolidated financial statements include
all subsidiaries which are more than 50 percent owned by OMI. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Investments in joint ventures, in which the Company's interest is 50
percent or less and where it is deemed that the Company's ownership gives it
significant influence over operating and financial policies, are accounted for
by the equity method.
Accounting Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Operating Revenues and Expenses--Voyage revenues and expenses are
recognized on the percentage of completion method of accounting based on voyage
costs incurred to date as compared to estimated total voyage costs. Estimated
losses on voyages are provided for in full at the time such losses become
evident.
Effective January 1, 1999, OMI changed its accounting policy on recognition
of voyage freight for vessels operating on voyage charters from load-to-load to
the discharge-to-discharge basis. Under this method, voyage revenue is
recognized evenly over the period from the departure of a vessel from its
original discharge port to departure from the next discharge port. Management
believes that the discharge-to-discharge method is preferable because (a) it is
the predominant method for shipowners, and (b) it eliminates the uncertainty
associated with the location of the next load port (See Note 7).
29
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Effective January 1, 1997, special survey and drydock expenses are
accounted for using the prepaid method. Under the prepaid method, expenses are
capitalized and amortized over the survey cycle, which is generally a two to
five year period. Prior to 1997, special survey and drydock expenses were
accrued and charged to operating expenses over the survey cycle. The accruals of
such expenses were based on management's best estimates of future costs and the
expected length of the survey cycle. However, the ultimate liability may have
been more or less than such estimates (See Note 8).
Vessels, Construction in Progress and Other Property--Vessels and other
property are recorded at cost. Depreciation for financial reporting purposes is
provided principally on the straight-line method based on the estimated useful
lives of the assets up to the assets' estimated salvage value. The useful lives
of the vessels range from 20 to 25 years. Salvage value is based upon a vessel's
lightweight tonnage multiplied by a scrap rate.
Interest costs incurred during the construction of vessels (until the
vessel is substantially complete and ready for its intended use) are
capitalized. The amount of interest capitalized was $1,384,000 in 1999,
$3,762,000 in 1998 and $2,207,000 in 1997.
Other property and leasehold improvements are amortized on the
straight-line method over the terms of the lease or estimated useful lives of
the assets.
Expenditures for maintenance, repairs and minor renewals are expensed.
Major replacements and renewals are capitalized. In the event that facts and
circumstances indicate that the carrying amount of a vessel may be impaired, an
evaluation of recoverability is performed. If an evaluation is required, the
estimated future undiscounted cash flows associated with the vessel are compared
to the vessel's carrying value to determine if a write down to fair value is
required.
Goodwill--Goodwill, included in Other Assets and Deferred Charges,
recognized in business combinations accounted for as purchases, was $1,827,000
and $11,079,000 at December 31, 1999 and 1998, respectively, and is being
amortized over the remaining lives of assets, which were acquired in such
combinations. During 1999, $8,600,000 of goodwill was charged to loss on
disposal/write down of assets for vessels sold (See Note 11) and for vessels to
be disposed of at December 31, 1999 (See Note 12). The carrying value of
goodwill is reviewed periodically based on the estimated future undiscounted
cash flows of the entity acquired over the remaining amortization period in
order to ensure that the carrying value of goodwill has not been impaired.
Earnings (Loss) Per Common Share--Effective January 1, 1997, the Company
adopted Statement of Financial Accounting Standards No. 128 ("SFAS 128")
"Earnings per Share" which was adopted for interim and annual reports. SFAS 128
specifies the computation, presentation, and disclosure requirements for
earnings per share ("EPS"). It replaces the presentation of primary and fully
diluted EPS with Basic and Diluted EPS. Basic EPS excludes the dilutive effect
of stock options. It is based upon the weighted average number of common shares
outstanding during the period. Diluted EPS reflects the potential dilution that
would occur if securities or other contracts to issue common stock were
exercised or converted into common stock.
Federal Income Taxes--Management estimated that the distribution of shares
to the shareholders of Old OMI would result in Federal income taxes becoming
payable by OMI Corporation of approximately $1,900,000 representing Federal
income taxes on previously excluded foreign ("Subpart F") income and on the
distribution of shares of non-United States shareholders. As OMI will not be
subject to any additional income taxes (other than adjustments to previously
reported amounts), $38,887,000 of the balance of deferred income taxes was
credited to income in 1998, leaving a balance of $3,100,000 (See Notes 2 and
13).
Stock Options--The Company has elected to follow Accounting Principles
Board Opinion No. 25 ("APB 25") "Accounting of Stock Issued to Employees" in
accounting for its employee stock options, and other stock based awards. Under
APB 25, if the exercise price of an employee's stock option equals or exceeds
the market price of the underlying stock on the date of grant, no compensation
expense is recognized (See Note 16).
30
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash Flows--Cash equivalents represent liquid investments which mature
within 90 days. The carrying amount approximates fair value.
Newly Issued Accounting Standards--In June 1999, the Financial Accounting
Standards Board Statement ("FASB") issued Statement of Financial Accounting
Standards No. 137 ("SFAS 137"), Accounting for Derivative Instruments and
Hedging Activities-Deferral of the Effective Date of FASB No. 133", which defers
the effective date of SFAS 133 to fiscal years beginning after June 15, 2000.
SFAS 133, "Accounting for Derivative Instruments and Hedging Activities",
establishes accounting and reporting standards for derivative instruments and
for hedging activities. Generally, it requires that an entity recognizes all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value, as well as identifies the
conditions for which a derivative may be specifically designated as a hedge. The
accounting for changes in the fair value of a derivative depends on the intended
use of the derivative and the resulting designation. This Statement amends and
supercedes Statements previously issued. The Company does not expect that the
adoption of SFAS 133 will have a material effect on the Company's financial
condition of results of operations.
NOTE 2--DISTRIBUTION
As part of the Distribution, OMI was party to certain agreements with MTC,
including the following:
Distribution Agreement--The Distribution Agreement provides for, with
certain exceptions, assumptions of liabilities and cross-indemnities designed
principally to place financial responsibility for the liabilities with the
appropriate company. OMI, however, assumed the obligations of Old OMI with
respect to Old OMI's 10.25 percent Senior Notes due November 1, 2003 in exchange
for a note from MTC in the amount of $6.4 million, which was equivalent in value
to the principal amount of the Senior Notes then outstanding. During February
2000, MTC paid $5.1 million in full settlement of the note, which was due in
2003. As a result, a loss of $1,209,000 was recorded in the Consolidated
Statements of Operations for the year ended December 31, 1999 in Net other
expense. The Distribution Agreement also provides that each of MTC and OMI will
indemnify the other in the event of certain liabilities arising under the
Federal securities laws. Each of MTC and OMI will have sole responsibility for
claims arising out of its respective activities after the Distribution.
The Distribution Agreement also provides that, except as otherwise set
forth therein or in any other agreement, all costs or expenses incurred on or
prior to the Distribution date in connection with the Distribution will be
charged to and paid by the party incurring such costs or expenses. Except as set
forth in the Distribution Agreement or any related agreement, each party shall
bear its own costs and expenses incurred after the Distribution date.
Prior to Distribution--Prior to the distribution, debt had been incurred
for the consolidated group at the parent company level or at a limited number of
subsidiaries, rather than at the operating company level, in order to centrally
manage various cash functions. Consequently, the mortgage debt of Old OMI and
its related interest expense (net of tax benefit) were allocated to OMI
(formerly UBC) and its subsidiaries based upon the value of the vessel
collateralizing the debt. The changes in allocated corporate debt, the after-tax
allocated interest expense and the after tax allocated general and
administrative expenses have been included as Net intercompany transactions in
Stockholders' equity. Although management believes that the historical
allocation of corporate debt and interest expense is reasonable, it is not
necessarily indicative of the Company's debt or results of operations had the
Company been on a stand alone basis for the periods up to June 17, 1998.
Net intercompany transactions represent an aggregate of allocations for
income taxes, interest expense on unsecured corporate debt and general corporate
purposes. As of the Distribution date, the cumulative balances of the Net
intercompany transactions of $40,840,000 were credited to Capital Surplus and
the balance at June 17, 1998 in Receivable from parent-net aggregating
$76,119,000 was charged to Capital Surplus. Included in the net receivable from
parent was the assumption by OMI (formerly UBC) of the revolving line of credit,
the assumption of the 10.25% Senior Notes and the 7% convertible note due 2004
(See Note 5).
31
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 3--EARNINGS (LOSS) PER COMMON SHARE
The computation of basic (loss) earnings per share is based on the weighted
average number of common shares outstanding during the year. The computation of
diluted earnings per share assumes the foregoing and the exercise of all stock
options (See Note 16) using the treasury stock method and the conversion of the
7% convertible note due 2004 (See Note 5), to the extent dilutive.
The components of the denominator for the calculation of basic earnings per
share and diluted earnings per share is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Basic earnings per share:
Weighted average common shares outstanding ........... 42,250 42,671 42,914
======= ======= =======
Diluted earnings per share:
Weighted average common shares outstanding ........... 42,250 42,671 42,914
7% Convertible Note .................................. -- -- 407
Options .............................................. -- 189 336
------- ------- -------
Weighted average common shares--diluted .............. 42,250 42,860 43,657
======= ======= =======
Basic (loss) earnings per common share:
Net (loss) income before extraordinary loss and
cumulative effect of change in accounting principles $ (1.94) $ 1.01 $ 0.16
Extraordinary loss ................................... (0.03) -- --
Cumulative effect of change in accounting
principles, net of income tax provision ............ 0.07 -- 0.23
------- ------- -------
Net (loss) income per common share ..................... $ (1.90) $ 1.01 $ 0.39
======= ======= =======
Diluted (loss) earnings per common share:
Net (loss) income before extraordinary loss and
cumulative effect of change in accounting
principles ......................................... $ (1.94) $ 1.00 $ 0.16
Extraordinary loss ................................... (0.03) -- --
Cumulative effect of change in accounting
principles, net of income tax provision ............ 0.07 -- 0.23
------- ------- -------
Net (loss) income per common share ..................... $ (1.90) $ 1.00 $ 0.39
======= ======= =======
</TABLE>
The effect of the assumed conversion of the 7% convertible note due 2004
was not included in the computation of diluted earnings per share in 1999 and
1998 because the average price of OMI's stock was less than the stock conversion
price of $7.285. The effect of the assumed exercise of options was not included
in the computation of diluted earnings per share because the grant prices
exceeded the average price of OMI stock in 1999.
32
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 4--INVESTMENTS IN JOINT VENTURES
The operating results of the joint ventures have been included in the
accompanying consolidated financial statements on the basis of ownership as
follows:
PERCENT OF
OWNERSHIP
-----------
Alliance Chartering LLC .............................. 50.0(1)
Amazon Transport, Inc. ("Amazon") .................... 49.0
Gainwell Investments Ltd ("Gainwell") ............... 25.0(2)
Geraldton Navigation Company Inc. ("Geraldton") ...... 49.9(3)
International Product Carriers Limited ("IPC") ....... 50.0(4)
Kanejoy Corporation ("Kanejoy") ...................... 49.9(2)
Mosaic Alliance Corporation ("Mosaic") ............... 49.9(5)
OMI-Heidmar Shipping Ltd. ("OMI-Heidmar") ............ 50.0(6)
White Sea Holdings Ltd. ("White Sea") ................ 49.0(7)
- ----------
(1) The venture was begun on May 8, 1998.
(2) Liquidated January 27, 1999.
(3) The Company sold its interest to its partner in March 2000.
(4) The venture was formed on April 15, 1999, and began operating effective May
1, 1999.
(5) Partner's interest acquired on December 10, 1997.
(6) The Company sold its interest to its partner on August 17, 1999.
(7) The Company sold its interest to its partner on September 29, 1999.
At December 31, 1999, OMI wrote down its investment in Geraldton to its net
realizable value of approximately $2,700,000. The investment is to be liquidated
in 2000. A dividend of $2,421,000 was paid in 2000 of which OMI's portion was
$1,209,000. A loss of $6,605,000 was recorded in the Company's Consolidated
Statements of Operations at December 31, 1999 relating to the disposal of this
investment in 2000.
On September 29, 1999, OMI sold its 49 percent share in its White Sea joint
venture for approximately $2,427,000, of which $1,560,000 cash was received in
October 1999. A loss of $867,000 was recorded from the sale of the venture.
In 1999, the Company chartered ten vessels for an aggregate of $14,237,000
to IPC. This amount is included in the revenue of the Company since the
operations of IPC are not consolidated. Voyage revenues from IPC in 1999 in
aggregate were 12 percent of OMI's consolidated revenues. The revenues are
received by IPC from numerous customers into a pool which is divided among the
vessels in the pool.
In 1999 and 1998, the Company chartered three vessels for an aggregate of
$4,227,000 and $6,720,000, respectively, to OMI-Heidmar. This amount is included
in the revenue of the Company since the operations of OMI-Heidmar are not
consolidated. During 1999, the Company wrote down its investment in OMI-Heidmar
by $299,000, as the partners agreed to dissolve this venture in June 1999.
For the years ended December 31, 1999 and 1998, aggregate revenues of
$6,333,000 and $17,385,000, respectively, included in the Consolidated
Statements of Operations related to vessels chartered to a company partially
owned by an individual who was a Director of OMI.
On March 14, 2000, OMI announced it was an investor in MarineProvider ASA,
which will offer on line services to shipowners, including bunker and supply
acquisition. The Company invested approximately $500,000 in the first quarter of
2000.
33
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT--(CONTINUED)
(ALL TABULAR AMOUNT ARE IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 4--INVESTMENTS In JOINT VENTURES (CONTINUED)
In November 1998, Gainwell sold the property it owned at a loss. Gainwell
repaid its outstanding obligations with proceeds from the sale, including an
outstanding loan with Kanejoy, another joint venture. Gainwell and Kanejoy were
both liquidated in January 1999, OMI received $2,989,000 cash from return of
capital in its Kanejoy venture, and recorded a loss from Gainwell of $678,000.
In September 1997, Mosaic sold a vessel to one of its joint venture
partners (the majority shareholder) at a loss, of which OMI's proportionate
share was $5,244,000.On December 10, 1997, Mosaic acquired that shareholder's
interest in the venture for cash of $32,332,000 and 50.1 percent of the stock in
its subsidiary (Kanejoy) with a proportionate book value of $3,501,535, and
Mosaic became a 100 percent owned subsidiary of OMI.
Summarized combined financial information pertaining to all affiliated
companies accounted for by the equity method is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
-------- ------- --------
<S> <C> <C> <C>
Results of operations:
Revenues .............................................. $80,263 $55,698 $41,804
Operating (loss) income ............................... (795) 9,637 10,762
Loss on disposal of assets--net ....................... -- (423) (8,765)
Cumulative effect of change in accounting principle ... 245 -- 1,196
Net income ............................................ 1,005 7,626 2,502
<CAPTION>
DECEMBER 31,
---------------------
1999 1998
--------- --------
<S> <C> <C>
Net Assets:
Current assets ......................................... $19,221 $19,888
Vessels and other property--net ........................ 44,404 51,824
Other assets ........................................... 2,244 2,402
------- -------
Total assets ........................................... 65,869 74,114
------- -------
Less:
Current liabilities .................................... 10,353 10,880
Long-term debt ......................................... 11,786 13,450
Other liabilities ...................................... 1,232 1,243
------- -------
Total liabilities ...................................... 23,371 25,573
------- -------
Shareholders' and partners' equity ....................... $42,498 $48,541
======= =======
Dividends received from joint ventures were as follows:
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1999 1998 1997
--------- --------- --------
<S> <C> <C> <C>
White Sea .............................................. $ 490 $1,470 $735
Amazon(1) .............................................. 1,960 1,960 --
------ ------ ----
Total ................................................ $2,450 $3,430 $735
====== ====== ====
- ------------
(1) OMI contributed $637,000 to Amazon during 1999.
</TABLE>
34
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT--(CONTINUED)
(ALL TABULAR AMOUNT ARE IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 5--LONG-TERM DEBT AND CREDIT ARRANGEMENTS
Long-term debt payable to banks consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1999 1998
--------- ---------
<S> <C> <C>
Loans under bank credit agreements at a margin plus variable
rates of the London Interbank Offering Rate ("LIBOR")(1) ....... $260,646 $239,790
10.25% Unsecured Senior Notes due 2003 ........................... 4,357 4,357
7.00% Convertible Note due 2004 .................................. 2,744 3,000
-------- --------
Total ........................................................ 267,747 247,147
-------- --------
Less current portion of long-term debt:
Scheduled amortization payments of debt ........................ 8,334 21,494
Debt related to Assets to be disposed of ....................... 46,500 --
-------- --------
Total Current Portion ........................................ 54,834 21,494
-------- --------
Long-term debt ................................................... $212,913 $225,653
======== ========
</TABLE>
- -----------
(1) Rates at December 31, 1999 were 6.468 percent to 7.875percent (including
margins).
Rates at December 31, 1998 were 5.6384 percent to 6.60 percent (including
margins).
As of December 31, 1999, OMI had an aggregate of $260,646,000 in floating
rate credit facilities and revolving lines of credit. The following paragraphs
below describe these facilities and revolving lines of credit that OMI used
during 1999, which were refinanced in February 2000. On February 11, 2000, OMI
completed its refinancing with its previous lenders for a credit agreement in
the amount of $264,500,000. Prior to the refinancing and at December 31, 1999,
OMI was not in compliance with certain of its covenants under previous credit
agreements. The effect of the refinancing revises debt covenants, interest rate
margins and principal amortization. There are two primary facilities under the
new agreement. Facility A is in the amount of $218,000,000 and matures five
years from the drawdown date. It will be repaid in ten semi-annual installments
commencing six months from the drawdown date, the first four installments in the
amount of $5,000,000 and the remaining six installments in the amount of
$12,500,000, in addition to a balloon payment in the amount of $123,000,000 as
the last installment on maturity. The outstanding balance of this Facility bears
interest at LIBOR plus a margin of 1.75% and is secured by thirteen vessels.
Facility B is in the amount of $46,500,000 and is a short-term facility which
matures two years after the drawdown date. The principal of this Facility will
be repaid with proceeds on the sale of vessels secured by this facility which
are classified as vessels to be disposed of on the Consolidated Balance Sheets
at December 31, 1999. The outstanding balance of this Facility bears interest at
LIBOR plus a margin of 2% and is secured by six vessels and OMI's interest in
its 49 percent owned joint venture. A third facility provides for certain
lenders to repay a portion of Facility A in the event certain mortgage insurance
is not obtained.
An extraordinary loss of $1,253,000 was recorded for the year ended
December 31, 1999. This loss relates to the write-off of the balance of
unamortized finance fees on debt which was refinanced in February 2000.
Aggregate maturities during the next five years under the new credit
agreement and continued fixed rate debt from December 31, 1999 are $54,834,000,
$10,539,000, $28,577,000, $29,896,000 and $25,539,000.
During the years ended December 31, 1999, 1998 and 1997 interest paid
totaled approximately $19,202,000, $8,070,000 and $6,734,000, respectively.
Certain of the loan agreements, including the new credit agreement of the
Company contain restrictive covenants requiring minimum levels of cash or cash
equivalents, working capital and net worth, maintenance of specified financial
ratios and collateral values, and restrict the ability of the Company to pay
dividends. These loan
35
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT--(CONTINUED)
(ALL TABULAR AMOUNT ARE IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 5--LONG-TERM DEBT AND CREDIT ARRANGEMENTS (CONTINUED)
agreements also contain various provisions restricting the right of OMI and/or
its subsidiaries to make certain investments, to place additional liens on the
property of certain of OMI's subsidiaries, to incur additional long-term debt,
to make certain payments, to merge or to undergo a similar corporate
reorganization, and to enter into transactions with affiliated companies.
Each of the following loan facilities terminated with the completion of the
refinancing described above.
On February 28, 1999, the Company obtained a $25,000,000 revolving line of
credit secured by five vessels, four of which were sold during the year, and
shares in a joint venture company. The revolving credit facility was used for
working capital and other general corporate purposes, and bore interest at LIBOR
plus a margin ranging from 1.375%-1.75%. The facility had a balance of
$6,450,000 at December 31, 1999.
The Company had a credit facility, which was assumed from Old OMI
(currently MTC), that provided for a line of credit amounting to $99,090,000 at
December 31, 1999. The credit facility was secured by eleven vessels. The Notes
under the Credit Facility bore interest at LIBOR plus a margin ranging from
0.60%-0.95%, which was computed based on OMI's funded debt to equity ratio and
interest coverage ratio.
On June 4, 1998, the Company entered into a secured revolving credit
agreement to refinance two Panamax tankers and to finance a new product carrier
upon delivery. On June 9, 1998, the Company drew down $16,000,000 to refinance
the two Panamax tankers. The $16,000,000 was to be repaid in quarterly
installments of $800,000 over the next five years and bore interest at LIBOR
plus a margin ranging from 0.65%-0.95%, which was computed based on the
Company's funded debt to capitalization ratio. On September 15, 1999,
$16,000,000 was drawn down to finance a new product carrier. The balance of the
loan at December 31, 1999 was $26,800,000.
On June 4, 1998, the Company entered into a $71,500,000 secured revolving
credit facility to finance two Suezmax tankers upon their delivery from the
yard. On June 9, 1998, $35,750,000 was drawn to finance the first vessel, and on
August 7, 1998, $35,750,000 was drawn to finance the second vessel. Each
drawdown was to be repaid by semi-annual payments of $1,294,000 beginning 18
months after the initial drawdown and a balloon of $13,750,000 ten years after
the initial drawdown date. The facility bore interest at LIBOR plus a margin
ranging from 0.85%-0.95%. At December 31, 1999, the outstanding loan balance was
$70,206,000.
On July 6, 1998, the Company entered into an agreement, as amended, for a
$37,800,000 secured reducing revolving credit facility to finance a Suezmax
tanker upon its delivery from the yard. The Company drew down $37,800,000 on
July 20, 1998 to finance the newbuilding. The availability under this facility
was to be reduced by 14 semi-annual reductions of 3.9% of the original facility,
and the remaining balance was due at maturity, which was to be ten years after
the initial drawdown. The facility bore interest at LIBOR plus a margin ranging
from 0.60%-1.05%. At December 31, 1999 the outstanding loan balance was
$36,900,000.
During December 1998, the Company entered into an agreement with a lender
for a $60,000,000 revolving credit facility. The revolving credit facility was
to be used to finance, on an interim basis, the acquisition of vessels and would
be secured by such vessels. Amounts drawn on the revolving credit facility were
to be repaid no later than six months after drawdown. The facility bore interest
at LIBOR plus a margin ranging from 1.00%-1.75% which was computed based on the
Company's funded debt to total capitalization ratio and interest coverage ratio.
On January 14, 1999, the Company drew down $37,498,000 under this facility to
finance the acquisition of a Suezmax newbuilding, which was repaid in June
1999.On July 15, 1999, $21,200,000 was drawn down to finance a new product
carrier, and this balance remained at December 31, 1999.
At December 31, 1999, vessels and shares in a joint venture with a net book
value of $385,426,000 have been pledged as collateral on long-term debt issues.
36
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT--(CONTINUED)
(ALL TABULAR AMOUNT ARE IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 5--LONG-TERM DEBT AND CREDIT ARRANGEMENTS (CONTINUED)
OMI has entered into interest rate swap agreements to manage interest costs
and the risk associated with changing interest rates. The Company had one
interest rate swap agreement with a commercial bank at December 31, 1999 and
three at December 31, 1998. These agreements effectively change the Company's
interest rate exposure on floating rate loans to fixed rates ranging from 6.98
percent to 8.475 percent. The differential to be paid or received is recognized
as an adjustment to interest expense over the lives of the agreements. The
remaining swap agreement matures in June 2000. The changes in the notional
principal amounts are as follows:
DECEMBER 31,
-------------------
1999 1998
-------- -------
Notional principal amount, beginning of the year ....... $32,700 $32,700
Reductions of notional amounts ......................... (22,700) --
------- -------
Notional principal amount, end of the year ............. $10,000 $32,700
======= =======
Interest expense pertaining to interest rate swaps for the years ended
December 31, 1999, 1998 and 1997 was $296,000, $718,000 and $765,000,
respectively.
The Company is exposed to credit loss in the event of non-performance by
other parties to the interest rate swap agreements. However, OMI does not
anticipate non-performance by the counter-parties.
NOTE 6--FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------
1999 1998
--------------------- ---------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
--------- ------- --------- --------
<S> <C> <C> <C> <C>
Cash and cash equivalents ................ $ 7,381 $ 7,381 $ 22,698 $ 22,698
Notes receivable ......................... 14,362 14,362 6,604 6,604
Total debt ............................... 267,747 267,700 247,147 247,156
Unrecognized financial instruments:
Interest rate swaps in a net
payable position ...................... 88 399
</TABLE>
The fair value of long-term debt is estimated based on current rates
offered to the Company for similar debt of the same remaining maturities. The
fair value of interest rate swaps (used for purposes other than trading) is the
estimated amount the Company would pay to terminate swap agreements at the
reporting date, taking into account current interest rates and the current
credit-worthiness of the swap counter-parties.
NOTE 7--CHANGE IN ACCOUNTING FOR VOYAGE REVENUE
Prior to 1999, voyage freight for vessels operating on voyage charters was
accounted for on a load-to-load basis. Under this method, voyage revenue is
recognized evenly over the period from arrival of the vessel at the first load
port to arrival at the next load port. Under this method of revenue recognition
it is necessary to assume the next load port to complete the revenue recognition
cycle.
Effective January 1, 1999, OMI changed its accounting policy on recognition
of voyage freight for vessels operating on voyage charters from load-to-load to
discharge-to-discharge basis. Under this method, voyage revenue is recognized
evenly over the period from the departure of a vessel from its original
discharge port to departure from the next discharge port. The change in revenue
recognition policy is a more reliable method in recognizing voyage
37
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT--(CONTINUED)
(ALL TABULAR AMOUNT ARE IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 7--CHANGE IN ACCOUNTING FOR VOYAGE REVENUE--(CONTINUED)
revenue as it eliminates the uncertainty associated with the location of the
next load port. The cumulative effect of this accounting change is shown
separately in the Consolidated Statements of Operations and resulted in income
of $2,729,000 or $0.07 per basic and diluted earnings per share. The cumulative
effect of this change in accounting principle as of January 1, 1999 on the
Company's Consolidated Balance Sheets was to increase total assets by
$1,490,000, decrease total liabilities by $1,239,000 and increase total
stockholders' equity by $2,729,000.
The years ended December 31, 1998 and 1997 were previously presented using
the load-to-load method of accounting for voyages. Pro forma amounts for these
years assuming discharge-to-discharge had been retroactively applied are
summarized as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1998 1997
----------- -----------
<S> <C> <C>
Net income ................................................... $42,612 $18,778
------- -------
Basic earnings per share:
Net income before cumulative effect of change
in accounting principle ................................... $ 1.00 $ 0.20
Cumulative effect of change in accounting
principle--net of tax ..................................... -- 0.23
------- -------
Net income ................................................. $ 1.00 $ 0.43
======= =======
Diluted earnings per share:
Net income before cumulative effect of
change in accounting principle ........................... $ 0.99 $ 0.20
Cumulative effect of change in accounting
principle--net of tax .................................... -- 0.23
------- -------
Net income ................................................. $ 0.99 $ 0.43
======= =======
</TABLE>
NOTE 8--ACCOUNTING CHANGE FOR SPECIAL SURVEY AND DRYDOCK EXPENSES
Effective January 1, 1997, the Company changed its method of accounting for
special survey and drydock expenses from the accrual method to the prepaid
method. Special survey and drydock expenses had been accrued and charged to
operating expenses over the vessel's survey cycle. Under the prepaid method,
survey and drydock expenses are capitalized and amortized over the two to five
year period until the next cycle. Management believes the prepaid method better
matches costs with revenues and minimizes any significant changes in estimates
associated with the accrual method. The cumulative effect of this accounting
change is shown separately in the Consolidated Statements of Operations and
resulted in income of $10,063,000 (net of income taxes of $5,419,000).
The cumulative effect of this change in accounting principle as of January
1, 1997 on the Company's balance sheet was to increase total assets by
$8,272,000, decrease total liabilities by $1,791,000 and increase total
stockholder's equity by $10,063,000.
NOTE 9--OPERATING LEASES
Total rental expense was $16,080,000, $25,820,000 and $8,877,000 for the
years ended December 31, 1999, 1998 and 1997, respectively. Leases are for
vessels and office space.
38
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT--(CONTINUED)
(ALL TABULAR AMOUNT ARE IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 9--OPERATING LEASES (CONTINUED)
The future minimum rental payments required by year, under operating leases
subsequent to December 31, 1999, are as follows:
2000 .......................................... $25,700
2001 .......................................... 23,673
2002 .......................................... 7,723
2003 .......................................... 686
2004 .......................................... 688
Thereafter .................................... 1,353
-------
Total ....................................... $59,823
=======
On January 19, 1999, the COLUMBIA, a new double-hulled Suezmax tanker was
delivered. The vessel, which had a book value of $55,992,000, was sold on June
30, 1999 for $54,000,000 in a sale/leaseback transaction. The COLUMBIA was then
chartered back from the purchaser over a period of three years. The resulting
lease is being accounted for as an operating lease.
Under the agreement, the Company is responsible for operating expenses and
is required to maintain $2,000,000 in escrow over the lease term, and a standby
letter of credit, which commenced September 1999.The standby letter of credit is
increased by $750,000 per quarter in the first year and by $500,000 per quarter
in the second year to a maximum of $9,000,000. The letter of credit is
additional collateral for the Company's obligation under the charter. As of
December 31, 1999, the escrow and the standby letter of credit aggregated
$7,500,000 and was included in Other Assets and deferred charges on the
Consolidated Balance Sheet.
In May 1997, the Company sold the ALTA (a Suezmax crude oil carrier) for
approximately $39,900,000 and leased back the vessel for five years. The gain on
the sale of approximately $15,700,000 has been deferred and is being credited to
income as an adjustment to lease expense over the term of the lease. As of
December 31, 1999, the deferred gain on sale was $7,514,000. The lessor has the
option to cancel the lease after two years with the payment of a $1,000,000
termination fee.
Time charters to third parties of the Company's owned vessels are accounted
for as operating leases. Minimum future revenues to be received subsequent to
December 31, 1999 on these time charters are $16,133,000 in 2000 and $8,230,000
in 2001.
NOTE 10--PROVISION FOR LOSS ON LEASE OBLIGATIONS
During 1999, as part of OMI's periodic review, the Company evaluated the
forecasted future net cash flows for vessels with lease obligations. The Company
determined that its current lease obligations for vessels exceeded its
undiscounted forecasted future net cash flows. The loss was measured by the
excess of the future lease payments, as set forth in the lease agreements, over
the vessels estimated forecasted future cash flows over the lease term. It was
determined that an impairment loss for its leases should be recognized, and a
provision of $6,229,000 was recorded in June 1999.The loss is reported as a
separate item in the Consolidated Statements of Operations. The liability for
the impairment is being amortized to charter hire expense over the remaining
term of the leases.
NOTE 11--ACQUISITIONS AND DISPOSALS OF VESSELS
The SEINE and the ISERE, two new product tankers, were delivered in July and
September 1999, respectively. Both vessels immediately went on time charter for
two years.
39
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT--(CONTINUED)
(ALL TABULAR AMOUNT ARE IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 11--ACQUISITIONS AND DISPOSALS OF VESSELS (CONTINUED)
On October 29, 1999, OMI agreed to acquire from Mega Tankers Newbuilding
AS, a Suezmax newbuilding. The purchase price of the vessel is approximately
$46,180,000.The Company issued 5,700,000 shares on November 24, 1999 to the
seller and an additional 599,998 shares in February 2000 of OMI common stock
valued at $2.50 per share. On March 15, 2000, OMI entered into a $27,000,000
credit facility to finance this vessel upon delivery from the yard. The
remaining balance, which is approximately $3,430,000, was also paid upon
delivery.
In July, August and November 1999, four Suezmax vessels, three built in
1975 and one built in 1974, were sold for scrap. These vessels were written down
to their estimated net realizable values in the period ended June 30, 1999.
Adjustments to the loss on disposal of assets were recorded at the sale dates.
On August 20, 1998, the Company sold the TANANA for approximately $45,000,000 at
a gain of $6,485,000. On March 12, 1997, OMI sold its liquid petroleum gas
carrier for gain of approximately $1,000,000.
(Loss) gain on disposal/write down of assets-net consists of the following:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
--------- ------- ------
<S> <C> <C> <C>
(Loss) gain on sale of vessels ........................ $(17,398) $6,485 $885
Loss on write down of vessels (See Note 12) ........... (31,294) -- --
-------- ------ ----
Total ............................................... $(48,692) $6,485 $885
======== ====== ====
</TABLE>
NOTE 12--VESSELS TO BE DISPOSED OF
As of December 31, 1999, the Company planned to dispose of nine vessels,
eight vessels with a net realizable value of $84,034,000 and one aframax with a
net realizable value of $4,262,000. These vessels were written down in December
1999 (the aframax was written down in June 1999 and adjusted in December 1999)
to their estimated market values, and the loss was included in the loss on
disposal/write down of assets (see Note 11) at that time. The write down of
vessels includes the reversal of the cumulative translation adjustment for
$7,442,000. The adjustment relates to two vessels whose functional currency
until July 1990 was not U.S. dollars. In December 1999, the Company contracted
to sell its aframax vessel with a delivery date scheduled for the end of the
first quarter.
As a result of the current market condition and estimated losses on the
disposal of certain vessels, the Company re-evaluated the carrying value of its
remaining vessels under the provisions of SFAS No. 121 and concluded that no
further write downs were necessary.
NOTE 13--INCOME TAXES
A summary of the components of the provision (benefit) for income taxes
excluding the cumulative effect of change in accounting principle is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
------ -------- ---------
<S> <C> <C> <C>
Current provision ....................................... $475 $ 1,729 $7,721
Deferred tax benefit .................................... -- (38,887) (2,314)
---- -------- ------
Provision(benefit) for income taxes ..................... $475 $(37,158) $5,407
==== ======== ======
</TABLE>
40
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT--(CONTINUED)
(ALL TABULAR AMOUNT ARE IN THOUSANDS, EXCEPT PER SHARE DATA)
The provision (benefit) for income taxes on income (loss) varies from the
statutory rates due to the following:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
------- --------- ----------
<S> <C> <C> <C>
Provision at statutory rate(1) ............................ $ -- $ 1,204 $4,293
Reversal of deferred income taxes ......................... -- (38,887) --
Equity in earnings of joint ventures (other than
Amazon/White Sea) net of dividends declared ............. -- 525 1,114
Other(2) .................................................. 475 -- --
---- -------- ------
Provision (benefit)for income taxes ....................... $475 $(37,158) $5,407
==== ======== ======
</TABLE>
- ----------
(1) 1998 includes income before income taxes of $3,540,000 through June 17,
1998 after which OMI was no longer a taxable entity.
(2) 1999 provision reflects adjustment to actual for 1998 taxes.
The Company did not provide deferred income taxes on its equity in the
undistributed earnings of foreign corporate joint ventures accounted for under
the equity method other than those of Amazon and White Sea because these
earnings were considered by management to be invested in the business for an
indefinite period. If the earnings were not considered indefinitely invested,
approximately $6,502,000 of additional deferred tax liabilities would have been
required at December 31, 1997.
NOTE 14--FINANCIAL INFORMATION RELATING TO SEGMENTS
The Company organizes its business principally into two operating segments.
These segments and their respective operations are as follows:
Crude Oil Tanker Fleet--includes vessels that normally carry crude oil
and "dirty" products. This fleet includes three sizes of vessels, Suezmax,
Aframax and Panamax.
Product Carrier Fleet--includes vessels that normally carry refined
petroleum products such as gasoline, naphtha and kerosene. This fleet
includes two sizes of vessels, Panamax and handysize vessels.
41
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 14--FINANCIAL INFORMATION RELATING TO SEGMENTS (CONTINUED)
The following is a summary of the operations by major operating segments
for the three years ended December 31, 1999:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
REVENUES:
Crude Oil Tanker Fleet ....................................... $ 78,143 $ 98,517 $ 72,678
Product Carrier Fleet ........................................ 37,570 50,649 67,919
Other ........................................................ 279 62 1,388
--------- --------- ---------
$ 115,992 $ 149,228 $ 141,985
========= ========= =========
OPERATING (LOSS) INCOME:
Crude Oil Tanker Fleet(1) .................................... $ (515) $ 13,135 $ 12,409
Product Carrier Fleet ........................................ 3,235 3,704 16,447
--------- --------- ---------
2,720 16,839 28,856
General and administrative expense not allocated to vessels .. (8,331) (7,089) (7,931)
Other ........................................................ (1,023) (3,506) (747)
--------- --------- ---------
Total .................................................... $ (6,634) $ 6,244 $ 20,178
========= ========= =========
IDENTIFIABLE ASSETS:
Crude Oil Tanker Fleet ....................................... $ 234,140 $ 252,741 $ 164,344
Product Carrier Fleet ........................................ 192,625 203,537 201,126
--------- --------- ---------
426,765 456,278 365,470
Investments in, and advances to joint ventures ............... 14,218 25,507 27,810
Cash and cash equivalents .................................... 7,381 22,698 30,608
Goodwill ..................................................... 1,827 11,079 11,763
Other ........................................................ 22,224 14,565 5,057
--------- --------- ---------
Total .................................................... $ 472,415 $ 530,127 $ 440,708
========= ========= =========
CAPITAL EXPENDITURES:
Crude Oil Tanker Fleet(2) .................................... $ 58,756 $ 133,969 $ 45,620
Product Carrier Fleet(3) ..................................... 45,546 12,714 9,241
Other ........................................................ 947 724 424
--------- --------- ---------
Total .................................................... $ 105,249 $ 147,407 $ 55,285
========= ========= =========
DEPRECIATION AND AMORTIZATION:
Crude Oil Tanker Fleet ....................................... $ 11,977 $ 11,976 $ 8,406
Product Carrier Fleet ........................................ 10,950 11,481 13,371
Other ........................................................ 908 857 898
--------- --------- ---------
Total .................................................... $ 23,835 $ 24,314 $ 22,675
========= ========= =========
INTEREST EXPENSE:
Crude Oil Tanker Fleet ....................................... $ 9,610 $ 5,631 $ 2,008
Product Carrier Fleet ........................................ 5,884 3,239 7,742
--------- --------- ---------
15,494 8,870 9,750
Intercompany borrowings ...................................... -- 1,382 1,241
Other ........................................................ 2,451 866 765
--------- --------- ---------
Total .................................................... $ 17,945 $ 11,118 $ 11,756
========= ========= =========
</TABLE>
(1) Crude oil tanker fleet operating loss includes the provision for loss on
lease obligations of $6,229,000 in 1999.
(2) Includes progress payments and capitalized interest aggregating $58,539,000
in 1999, $133,645,000 in 1998 and $45,289,000 in 1997 for newbuildings.
(3) Includes progress payments and capitalized interest aggregating $45,209,000
in 1999 and $11,940,000 in 1998 for newbuildings.
42
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 14--FINANCIAL INFORMATION RELATING TO SEGMENTS (CONTINUED)
Mortgage debt of Old OMI prior to the Distribution and its related interest
expense were allocated to OMI Corporation based upon the value of the vessels
collateralizing the debt.
General and administrative expense includes an allocation of costs of
corporate administrative services provided by Old OMI up to the Distribution
date. OMI Corporation, or its applicable subsidiary, was charged a fixed amount
per month per vessel for vessel management and accounting activities and was
charged 1.25 percent of revenues earned by each vessel for commercial
management. General corporate activities, such as salaries (other than those
included in the aforementioned fees), legal, accounting, communications and
other administrative expenses were allocated based on the services provided to
the segment. Rent expense was allocated based on the number of employees
included in the corporate allocation. Management believes the methods for
allocating such expenses were reasonable.
NOTE 15--SAVINGS PLAN
The Company has a 401(k) Plan (the "Plan") which continued from Old OMI,
and is available to full-time employees who meet the Plan's eligibility
requirements. This Plan is a defined contribution plan, which permits employees
to make contributions up to ten percent of their annual salaries with the
Company matching up to the first six percent in 1999. The Company may elect to
make additional contributions to the Plan at the discretion of the Company's
Board of Directors. The Company also has an Executive Savings Plan for certain
key employees. Company contributions were $261,000 and $106,000 for the 401(k)
and Executive Savings Plan, respectively, for the year ended December 31, 1999,
and were $74,000 and $54,000 for the 401(k) and Executive Savings Plan,
respectively, from June 18, 1998 (distribution date) to December 31, 1998.
NOTE 16--STOCK OPTION PLAN
The shareholders approved the 1998 Stock Option Plan ("1998 Plan") on May
19, 1998. The 1998 Plan provides for the granting of options to officers,
employees, consultants and Directors for purchase of the Company's common
shares. The total number of shares that may be awarded under the Plan are
2,500,000, not including the replacement options described in the next sentence.
Effective June 17, 1998, 855,243 options were granted to officers and employees
to replace options they held in Old OMI and have the same vesting provisions and
expiration dates as those Old OMI options forfeited. Option prices at the date
of grant represent the option prices at which options were originally granted by
Old OMI to officers and employees reduced by the estimated fair value per share
of Old OMI's domestic business. In addition, 120,000 options were issued to new
directors in 1998 and vest ratably over three years. In 1999, the Company issued
10,000 options at $3.25 per share.
The following is a summary of the change in the options (in whole numbers,
not thousands) from December 31, 1998 to December 31, 1999:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
OPTIONS AT OPTIONS AT WEIGHTED
RANGE OF DECEMBER 31, DECEMBER 31, AVERAGE
EXERCISE PRICE 1998 GRANTS EXPIRED FORFEITURES 1999 EXERCISE PRICE EXPIRATION DATE
- -------------- ------------ ------ ------- ----------- ------------ -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
$3.25 -$3.39 31,006 10,000 4,666 5,000 31,340 $3.35 January 2003 to January 2009
$4.015-$4.58 270,000 10,000 260,000 $4.10 February 2000 to April 2005
$5.14 -$5.43 416,237 22,667 393,570 $5.22 February 2004 to May 2008
$6.42 -$6.67 160,000 160,000 $6.61 June 2001 to June 2008
$8.675-$8.95 98,000 68,000 30,000 $8.95 August 1999 to May 2008
------- ------ ------ ------ -------
975,243 10,000 82,666 27,667 874,910 $5.20
======= ====== ====== ====== =======
</TABLE>
Proceeds received from the exercise of the options are credited to the
capital accounts.
43
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 16--STOCK OPTION PLAN (CONTINUED)
Had compensation cost for the Company's stock option plans been determined
based on the fair value at the grant dates for awards under those plans
consistent with the methods recommended by SFAS No. 123, the Company's net
income and net income per share for the years ended December 31, 1999 and 1998,
would have been stated at the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1999 1998
-------- -------
<S> <C> <C>
Net (loss) income:
As reported .................................... $(80,305) $42,917
Pro forma ...................................... (80,461) 41,409
<CAPTION>
1999 1999 1998 1998
AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Basic (loss) earnings per share:
Net (loss) income before extraordinary loss and
cumulative effect of change in accounting principle .. $(1.94) $(1.94) $1.01 $0.97
Extraordinary loss ..................................... (0.03) (0.03) -- --
Cumulative effect of change in accounting principle .... 0.07 0.07 -- --
------ ------ ----- -----
Net (loss) income ........................................ $(1.90) $(1.90) $1.01 $0.97
====== ====== ===== =====
Diluted (loss) earnings per share:
Net (loss) income before extraordinary loss and
cumulative effect of change in accounting principle .. $(1.94) $(1.94) $1.00 $0.97
Extraordinary loss ..................................... (0.03) (0.03) -- --
Cumulative effect of change in accounting principle .... 0.07 0.07 -- --
------ ------ ----- -----
Net (loss) income ........................................ $(1.90) $(1.90) $1.00 $0.97
====== ====== ===== =====
</TABLE>
The fair value of options granted under the Company's stock option plans
during 1999 and 1998, was estimated on the dates of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used: no dividend yield, expected volatility of 40 percent, risk
free average interest rates of 6.13 percent in 1999 and 5.01 percent in 1998,
and expected lives ranging from one to five years.
See Note 17 regarding "Change in Control".
NOTE 17--EMPLOYMENT AGREEMENTS
OMI has employment agreements with all of its executive officers which
provide for an annual base salary and a performance incentive bonus. The base
salary is the amount paid in the previous year plus any raise granted by the OMI
Board. Under the contracts, bonuses are paid at the discretion of the OMI Board.
Each of these agreements also provide that if the employee (i) is terminated
without cause, (ii) voluntarily terminates his employment within 90 days of a
relocation following a Change in Control or reduction in compensation or
responsibilities, or (iii) is disabled, such employee will continue to receive
base salary and other benefits for a period of two years. In addition, in the
event of a Change in Control (as defined in the relevant agreement) and if any
such employee's employment is terminated without cause (other than for reasons
of disability) within two years of such a Change in Control, then OMI will pay
such employee an amount equal to the incentive bonus paid during the previous
twelve months and an amount equal to three times the sum of his then current
base salary and that incentive bonus.
NOTE 18--STOCKHOLDERS' EQUITY
Preferred Stock--The Company has 5,000,000 shares of preferred stock
authorized, none issued.
Shareholders' Rights Plan--On November 19, 1998, the Board of Directors
approved the adoption of a shareholder rights plan in which it declared a
dividend distribution of one Right for each outstanding share of common stock,
$0.50 par value (the "Common Stock") of the Company, to stockholders of record
at the close of business on December 1, 1998. Each Right entitles the record
holder to purchase from the Company one hundred-thousandth of a share of the
Company's Series A Participating Preferred Stock, $1.00 par value at a price of
$25.00 (the "Purchase Price"), subject to adjustment in certain circumstances.
44
<PAGE>
OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL TABULAR AMOUNTS ARE IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 18--STOCKHOLDERS' EQUITY (CONTINUED)
Initially, the Rights attach to the certificates representing outstanding
shares of Common Stock, and no Rights Certificates will be distributed. In
general the Rights will separate from the Common Stock and a "Distribution Date"
will occur only if a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 15% or more of the outstanding shares of
Common Stock, or after the commencement of a tender offer or exchange offer if,
upon consummation thereof, the person or group making such offer would be the
beneficial owner of 15% or more of the outstanding shares of Common Stock.
Thereafter, under certain circumstances, each Right (other than any Rights that
are or were beneficially owned by an Acquiring Person, which Rights will be
void) could become exercisable to purchase at the Purchase Price a number of
shares of Common Stock (or, in certain circumstances, the common stock of a
company into which the Company is merged or consolidated or to which the Company
sells all or substantially all of its assets) having a market value equal to two
times the Purchase Price.
Treasury Stock--On August 4, 1998, the Board of Directors approved a plan
to repurchase up to 4.4 million shares of the Company's common stock. As of
December 31, 1998, the Company purchased 2,076,700 shares at a cost of
$9,040,000 or an average price of $4.35 per share. During March 1999, OMI issued
47,408 shares of the Company's treasury stock to Directors in lieu of cash for
fees.
Dividends--Any determination to pay dividends in the future by OMI will be
at the discretion of the Board of Directors and will be dependent upon its
results of operations, financial condition, capital restrictions, covenants and
other factors deemed relevant by the board of directors. Currently, the payment
of dividends by OMI is restricted by its credit agreements.
Private Placement--During February 2000, OMI agreed to sell in a private
placement to four unrelated investors 9,583,000 shares of OMI common stock for
$2.00 per share ($1.92 per share net of commissions).
NOTE 19--COMMITMENTS AND CONTINGENCIES
At December 31, 1999, the Company had two doubled-hulled Suezmax tankers
under construction. One Suezmax with a cost of approximately $51,000,000 is to
be delivered in May 2000, and the other Suezmax with a cost of approximately
$46,180,000 was delivered in March 2000 (See Note 11).
OMI acts as a guarantor for a portion of the debt incurred by a joint
venture with affiliates of its joint venture partner. Such debt was
approximately $13,450,000 at December 31, 1999 with OMI's guaranty of such debt
being approximately $6,725,000. The guarantee ended in the first quarter of 2000
when OMI sold its interest in the joint venture (See Note 4).
OMI and certain subsidiaries are defendants in various actions arising from
shipping operations. Such actions are covered by insurance or, in the opinion of
management, are of such nature that the ultimate liability, if any, would not
have a material adverse effect on the consolidated financial statements.
The Company has guaranteed a minimum resale or residual value for a vessel
that is leased until June 2002. At December 31, 1999, the impact of the
guarantee is not expected to be material.
The Company was a defendant in an arbitration arising from alleged defects
in a vessel sold to a third party. The claims exceeded $7,000,000 which
encompassed damages for repairs to the vessel, lost revenues, interest and
costs. During 1998, this claim was settled for $900,000.
The Company and its joint venture partners have committed to fund any
working capital deficiencies which may be incurred by their joint venture
investments. At December 31, 1999, no such deficiencies have been funded.
45
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of OMI Corporation:
We have audited the accompanying consolidated balance sheets of OMI
Corporation and subsidiaries (successor to Universal Bulk Carriers, Inc. and its
subsidiaries) as of December 31, 1999 and 1998 and the related consolidated
statements of operations, and comprehensive income, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits. We did not audit the financial statements of certain corporate
joint ventures, which were accounted for by use of the equity method. The
Company's equity of $7,637,000 and $9,597,000 in the net assets of those
corporate joint ventures as of December 31, 1999 and 1998, respectively, and of
($637,000), $2,995,000, and ($1,284,000) in those companies' net income (loss)
for each of the three years in the period ended December 31, 1999 is included in
the accompanying financial statements. The financial statements of those
corporate joint ventures were audited by other auditors whose reports have been
furnished to us, and our opinion, insofar as it relates to the amounts included
for such companies, is based solely on the reports of such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, such
consolidated financial statements present fairly, in all material respects, the
financial position of the companies at December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999 in conformity with generally accepted
accounting principles.
As discussed in Note 7 to the consolidated financial statements, effective
January 1, 1999, the Company changed its method of accounting for vessels
operating on voyage charters from load-to-load to discharge-to-discharge basis.
As discussed in Note 8 to the consolidated financial statements, effective
January 1, 1997, the Company changed its method of accounting for special and
drydock expense from the accrual method to the prepaid method.
DELOITTE & TOUCHE LLP
New York, New York
February 17, 2000
(March 15, 2000 as to Notes 4 and 11)
46
<PAGE>
ITEM 8. SUPPLEMENTARY DATA
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1999 QUARTER ENDED 1998 QUARTER ENDED
---------------------------------------- ---------------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31 JUNE 30 SEPT. 30 DEC. 31
------- -------- ------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues ............................ $34,978 $ 30,535 $25,771 $ 24,708 $40,032 $36,827 $38,124 $34,245
Operating income (loss) ............. 3,934 (5,764) (1,841) (2,963) 5,289 (1,790) 4,189 (1,444)
Extraordinary loss .................. -- -- -- (1,253) -- -- -- --
Cumulative effect of change in
accounting principle(1) ........... 2,729 -- -- -- -- -- -- --
Net income (loss) ................... $ 2,736 $(33,172) $(7,119) $(42,750) $ 3,089 $36,450 $ 8,043 $(4,665)
Basic Earnings (Loss)
Per Common Share:
Income before extraordinary
loss and cumulative effect
of change in accounting
principle. ...................... $ -- $ (0.80) $ (0.17) $ (0.94) $ 0.07 $ 0.84 $ 0.19 $ (0.11)
Extraordinary loss .................. -- -- -- (0.03) -- -- -- --
Cumulative effect of change in
accounting principle(1) ........... 0.07 -- -- -- -- -- -- --
------- -------- ------- -------- ------- ------- ------- -------
Net income (loss)(2) ................ $ 0.07 $ (0.80) $ (0.17) $ (0.97) $ 0.07 $ 0.84 $ 0.19 $ (0.11)
======= ======== ======= ======== ======= ======= ======= =======
Weighted average number of
shares of common stock
outstanding-basic ................. 41,611 41,647 41,647 44,020 43,072 43,271 42,837 41,609
======= ======== ======= ======== ======= ======= ======= =======
Diluted Earnings (Loss)
Per Common Share:
Income before extraordinary
loss and cumulative effect
of change in accounting
principle ....................... $ -- $ (0.80) $ (0.17) $ (0.94) $ 0.07 $ 0.83 $ 0.19 $ (0.11)
Extraordinary loss .................. -- -- -- (0.03) -- -- -- --
Cumulative effect of change in
accounting principle(1) ............. 0.07 -- -- -- -- -- -- --
------- -------- ------- -------- ------- ------- ------- -------
Net income (loss)(2) ................ $ 0.07 $ (0.80) $ (0.17) $ (0.97) $ 0.07 $ 0.83 $ 0.19 $ (0.11)
======= ======== ======= ======== ======= ======= ======= =======
Weighted average number of
shares of common stock
outstanding-diluted ............... 41,611 41,647 41,647 44,020 43,433 43,961 43,113 41,609
======= ======== ======= ======== ======= ======= ======= =======
</TABLE>
- -----------
(1) The March 31, 1999 quarter has been restated to reflect the cumulative
effect of the change in the accounting principle effective January 1, 1999.
(2) Earnings per share are based on stand-alone quarters.
47
<PAGE>
AMAZON TRANSPORT INC.
BALANCE SHEETS
DECEMBER 31,
---------------------------
1999 1998
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .............. $ 3,263,011 $ 7,532,673
Accounts receivable .................... 715,810 2,340,063
Bunkers ................................ 617,705 659,933
----------- -----------
Total current assets ............. 4,596,526 10,532,669
----------- -----------
Long-term assets
Vessel ............................... 12,786,778 13,407,504
----------- -----------
Total long term assets ........... 12,786,778 13,407,504
----------- -----------
Total assets ........................... $17,383,304 $23,940,173
=========== ===========
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable ....................... $ 1,796,786 $ 4,354,145
----------- -----------
Total current liabilities ............ 1,796,786 4,354,145
----------- -----------
Total liabilities .................... 1,796,786 4,354,145
----------- -----------
EQUITY:
Share capital .......................... 900 900
Accumulated result 1/1 ................. 19,585,128 17,473,325
Cash dividend .......................... (4,000,000) (4,000,000)
Capital contributions .................. 1,300,000 --
Net income (loss) ...................... (1,299,510) 6,111,803
----------- -----------
Total equity ........................... 15,586,518 19,586,028
----------- -----------
Total liabilities and equity ........... $17,383,304 $23,940,173
=========== ===========
See notes to financial statements.
48
<PAGE>
AMAZON TRANSPORT INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING INCOME AND COSTS
Gross freight ........................ $ 7,640,089 $ 15,647,357 $ 15,692,654
Voyage related costs ................. (3,830,509) (4,462,752) (6,584,317)
------------ ------------ ------------
Net voyage revenue ................... 3,809,580 11,184,605 9,108,337
------------ ------------ ------------
Crew wages and social security ....... (1,477,085) (1,284,936) (1,462,583)
Other operating costs ................ (3,193,913) (3,450,102) (3,794,536)
------------ ------------ ------------
Profit before depreciation ........... (861,418) 6,449,567 3,851,218
Depreciation ......................... (620,726) (620,726) (620,726)
------------ ------------ ------------
Operating result ..................... (1,482,144) 5,828,841 3,230,492
------------ ------------ ------------
FINANCIAL INCOME AND COSTS
Interest received .................... 202,156 323,555 200,267
Net gain (loss) on foreign exchange .. (18,652) (39,461) (311)
Other financial costs ................ (870) (1,132) (1,896)
------------ ------------ ------------
Net financial items .................. 182,634 282,962 198,060
------------ ------------ ------------
Net income (loss) .................... $ (1,299,510) $ 6,111,803 $ 3,428,552
============ ============ ============
</TABLE>
See notes to financial statements
49
<PAGE>
AMAZON TRANSPORT INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS PROVIDED (USED) BY
OPERATING ACTIVITIES
Net (loss) income ................................... $(1,299,510) $ 6,111,803 $ 3,428,552
Depreciation ........................................ 620,726 620,726 620,726
Change in short-term assets ......................... 1,666,481 (349,306) (1,150,402)
Change in short-term liabilities .................... (2,557,359) 1,362,885 1,505,321
----------- ----------- -----------
Net cash (used) provided by operating activities .... (1,569,662) 7,746,108 4,404,197
----------- ----------- -----------
CASH FLOW USED BY FINANCING ACTIVITIES
Repayment of loan to shareholders ................... -- -- (3,000,000)
Cash dividends ...................................... (4,000,000) (4,000,000) --
Capital contributions ............................... 1,300,000 -- --
----------- ----------- -----------
Net cash (used) by financing activities ............. (2,700,000) (4,000,000) (3,000,000)
----------- ----------- -----------
Net (decrease) increase in cash and
cash equivalents .................................. (4,269,662) 3,746,108 1,404,197
Cash and cash equivalents beginning of year ......... 7,532,673 3,786,565 2,382,368
----------- ----------- -----------
Cash and cash equivalents end of year ............... $ 3,263,011 $ 7,532,673 $ 3,786,565
=========== =========== ===========
</TABLE>
See notes to financial statements.
50
<PAGE>
AMAZON TRANSPORT, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
1. COMPANY
Amazon Transport, Inc. (the "Company" or "Amazon") is jointly owned by a
wholly-owned subsidiary of OMI Corporation ("OMI") and Bergesen d.y.
Shipping AS ("Bergesen d.y. Shipping"), a wholly-owned subsidiary of
Bergesen d.y. ASA ("Bergesen") with interests of 49 and 51 percent,
respectively. The Company began operating as a joint venture on December 3,
1988 for the purpose of owning and chartering commercial vessels. The
Company owns and operates one vessel, the Settebello, for all years
presented.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Operating Revenues and Expenses--Voyage revenues and expenses are
recognized on the percentage of completion method of accounting based on
voyage costs incurred to date to estimated total voyage costs. Estimated
losses are provided in full at the time such losses become evident.
Special survey and drydock expenses are accrued and charged to
operating expenses over the survey cycle, which is generally a three year
period. The accruals of such expenses are based on management's best
estimates of future cost and the expected length of the survey cycle.
However, the ultimate liability may be more or less than such estimates.
Vessel--The vessel is recorded at cost. Depreciation is provided on the
straight-line method based on the estimated 25 year useful life of the
vessel up to the estimated salvage value. Salvage value is based upon the
vessel's light weight tonnage multiplied by a scrap rate.
Expenditures for maintenance, repairs and minor renewals are expensed.
Major replacements and renewals are capitalized.
In the event that facts and circumstances indicate that the carrying
amount of the vessel may be impaired, an evaluation of recoverability is
performed. If an evaluation is required, the estimated future undiscounted
cash flows associated with the vessel are compared to the vessel's carrying
value to determine if a writedown to fair value or discounted cash flow is
required.
Federal Income Taxes--No provision has been made for Federal income taxes.
The income of the Company is not generally subject to tax as a result of
various provisions of the Internal Revenue Code. Additionally, the country
in which the Company is incorporated exempts shipping and maritime
operations from taxation.
Cash Flows--Cash equivalents represent liquid investments which mature
within 90 days. The carrying amount approximates fair value. The Company
paid no interest in the three years ended December 31, 1999.
3. RELATED PARTY TRANSACTIONS
The Company has entered into management service agreements with Bergesen,
who act as technical and commercial managers of the Settebello. The Company
paid Bergesen management fees of $267,291 for the year ended December 31,
1999, $261,246 for the year ended December 31, 1998 and $256,204 for the
year ended December 31, 1997.
During the year 1999, the Company made a cash distribution to the
shareholders of $4,000,000.
During the year 1999, the Company also called in capital from the
shareholders of $1,300,000.
During the year 1998, the Company made a cash distribution to the
shareholders of $4,000,000.
During the year 1997, the Company paid back the loan to the
shareholders of $3,000,000.
51
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANT
To the Stockholders of
Amazon Transport Inc.
We have audited the accompanying balance sheets of Amazon Transport Inc. as of
December 31, 1999 and 1998 and the related statements of income and changes in
financial position for each of the three years in the period ended December 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audit in accordance with International Standards on Auditing.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Amazon Transport Inc. as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years ended December 31, 1999 in conformity with the
accounting principles disclosed in notes to the financial statements which in
all material respects are in agreement with International Accounting Principles.
ARTHUR ANDERSEN & CO.
Morten Drake
State Authorised Public Accountant (Norway)
Oslo, Norway
March 16, 2000
52
<PAGE>
WHITE SEA HOLDINGS LTD.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARES)
SEPTEMBER 29, DECEMBER 31,
1999 1998
------------ ------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents ........................... $1,550 $2,405
Advances to masters ................................. -- 27
Receivables:
Traffic ........................................... 230 98
Other ............................................. 105 211
Prepaid expenses and other current assets ........... 230 391
------ ------
Total current assets .......................... 2,115 3,132
------ ------
Vessel:
Vessel at cost ...................................... 7,430 7,430
Less accumulated depreciation ....................... 2,581 2,220
------ ------
Vessel--net ......................................... 4,849 5,210
------ ------
Total assets .................................. $6,964 $8,342
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .................................... $ 68 $ 121
Accrued expenses .................................... 63 495
Accrued interest .................................... -- 10
Payable to affiliates (Note 3) ...................... 19 54
Current portion of long-term debt (Note 4) .......... -- 500
------ ------
Total current liabilities ..................... 150 1,180
------ ------
Advance time charter revenues and other liabilities ... -- 211
Stockholders' equity:
Common stock--no par value; 500 shares authorized
and outstanding ................................... 1 1
Capital surplus ..................................... 2,499 2,499
Retained earnings (Note 7) .......................... 4,314 4,451
------ ------
Total stockholders' equity .................... 6,814 6,951
------ ------
Total liabilities and stockholders' equity ............ $6,964 $8,342
====== ======
See notes to financial statements.
53
<PAGE>
WHITE SEA HOLDINGS LTD.
STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, FOR THE YEARS ENDED
1999 TO DECEMBER 31,
SEPTEMBER 29, --------------------
1999 1998 1997
------------ ------- -------
(UNAUDITED)
<S> <C> <C> <C>
Voyage Revenues ................................. $ 4,583 $ 9,022 $12,552
------- ------- -------
Operating Expenses:
Vessel and voyage ............................. 3,542 6,738 7,375
Depreciation .................................. 361 461 442
General and administrative .................... 116 97 94
------- ------- -------
Total operating expenses ................ 4,019 7,296 7,911
------- ------- -------
Operating Income ................................ 564 1,726 4,641
Net Interest Income (Expense):
Interest expense .............................. (6) (43) (158)
Interest income ............................... 60 167 99
------- ------- -------
Net interest income (expense) ........... 54 124 (59)
------- ------- -------
Income Before Cumulative Effect of Change in
Accounting Principles ......................... 618 1,850 4,582
Cumulative Effect of Change in Accounting
Principles (Notes 5, 6) ....................... 245 -- 1,196
------- ------- -------
Net Income ...................................... 863 1,850 5,778
Retained Earnings, Beginning of Year ............ 4,451 5,601 1,323
Dividends Paid (Note 7) ......................... (1,000) (3,000) (1,500)
------- ------- -------
Retained Earnings, End of Period ................ $ 4,314 $ 4,451 $ 5,601
======= ======= =======
</TABLE>
See notes to financial statements.
54
<PAGE>
WHITE SEA HOLDINGS LTD.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, FOR THE YEARS ENDED
1999 TO DECEMBER 31,
SEPTEMBER 29, --------------------
1999 1998 1997
-------------- ------- -------
(UNAUDITED)
<S> <C> <C> <C>
Cash Flows Provided by Operating Activities:
Net income ......................................... $ 863 $ 1,850 $ 5,778
Adjustments to reconcile net income to net cash
flows provided by operating activities:
Depreciation ..................................... 361 461 442
Cumulative effect of change in
accounting principles .......................... (245) -- (1,196)
Change in assets and liabilities:
Decrease (increase) in receivables and advances
to masters ....................................... 43 509 (438)
Decrease in prepaid expenses and other
current assets ................................... 161 591 827
Decrease in accounts payable and accrued
liabilities ...................................... (495) (31) (229)
Decrease in payable to affiliates .................. (35) (310) (877)
(Decrease) increase in advanced time charter
revenues and other liabilities ................... (8) 19 (5)
------- ------- -------
Net cash provided by operating
activities ................................. 645 3,089 4,302
------- ------- -------
Cash Flows Used by Investing Activities:
Additions to vessel ................................ -- (40) (7)
------- ------- -------
Net cash used by investing activities ........ -- (40) (7)
------- ------- -------
Cash Flows Used by Financing Activities:
Dividends paid ..................................... (1,000) (3,000) (1,500)
Payments on long-term debt ......................... (500) (500) (500)
------- ------- -------
Net cash used by financing activities ........ (1,500) (3,500) (2,000)
------- ------- -------
Net (Decrease) Increase in Cash and
Cash Equivalents ................................... (855) (451) 2,295
Cash and Cash Equivalents, Beginning of Year ......... 2,405 2,856 561
------- ------- -------
Cash And Cash Equivalents, End of Period ............. $ 1,550 $ 2,405 $ 2,856
======= ======= =======
</TABLE>
See notes to financial statements.
55
<PAGE>
WHITE SEA HOLDINGS LTD.
NOTES TO FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED DECEMBER 31, 1998
AND THE PERIOD ENDING SEPTEMBER 29, 1999
1. COMPANY
White Sea Holdings Ltd. (the "Company") was jointly owned by a
subsidiary of OMI Corporation ("OMI"), ( the successor to Universal Bulk
Carriers, Inc.) and an affiliate of Anders Wilhelmsen & Co. A/S
("Wilhelmsen"), Norway, with interests of 49 and 51 percent, respectively.
On September 29, 1999, OMI sold its 49 percent share to Wilhelmsen for
approximately $2,427,000. The Company owns and operates one crude oil
carrier, the White Sea.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Effective January 1, 1999, White Sea changed its accounting policy on
recognition of voyage freight for vessels operating on voyage charters from
load-to-load to the discharge-to-discharge basis. Under this method, voyage
revenue is recognized evenly over the period from the departure of a vessel
from its original discharge port to departure from the next discharge port.
Management believes that the discharge-to-discharge method is preferable
because (a) it is the predominant method for shipowners, and (b) it
eliminates the uncertainty associated with the location of the next load
port (See Note 6).
Operating Revenues and Expenses--Voyage revenues and expenses are
recognized on the percentage of completion method of accounting based on
voyage costs incurred to date to estimated total voyage costs. Estimated
losses are provided in full at the time such losses become evident.
Effective January 1, 1997, special survey and drydock expenses are
accounted for using the prepaid method. Under the prepaid method expenses
are capitalized and amortized over the survey cycle, which is generally a
two to five year period. Prior to 1997, special survey and drydock expenses
were accrued and charged to operating expenses over the survey cycle, which
was generally a two to three year period. The accruals of such expenses
were based on management's best estimates of future costs and the expected
length of the survey cycle. However, the ultimate liability may have been
more or less than such estimates (See Note 5).
Vessel--The vessel is recorded at cost. Depreciation is provided on the
straight-line method based on the estimated 25 year useful life of the
vessel up to the estimated salvage value. Salvage value is based upon the
vessel's lightweight tonnage multiplied by a scrap rate.
Expenditures for maintenance, repairs and minor renewals are expensed.
Major replacements and renewals are capitalized.
In the event that facts and circumstances indicate that the carrying
amount of the vessel may be impaired, an evaluation of recoverability is
performed. If an evaluation is required, the estimated future undiscounted
cash flows associated with the vessel are compared to the vessel's carrying
value to determine if a writedown to fair value or discounted cash flow is
required.
Federal Income Taxes--No provision has been made for Federal income taxes.
The income of the Company is not generally subject to tax as a result of
various provisions of the Internal Revenue Code. Additionally, the country
in which the Company is incorporated exempts shipping and maritime
operations from taxation.
Cash Flows--Cash equivalents represent liquid investments which mature
within 90 days. The carrying amount approximates fair value. The Company
paid $16,000, $50,000 and $182,000 in interest during 1999, 1998, and 1997,
respectively.
56
<PAGE>
WHITE SEA HOLDINGS LTD.
NOTES TO FINANCIAL STATEMENTS
(CONCLUDED)
3. RELATED PARTY TRANSACTIONS
The Company has a management service agreement with OMI to act as both
technical and commercial manager of the White Sea. The Company paid
management fees to OMI of $113,000 for the period January 1, 1999 to
September 29, 1999. The Company paid management fees to OMI or its
affiliates of $78,000 for each of the years ended December 31, 1998 and
1997.
White Sea Holdings Ltd. owed OMI and its affiliates $19,000 and
$54,000 as of September 29, 1999 and December 31, 1998, respectively.
4. LONG-TERM DEBT
At December 31, 1998 the Company had $500,000 outstanding on a mortgage
note secured by the vessel at a rate of 6.9062 percent. The note was paid
on March 5,1999. The fair value of long-term debt at December 31, 1998
approximates its carrying value.
5. ACCOUNTING CHANGE FOR SPECIAL SURVEY AND DRYDOCK EXPENSES
Effective January 1, 1997, the Company changed its method of accounting
for special survey and drydock expenses from the accrual method to the
prepaid method. Special survey and drydock expenses had been accrued and
charged to operating expenses over the vessel's survey cycle, which was
generally a two to three year period. Under the prepaid method, survey and
drydock expenses are capitalized and amortized over the period until the
next survey cycle. Management believes the prepaid method better matches
costs with revenues, and minimizes any significant changes in estimates
associated with the accrual method. The cumulative effect of this
accounting change is shown separately in the consolidated statement of
operations and resulted in income of $1,196,000.
The cumulative effect of this change in accounting principle as of
January 1, 1997 on the Company's balance sheet was to increase total assets
by $1,166,000, decrease total liabilities by $30,000 and increase total
stockholders' equity by $1,196,000.
6. CHANGE IN ACCOUNTING FOR VOYAGE REVENUE
Prior to 1999, voyage freight for vessels operating on voyage charters
was accounted for on a load-to-load basis. Under this method, voyage
revenue is recognized evenly over the period from arrival of the vessel at
the first load port to arrival at the next load port. Under this method of
revenue recognition it is necessary to assume the next load port to
complete the revenue recognition cycle.
Effective January 1, 1999, White Sea changed its accounting policy on
recognition of voyage freight for vessels operating on voyage charters from
load-to-load to discharge-to-discharge basis. Under this method, voyage
revenue is recognized evenly over the period from the departure of a vessel
from its original discharge port to departure from the next discharge port.
The change in revenue recognition policy is a more reliable method in
recognizing voyage revenue as it eliminates the uncertainty associated with
the location of the next load port. The cumulative effect of this
accounting change is shown separately in the Statements of Income and
resulted in income of $245,000. The cumulative effect of this change in
accounting principle as of January 1, 1999 on the Company's Balance Sheets
was to increase total assets by $42,000, decrease total liabilities by
$203,000 and increase total stockholders' equity by $245,000.
The years ended December 31, 1998 and 1997 were previously presented
using the load-to-load method of accounting for voyages. Pro forma amounts
for these years assuming discharge-to-discharge had been retroactively
applied are net income of $1,910,000 and $5,688,000 for the years ended
December 31, 1998 and 1997, respectively.
7. DIVIDENDS
During 1999, 1998 and 1997, the Company declared and paid dividends of
$1,000,000, $3,000,000 and $1,500,000, respectively.
57
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of White Sea Holdings Ltd.:
We have audited the accompanying balance sheet of White Sea Holdings Ltd. as of
December 31, 1998 and the related statements of income and retained earnings and
of cash flows for each of the two years in the period ended December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the accompanying financial statements present fairly, in all
material respects, the financial position of the Company at December 31, 1998,
and the results of its operations and its cash flows for each of the two years
in the period ended December 31, 1998 in conformity with generally accepted
accounting principles.
As disclosed in Note 5 to the financial statements, effective January 1, 1997,
the Company changed its method of accounting for special surveys and drydock
expenses from the accrual method to the prepaid method.
DELOITTE & TOUCHE LLP
New York, New York
February 23, 1999
58
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF OMI CORPORATION
Pursuant to General Instruction G(3) the information regarding directors
called for by this item is hereby incorporated by reference from OMI's Proxy
Statement to be filed with the Securities and Exchange Commission. Certain
information relating to Executive Officers of the Company appears at the end of
Part I of this Form 10-K Annual Report.
ITEM 11. EXECUTIVE COMPENSATION
Pursuant to General Instruction G(3) the information called for by this
item is hereby incorporated by reference from OMI's Proxy Statement to be filed
with the Securities and Exchange Commission.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Pursuant to General Instruction G(3) the information called for by this
item is hereby incorporated by reference from OMI's Proxy Statement to be filed
with the Securities and Exchange Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G(3) the information called for by this
item is hereby incorporated by reference from OMI's Proxy Statement to be filed
with the Securities and Exchange Commission.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedules
1. Financial statements as indicated in the index is set forth on page 23.
2. Financial Statement Schedules
None.
3. The index to Exhibits is on page 60.
(b) Reports on Form 8-K:
OMI has not filed any current reports on Form 8-K with the Commission
during the last quarter of the fiscal period covered by this report.
59
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
NUMBER INCORPORATED BY REFERENCE TO DESCRIPTION OF EXHIBIT
------ ---------------------------- ----------------------
<S> <C> <C>
3(i) Registration Statement on Form S-1 Articles of Association of OMI
(No. 333-52771) Filed May 15, 1998
3(ii) Registration Statement on Form S-1 By-laws
(No. 333-52771) Filed May 15, 1998
4.1 Registration Statement on Form S-3 Registration of 6,299,998 shares of common
(No. 333-30230) Filed February 11, 2000 stock sold in a private placement
4.2 Registration Statement on Form S-3 Registration of 9,583,000 shares of common
(No. 333-33424) Filed March 28, 2000 stock sold in a private placement
4.3 Form 8A Filed December 14, 1998 Registration Statement of Preferred Stock
Purchase Rights
10.1 Registration Statement on Form S-1 Form of Common Stock Certificate
(No. 333-52771) Filed May 15, 1998
10.2 Registration Statement on Form S-1 Corporation Stock Option Plan (1)
(No. 333-52771) Filed May 15, 1998
10.3 Form S-8 Filed June 17, 1998 Employee Benefit Plan Registration Statement
10.4 Form 10-Q Filed November 13, 1998 Form of OMI Employment Agreements for Senior
Executives (1)
10.5 Form 10-K Filed March 31, 1999 OMI Corporation 1998 Performance Share Unit
Plan (1)
10.6 Loan Agreement dated as of February 4, 2000
providing for a US $218,000,000 Secured Term
Loan Facility
10.7 Loan Agreement dated as of February 4, 2000
providing for a US $46,500,000 Secured Term Loan
Facility
10.8 Facility Agreement dated as of February 4,
2000 providing for a US $36,000,000 Convertible
Letter of Credit Facility
18 Form 10-Q Filed November 12, 1999 Preferability Letter dated August 13, 1999
21 Subsidiaries of the Company
27 Financial Data Schedule dated December 31, 1999
</TABLE>
- ----------
(1) Denotes compensation plan and/or agreement
60
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
OMI CORPORATION
By /s/ CRAIG H. STEVENSON, JR.
--------------------------------------
CRAIG H. STEVENSON, JR., PRESIDENT,
CHAIRMAN OF THE BOARD OF DIRECTORS,
CHIEF EXECUTIVE OFFICER
MARCH 30, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
-------- ----- ----
<S> <C> <C>
/s/ CRAIG H. STEVENSON, Jr. President, Chief Executive Officer March 30, 2000
- --------------------------------- and Director
CRAIG H. STEVENSON, JR.
/s/ MICHAEL KLEBANOFF Director March 30, 2000
- ---------------------------------
MICHAEL KLEBANOFF
/s/ ROBERT BUGBEE Director March 30, 2000
- ---------------------------------
ROBERT BUGBEE
/s/ JAMES N. HOOD Director March 30, 2000
- ---------------------------------
JAMES N. HOOD
/s/ EDWARD SPIEGEL Director March 30, 2000
- ---------------------------------
EDWARD SPIEGEL
/s/ JAMES D. WOODS Director March 30, 2000
- ---------------------------------
JAMES D. WOODS
/s/ VINCENT J. de SOSTOA Senior Vice President, Treasurer, March 30, 2000
- --------------------------------- Chief Financial Officer and
VINCENT J. de SOSTOA Chief Accounting Officer
</TABLE>
61
================================================================================
LOAN AGREEMENT PROVIDING FOR A
US$218,000,000
SECURED TERM LOAN FACILITY
TO BE MADE AVAILABLE TO
OMI CORPORATION
BY
CHRISTIANIA BANK OG KREDITKASSE ASA,
acting through its New York branch,
as Arranger and Administrative Agent,
DEN NORSKE BANK ASA,
acting through its New York branch,
as Arranger and Syndication Agent,
MEESPIERSON CAPITAL CORP.,
as Arranger and Security Agent,
and the Banks and Financial Institutions
identified on Schedule 1, as Lenders
================================================================================
as of February 4, 2000
<PAGE>
CONTENTS
PAGE
----
1. DEFINITIONS..........................................................1
1.1 Specific Definitions.................................................1
1.2 Computation of Time Periods; Other Definitional Provisions..........16
1.3 Accounting Terms....................................................16
1.4 Certain Matters Regarding Materiality...............................16
1.5 Forms of Documents..................................................16
2. REPRESENTATIONS AND WARRANTIES......................................16
2.1 Representations and Warranties......................................16
(a) Due Organization and Power....................................17
(b) Authorization and Consents....................................17
(c) Binding Obligations...........................................17
(d) No Violation..................................................17
(e) Litigation....................................................17
(f) No Default....................................................17
(g) Vessels.......................................................17
(h) Insurance.....................................................18
(i) Financial Information.........................................18
(j) Tax Returns...................................................18
(k) ERISA.........................................................18
(l) Chief Executive Office........................................18
(m) Foreign Trade Control Regulations.............................19
(n) Equity Ownership..............................................19
(o) Environmental Matters and Claims..............................19
(p) Compliance with ISM Code......................................20
(q) Threatened Withdrawal of DOC or SMC...........................20
(r) Liens.........................................................20
(s) Indebtedness..................................................20
(t) Survival......................................................20
3. THE LOAN............................................................20
3.1 (a) Purpose.........................................................20
(b) Making of the Loan............................................20
3.2 Drawdown Notice.....................................................20
3.3 Effect of Drawdown Notice...........................................20
4. CONDITIONS..........................................................21
4.1 Conditions Precedent to Drawdown of the Loan........................21
i
<PAGE>
(a) Corporate Authority.............................................21
(b) The Vessels.....................................................22
(c) The Note .......................................................22
(d) Guarantor Documents.............................................22
(e) Pledge Agreement................................................23
(f) Intercreditor Agreement.........................................23
(g) Vessel Appraisals...............................................23
(h) Guarantor Solvency..............................................23
(i) Environmental Claims............................................23
(j) Fees............................................................23
(k) Accounts........................................................23
(l) Vessel Liens....................................................23
(m) Ship Mortgage Indemnity.........................................23
(n) Facility B......................................................23
(o) Charters; Pooling Agreements....................................23
(p) Legal Opinions..................................................23
4.2 Further Conditions Precedent........................................24
4.3 Breakfunding Costs..................................................24
4.4 Satisfaction after Drawdown.........................................24
4.5 Cancellation of Standby Letter of Credit............................24
5. REPAYMENT AND PREPAYMENT............................................24
5.1 Repayment...........................................................24
5.2 Voluntary Prepayment; no re-borrowing...............................25
5.4 Mandatory Prepayment; Sale or Loss of Vessel........................25
(a) Required Percentage Not Satisfied.............................25
(b) Asset Ratio Preserved.........................................25
(c) Loan-to-Value Reduction. if the Ship Mortgage Indemnity
has been obtained and.........................................25
(d) As Excess Cash................................................25
5.5 Interest and Costs with Prepayments/Application of Prepayments......26
6. INTEREST AND RATE...................................................26
6.1 Applicable Rate.....................................................26
6.2 Default Rate........................................................26
6.3 Interest Periods....................................................26
6.4 Interest Payments...................................................26
7. PAYMENTS............................................................26
7.1 Place of Payments, No Set Off.......................................26
ii
<PAGE>
7.2 Tax Credits.........................................................27
7.3 Computations; Banking Days..........................................27
8. EVENTS OF DEFAULT...................................................27
8.1 Events of Default. The occurrence of...............................27
(a) Non-Payment of Principal......................................27
(b) Non-Payment of Interest or Other Amounts......................27
(c) Representations...............................................27
(d) Mortgage......................................................28
(e) Covenants.....................................................28
(f) Indebtedness..................................................28
(g) Ownership of Guarantors.......................................28
(h) Bankruptcy....................................................28
(i) Termination of Operations; Sale of Assets.....................28
(j) Judgments.....................................................29
(k) Inability to Pay Debts........................................29
(l) Change in Financial Position..................................29
(m) Change in Control.............................................29
(n) Cross-Default.................................................29
(o) ERISA Debt....................................................29
(p) Standby Letter of Credit/Ship Mortgage Indemnity..............29
8.2 Indemnification.....................................................30
8.3 Application of Moneys...............................................30
(a) first,........................................................30
(b) secondly,.....................................................30
(c) thirdly,......................................................30
(d) fourthly,.....................................................30
(e) fifthly,......................................................30
(g) seventhly,....................................................31
9. COVENANTS...........................................................31
9.1 Affirmative Covenants...............................................31
(a) Performance of Agreements.....................................31
(b) Notice of Default, etc........................................31
(c) Obtain Consents...............................................31
(d) Financial Information.........................................32
(e) Corporate Existence...........................................32
(f) Books and Records.............................................32
(g) Taxes and Assessments.........................................32
(h) Inspection....................................................32
(i) Compliance with Statutes, Agreements, etc.....................32
(j) Environmental Matters.........................................33
(k) ERISA.........................................................33
(l) Vessel Management.............................................33
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<PAGE>
(m) Funded Debt to Total Capitalization Ratio.....................33
(n) Cash..........................................................33
(o) Consolidated Net Worth........................................34
(p) EBITDA to Interest Expense....................................34
(q) Use of Excess Cash............................................34
(r) Brokerage Commissions, etc....................................34
(s) Deposit Accounts; Assignment..................................34
(t) Future Guaranties.............................................35
(u) Future Pledge Agreements......................................35
(v) Insurance.....................................................35
(w) Ship Mortgage Indemnity.......................................35
9.2 Negative Covenants..................................................35
(a) Liens.........................................................35
(b) Change in Business............................................36
(c) Sale or Pledge of Shares......................................36
(d) Sale of Assets................................................36
(e) Changes in Offices or Names...................................36
(f) Consolidation and Merger......................................36
(g) Chartering-in.................................................36
(h) Chartering-out................................................37
(i) Vessel Pooling................................................37
(j) Distributions on Stock........................................37
(k) Indebtedness..................................................37
(l) Investments...................................................38
(m) Capital Expenditures..........................................38
(n) Deposit Accounts..............................................38
(o) Change Fiscal Year............................................38
9.3 Subsidiary Negative Covenants.......................................38
(a) Limitations on Ability to Make Distributions..................39
(b) Use of Corporate Funds........................................39
(c) Issuance of Shares............................................39
9.4 Vessel Valuations...................................................39
9.5 Asset Maintenance...................................................39
9.6 Inspection and Survey Reports.......................................40
9.7 Vessel Substitution Sales...........................................40
9.8 Tender of Qualified Substitute Vessel...............................40
10. ASSIGNMENT..........................................................41
11. ILLEGALITY, INCREASED COST, NON-AVAILABILITY, ETC...................41
11.1 Illegality..........................................................41
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11.2 Increased Costs.....................................................41
11.3 Nonavailability of Funds............................................42
11.4 Lender's Certificate Conclusive.....................................42
11.5 Compensation for Losses.............................................42
12. CURRENCY INDEMNITY..................................................43
12.1 Currency Conversion.................................................43
12.2 Change in Exchange Rate.............................................43
12.3 Additional Debt Due.................................................43
12.4 Rate of Exchange....................................................43
13. FEES AND EXPENSES...................................................43
13.1 Fees................................................................43
13.2 Expenses............................................................43
14. APPLICABLE LAW, JURISDICTION AND WAIVER.............................44
14.1 Applicable Law......................................................44
14.2 Jurisdiction........................................................44
14.3 WAIVER OF JURY TRIAL................................................44
15. THE AGENTs..........................................................44
15.1 Appointment of Agents...............................................44
15.2 Security Agent as Trustee...........................................45
15.3 Distribution of Payments............................................45
15.4 Holder of Interest in Note..........................................45
15.5 No Duty to Examine, Etc.............................................45
15.6 Agents as Lenders...................................................45
15.7 Acts of the Agents..................................................45
15.8 Certain Amendments..................................................46
15.9 Assumption re Event of Default......................................46
15.10 Limitations of Liability............................................47
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15.11 Indemnification of the Agents.......................................47
15.12 Consultation with Counsel...........................................47
15.13 Resignation.........................................................47
15.14 Representations of Lenders..........................................48
15.15 Notification of Event of Default....................................48
16. NOTICES AND DEMANDS.................................................48
16.1 Notices.............................................................48
17. MISCELLANEOUS.......................................................49
17.1 Time of Essence.....................................................49
17.2 Unenforceable, etc., Provisions - Effect............................49
17.3 References..........................................................49
17.4 Further Assurances..................................................49
17.5 Prior Agreements, Merger............................................49
17.6 Entire Agreement; Amendments........................................49
17.7 Indemnification.....................................................49
17.8 Release of Designated Vessel Owner Guaranty.........................50
17.9 Headings............................................................50
vi
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SCHEDULE
1 The Lenders and the Commitments
2 OMI and Affiliates
3 The Vessels
4 Margin
5 The Facility B Vessels
6 Disclosure
EXHIBITS
A Form of Note
B Form of Guaranty
C Form of Pledge Agreement
D Form of Mortgage
E Form of Earnings Assignment
F Form of Insurances Assignment
G Form of Assignment and Assumption Agreement
H Form of Compliance Certificate
I Form of Drawdown Notice
J Form of Interest Notice
K Form of Intercreditor Agreement
L Form of Standby Letter of Credit
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT is made as of the 4th day of February, 2000, by
and among (1) OMI CORPORATION, a corporation incorporated under the laws of the
Republic of the Marshall Islands (the "Borrower"), (2) the banks and financial
institutions listed on Schedule 1, as lenders (together with any bank or
financial institution which becomes a Lender pursuant to Article 10, the
"Lenders"), (3) CHRISTIANIA BANK OG KREDITKASSE ASA, acting through its New York
branch ("CBK"), as administration agent for the Lenders (in such capacity, the
"Administrative Agent") and as arranger, (4) DEN NORSKE BANK ASA, acting through
its New York branch ("DnB"), as syndication agent for the Lenders (in such
capacity, the "Syndication Agent") and as arranger, and (5) MEESPIERSON CAPITAL
CORP. ("MeesPierson"), as arranger (in such capacity, together with CBK and DnB
as arrangers, the "Arrangers") and as security agent for the Lenders (in such
capacity, the "Security Agent" and, together with the Administrative Agent and
the Syndication Agent, the "Agents").
WITNESSETH THAT:
WHEREAS, at the request of the Borrower, the Arrangers have arranged
for the Agents to serve in their respective capacities under the terms of this
Agreement and for the Lenders to provide to the Borrower a secured term loan
facility in the amount of up to US$218,000,000;
NOW, THEREFORE, in consideration of the premises set forth above,
the covenants and agreements hereinafter set forth, and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as set forth below:
1. DEFINITIONS
1.1 Specific Definitions. In this Agreement the words and expressions specified
below shall, except where the context otherwise requires, have the meanings
attributed to them below:
"Acceptable Accounting Firm" means Deloitte & Touche LLP, or such other
recognized international accounting firm as
shall be approved by the Administrative
Agent, such approval not to be unreasonably
withheld;
"Affiliate" means with respect to any Person, any other
Person directly or indirectly controlled by
or under common control with such Person.
For the purposes of this definition,
"control" (including, with correlative
meanings, the terms "controlled by" and
"under common control with") as applied to
any Person means the possession directly or
indirectly of the power to direct or cause
the direction of the management and policies
of that Person whether through ownership of
voting securities or by contract or
otherwise; for purposes of Section 8.1(f),
"Affiliate" shall also include each of
Alliance Chartering LLC, International
Product Carriers Limited, Geraldton
Navigation Company Incorporated, Amazon
Transport, Inc. and Hayes Navigation Co.
Pte. Ltd. unless and until the Borrower's
direct or indirect
<PAGE>
interest in and to such company has ceased;
"Agreement" means this Agreement, as the same shall be
amended, modified or supplemented from time
to time;
"Applicable Rate" means any rate of interest applicable to the
Loan from time to time pursuant to Section
6.1;
"Assigned Moneys" means sums assigned to or received by any
Agent pursuant to any Security Document;
"Assignment and Assumption means the Assignment and Assumption
Agreement(s)" Agreement(s) executed pursuant to Section 10
substantially in the form set out in Exhibit
G;
"Assignment Notices" means
(i) notices with respect to the Earnings
Assignments substantially in the form
set out in Exhibit 1 thereto;
and
(ii) notices with respect to the Insurances
Assignments substantially in the form
set out in Exhibit 3 thereto;
"Assignments" means the Earnings Assignments and the
Insurances Assignments;
"Availability Period" means the period commencing the date hereof
and ending February 29, 2000;
"Banking Day(s)" means day(s) on which banks are open for the
transaction of business in London, England,
Hong Kong, Frankfurt, Germany and New York,
New York;
"Capital Expenditures" means all capital expenditures except for
(i) normal maintenance of Vessels and other
properties and (ii) Permitted Drydocking
Costs;
"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 (provided that the
full faith and credit of the United States
of America is pledged in support thereof),
and (ii) time deposits, certificates of
deposit or deposits in the interbank market
of any commercial bank of recognized
standing organized under the laws of the
United States of America, any state thereof
or any foreign jurisdiction having capital
and surplus in excess of $500,000,000, and
rated at least A or the equivalent thereof
by Standard & Poor's Rating Services, in
respect of both (i) and (ii) above, in each
case having maturities of not more
2
<PAGE>
than ninety (90) days from the date of
acquisition;
"Change of Control" means (a) any "person" (as such term is used
in Sections 13(d) and 14(d) of the Exchange
Act) becomes the beneficial owner (as
defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of
more than 35% of the total voting power of
the Borrower or (b) the Board of Directors
of the Borrower ceases to consist of a
majority of the directors existing on the
date hereof or directors nominated by at
least two-thirds (2/3) of the then existing
directors;
"Classification Society" shall mean a member of the International
Association of Classification Societies with
whom the Vessels are entered and who
conducted periodic physical surveys and/or
inspections of the Vessels;
"Code" means the Internal Revenue Code of 1986, as
amended, and any successor statute and
regulation promulgated thereunder;
"Collateral" means, all property or other assets, real or
personal, tangible or intangible, whether
now owned or hereafter acquired in which any
Agent or Lender has been granted a security
interest pursuant to a Security Document;
"Columbia Shipping" means Columbia Shipping LLC, a limited
liability company organized under the laws
of the Republic of the Marshall Islands;
"Commitment(s)" means in relation to a Lender, the portion
of the Loan set out opposite its name in
Schedule 1 or, as the case may be, in any
relevant Assignment and Assumption
Agreement;
"Compliance Certificate" means a certificate certifying the
compliance by the Borrower with all of its
covenants contained herein and showing the
calculations thereof in reasonable detail,
delivered by the chief financial officer of
the Borrower to the Agent from time to time
pursuant to Section 9.1(d) in the form set
out in Exhibit H, or in such other form as
the Agent may agree;
"Consolidated Net Worth" means, at any time, shareholders equity
(excluding treasury stock) of the Borrower
on a consolidated basis determined in
accordance with GAAP;
"Designated Indebtedness" means Indebtedness that is
(i) incurred by the Designated Vessel
Owner to finance
3
<PAGE>
the Designated Vessel Acquisition,
(ii) non-recourse to the Borrower and the
Borrower's Subsidiaries (other than
the Designated Vessel Owner),
and
(iii) in an amount not exceeding $30.0
million;
"Designated Subsidiary" means (i) during the term of the Columbia
Lease, Columbia Shipping, (ii) while the
Designated Indebtedness is outstanding, the
Designated Vessel Owner, and (iii) any
Subsidiary of the Borrower (A) which is not
a Guarantor, (B) which has total assets of
$1,000 or less, (C) which is not engaged in
any financing that is recourse to the
Borrower or any other Subsidiary of the
Borrower, (D) in respect of which the
Borrower has requested that the
Administrative Agent permit such
Subsidiary's designation as a Designated
Subsidiary, and (E) in respect of which the
Administrative Agent has consented in
writing to such designation;
"Designated Vessel" means the MEGA I or the SOYANG, whichever
thereof is designated by the Borrower by
written notice to the Administrative Agent
as the vessel to be financed on a
non-recourse basis in accordance with the
terms and conditions herein provided;
"Designated Vessel Acquisition" means the acquisition of
the Designated Vessel by the Designated
Vessel Owner, occurring not later than June
30, 2000, or such other date as may be
agreed by the Administrative Agent;
"Designated Vessel Conditions" means, upon or prior to the Designated
Vessel Acquisition,
(i) the Borrower having received not less
than $18.0 million net cash proceeds
from the issuance of equity
securities of the Borrower after the
Drawdown Date;
(ii) in the event the Designated Vessel is
the SOYANG, the Borrower (and its
Subsidiaries on a consolidated basis)
not having contributed more than the
amount of the SOYANG Investment to
the Designated Vessel Acquisition;
(iii) the Borrower (and its Subsidiaries on
a consolidated basis) not having
incurred any Indebtedness other than
the Designated Indebtedness to
finance the
4
<PAGE>
Designated Vessel Acquisition;
(iv) the Designated Vessel being accepted
for service under a time charter of
not less than twelve (12) months
duration at a rate of hire sufficient
to pay reasonably anticipated
operating expenses and to amortize
(on a level-debt service basis), on a
maximum 15-years profile, all
Indebtedness incurred to finance the
Designated Vessel Acquisition for the
duration of such time charter;
(v) true and complete copies of all
contracts, agreements or other
documents entered into by the
Borrower or any Subsidiary in
connection with the Designated Vessel
Acquisition being delivered to and
approved by the Administrative Agent;
(vi) not later than ten (10) Banking Days
prior to the date of the Designated
Vessel Acquisition, the Borrower
having delivered to the
Administration Agent a Compliance
Certificate as of such date and after
considering the effect of the
Designated Vessel Acquisition; and
(vii) immediately prior to the Designated
Vessel Acquisition, the Designated
Vessel Owner has total assets of less
than $500,000 and has no
Subsidiaries;
"Designated Vessel Owner" means the Subsidiary which is the owner of
the Designated Vessel;
"DOC" means a document of compliance issued to an
Operator in accordance with rule 13 of the
ISM Code;
"Dollars" and the sign "$" means the legal currency, at any relevant
time hereunder, of the United States of
America and, in relation to all payments
hereunder, in same day funds settled through
the New York Clearing House Interbank
Payments System (or such other Dollar funds
as may be determined by the Administrative
Agent to be customary for the settlement in
New York City of banking transactions of the
type herein involved);
"Drawdown Date" means the date, being a Banking Day during
the Availability Period, upon which the
Borrower has requested that the Loan be made
available to the Borrower, and the Loan is
made, as provided in Section 3;
5
<PAGE>
"Drawdown Notice" shall have the meaning ascribed thereto in
Section 3.2;
"EBITDA" means, with respect to any Person for any
period, operating income, plus depreciation,
amortization and other non-cash charges, but
excluding any gains or losses on vessel
sales, any writedown amounts, or any
impairment reserves;
"Earnings Assignments" means the assignments in
respect of the earnings of each Vessel from
any and all sources to be executed by the
relevant Guarantor in favor of the Security
Agent pursuant to Section 4.1(d)
substantially in the form set out in Exhibit
E;
"Environmental Affiliate" means any person or entity, the liability of
which for Environmental Claims any Security
Party or Subsidiary of any Security Party
may have assumed by contract or operation of
law;
"Environmental Approvals" shall have the meaning ascribed thereto in
Section 2.1(o);
"Environmental Claim(s)" shall have the meaning ascribed thereto in
Section 2.1(o);
"Environmental Laws" shall have the meaning ascribed thereto in
Section 2.1(o);
"ERISA" means the Employment Retirement Income
Security Act of 1974, as amended;
"ERISA Affiliate" means a trade or business (whether or not
incorporated) which is under common control
with the Borrower within the meaning of
Sections 414(b), (c), (m) or (o) of the
Code;
"Event(s) of Default" means any of the events set out in Section
8.1;
"Exchange Act" shall mean the Securities and Exchange Act
of 1934, as amended;
"Facility B Administrative Agent" means CBK, in its capacity as administrative
agent for the Facility B Lenders;
"Facility B Agent" means the Facility B Administrative Agent,
the Facility B Security Agent and the
Facility B Syndication Agent;
"Facility B Guaranty" means the guaranty, made by each of the
guarantors of the obligations of the
Borrower under the Facility B Loan
Agreement;
"Facility B Lenders" means the banks and other financial
institutions identified on Schedule 1 to the
Facility B Loan Agreement as lenders;
6
<PAGE>
"Facility B Loan Agreement" means the loan agreement to be dated on or
about the date hereof made by and among,
inter alia, the Borrower, as borrower, and
the Facility B Lenders, as lenders, pursuant
to which the Facility B Lenders will make
Facility B available to the Borrower for the
purpose of refinancing existing indebtedness
secured by the Facility B Vessels;
"Facility B Syndication Agent" means DnB, in its capacity as syndication
agent for the Facility B Lenders;
"Facility C" means the convertible letter of credit
facility in the principal amount of
$36,000,000 to be made available to the
Borrower pursuant to the Facility C
Agreement;
"Facility C Administrative Agent" means CBK, in its capacity as administrative
agent for the Facility C Bank;
"Facility C Agents" means the Facility C Administrative Agent,
the Facility C Security Agent and the
Facility C Syndication Agent;
"Facility C Agreement" means the facility agreement to be dated on
or about the date hereof made by and among,
inter alia, the Borrower and the Facility C
Banks, pursuant to which the Facility C
Banks will make Facility C available to the
Borrower for the purpose of issuing the
Standby Letter of Credit;
"Facility C Banks" means the banks and other financial
institutions identified on Schedule 1 to the
Facility C Agreement;
"Facility C Issuer" means CBK in its capacity as Issuer for the
Facility C Banks pursuant to the Facility C
Agreement;
"Facility C Security Agent" means MeesPierson, in its capacity as
security agent for the Facility C Banks;
"Facility C Syndication Agent" means DnB, in its capacity as syndication
agent for the Facility C Banks;
"Fair Market Value" means, in respect of any vessel, means the
average of three charter-free appraisals of
such vessel from independent ship brokers
approved by the Administrative Agent, no
such appraisal to be dated more than thirty
(30) days prior to the date on which such
appraisal is required pursuant to this
Agreement unless the Administrative Agent
consents in writing (on each occasion) to
the use of an older appraisal;
"Fee Letter" means the letter dated November 15, 1999 and
entered into by the Borrower, the Arrangers
and the Agents in respect of
7
<PAGE>
the fees referred to therein;
"Final Payment" means the principal amount of One Hundred
Twenty-Three Million Dollars ($123,000,000)
plus such other amounts as may be necessary
to repay the Loan in full together with
accrued but unpaid interest and any other
amounts owing by the Borrower or any other
Security Party to any Arranger, Agent or
Lender pursuant to this Agreement, the Note
or any Security Document;
"Final Payment Date" means the date that is five years after the
Drawdown Date;
"Funded Debt" shall mean on a consolidated basis for the
Borrower (without duplication), the sum of
(i) all Indebtedness of the Borrower (on a
consolidated basis), (ii) all obligations to
pay a specific purchase price for goods or
services whether or not delivered or
accepted, i.e., take-or-pay and similar
obligations which in accordance with GAAP
would be shown on the liability side of the
balance sheet, (iii) all net obligations
under Interest Rate Agreements, and (iv) all
guarantees of non-consolidated entity
obligations; provided, however, that balance
sheet accruals for future drydock expenses
shall not be classified as Funded Debt;
"GAAP" shall have the meaning ascribed thereto in
Section 1.3;
"Guarantor(s)" means, as of the date of this Agreement,
each of the companies listed in Schedule 2
as Guarantors and thereafter shall also mean
such companies as may execute a Guaranty
pursuant to Section 9.1(t) or otherwise;
"Guaranty(ies)" means the guaranty to be executed by each
Guarantor in respect of the obligations of
the Borrower under and in connection with
this Agreement and the Note in favor of the
Security Agent pursuant to Section 4.l(d),
and any guaranty executed thereafter
pursuant to Section 9.1(t) or otherwise,
each substantially in the form of Exhibit B;
"Indebtedness" means, with respect to any Person at any
date of determination (without duplication),
(i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes
or other similar instruments, (iii) all
obligations of such Person in respect of
letters of credit or other similar
instruments (including reimbursement
obligations with respect thereto), (iv) all
obligations of such Person to pay the
deferred and unpaid purchase price of
property or services, which purchase price
is due more than six months after the date
of placing such property in service or
taking delivery thereof
8
<PAGE>
or the completion of such services, except
trade payables, (v) all obligations on
account of principal of such Person as
lessee under capitalized leases, (vi) all
indebtedness of other Persons secured by a
lien on any asset of such Person, whether or
not such indebtedness is assumed by such
Person; provided that the amount of such
indebtedness shall be the lesser of (a) the
fair market value of such asset at such date
of determination and (b) the amount of such
indebtedness, and (vii) all indebtedness of
other Persons guaranteed by such Person to
the extent guaranteed; the amount of
Indebtedness of any Person at any date shall
be the outstanding balance at such date of
all unconditional obligations as described
above and, with respect to contingent
obligations, the maximum liability upon the
occurrence of the contingency giving rise to
the obligation, provided that the amount
outstanding at any time of any indebtedness
issued with original issue discount is the
face amount of such indebtedness less the
remaining unamortized portion of the
original issue discount of such indebtedness
at such time as determined in conformity
with GAAP; and provided further that
Indebtedness shall not include any liability
for current or deferred federal, state,
local or other taxes, or any trade payables;
"Initial Payment Date" means the date which is six months after the
Drawdown Date;
"Insurances Assignments" means the assignments in respect of the
insurances over the Vessels to be executed
by the respective Guarantor owning same in
favor of the Security Agent pursuant to
Section 4.1(d) substantially in the form set
out in Exhibit F;
"Intercreditor Agreement" means the intercreditor agreement dated on
or about the date hereof entered into by and
among the Agents, the Facility B Agents and
the Facility C Agents substantially in the
form set out in Exhibit K;
"Interest Expense" means for any period, all interest charges,
including the interest component of
capitalized leases;
"Interest Notice" means a notice from the Borrower to the
Administrative Agent specifying the duration
of any relevant Interest Period and
certifying the current ratio of the
Borrower's Funded Debt to EBITDA and the
corresponding Margin, each substantially in
the form of Exhibit J;
"Interest Period(s)" means period(s) of one, three or six months
selected by the Borrower or, in the Lenders'
discretion, such other
9
<PAGE>
period(s) as may be agreed;
"Interest Rate Agreements" means any interest rate protection
agreement, interest rate future agreement,
interest rate option agreement, interest
rate swap agreement, interest rate cap
agreement, interest rate collar agreement,
interest rate hedge agreement or other
similar agreement or arrangement designed to
protect the Borrower or any of its
Subsidiaries against fluctuations in
interest rates to or under which the
Borrower or any of its Subsidiaries is a
party or a beneficiary on the date of this
Agreement or becomes a party or a
beneficiary hereafter;
"Investment" means any direct or indirect advance, loan
or other extension of credit (including by
way of guarantee or similar arrangement) or
capital contribution to (by means of any
transfer of cash or other property to others
or any payment for property or services for
the account or use of others), or any
purchase or acquisition of capital stock (or
other equity interest), Indebtedness or
other similar instruments;
"ISM Code" means the International Safety Management
Code for the Safe Operating of Ships and for
Pollution Prevention constituted pursuant to
Resolution A.741(18) of the International
Maritime Organization and incorporated into
the Safety of Life at Sea Convention and
includes any amendments or extensions
thereto and any regulation issued pursuant
thereto;
"L/C Drawing Event" means (i) the failure of the Administrative
Agent to receive evidence of the
satisfactory placing of the Ship Mortgage
Indemnity within ninety (90) days after the
Drawdown Date, or (ii) the occurrence of an
Event of Default prior to the earlier of (a)
the expiration of the Standby Letter of
Credit or (b) the issuance of the Ship
Mortgage Indemnity;
"LIBOR" means the rate (rounded upward to the
nearest 1/16th of one percent) for deposits
of Dollars for a period equivalent to the
relevant Interest Period at or about 11:00
a.m. (London time) on the second London
Banking Day before the first day of such
period as displayed on Telerate page 3750
(British Bankers' Association Interest
Settlement Rates) (or such other page as may
replace such page 3750 on such system or on
any other system of the information vendor
for the time being designated by the British
Bankers' Association to calculate the BBA
Interest Settlement Rate (as defined in the
British Bankers' Association's Recommended
Terms and Conditions
10
<PAGE>
("BBAIRS" terms) dated August 1985)),
provided that if on such date no such rate
is so displayed for the relevant Interest
Period, LIBOR for such period shall be the
arithmetic mean (rounded upward if necessary
to four decimal places) of the rates
respectively quoted to the Administrative
Agent by each of the Reference Banks at the
request of the Administrative Agent as the
offered rate for deposits of Dollars in an
amount approximately equal to the amount in
relation to which LIBOR is to be determined
for a period equivalent to the relevant
Interest Period to prime banks in the London
Interbank Market at or about 11:00 a.m.
(London time) on the second Banking Day
before the first day of such period;
"Loan" means the loan facility to be made available
by the Lenders to the Borrower pursuant to
Section 3 in the original principal amount
of up to Two Hundred Eighteen Million
Dollars ($218,000,000), or the balance
thereof from time to time outstanding;
"Majority Lenders" at any time means Lenders holding an
aggregate of more then 50% of the Loan then
outstanding (which must include at least one
Lender which is not an Arranger);
"Margin" means a margin which will vary based upon
the Borrower's Funded Debt to EBITDA ratio
as set forth in Schedule 4;
"Material Adverse Effect" shall mean a material adverse effect on (i)
the ability of the Borrower to repay the
Loan or perform any of its obligations
hereunder or under the Note, (ii) the
ability of any Security Party to perform its
obligations under any Security Documents or
(iii) the business, property, assets,
liabilities, operations, condition
(financial or otherwise) or prospects of the
Borrower and other Security Parties taken as
a whole;
"Materials of shall have the meaning ascribed thereto in
Environmental Concern" Section 2.1(o);
"MEGA I" means Hyundai Hull No. 1173, currently under
construction by Hyundai Heavy Industries,
South Korea;
"Mortgages" means the first preferred Marshall Islands
or Liberian ship mortgages on the Vessels,
to be executed by the respective Guarantors
as listed in Schedule 3 in favor of the
Security Agent (as trustee for the Lenders)
pursuant to Section 4.1(d) substantially in
the form set out in Exhibit D;
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"Multiemployer Plan" means, at any time, a "multiemployer plan"
as defined in Section 4001(a)(3) of ERISA to
which the Borrower or any ERISA Affiliate is
making or accruing an obligation to make
contributions or has within any of the three
preceding plan years made or accrued an
obligation to make contributions;
"Multiple Employer Plan" means, at any time, an employee benefit
plan, other than a Multiemployer Plan,
subject to Title IV or ERISA, to which the
Borrower or any ERISA Affiliate, and one or
more employers other than the Borrower or an
ERISA Affiliate, is making or accruing an
obligation to make contributions or, in the
event that any such plan has been
terminated, to which the Borrower or any
ERISA Affiliate made or accrued an
obligation to make contributions during any
of the five plan years preceding the date of
termination of such plan;
"Note" means the promissory note to be executed by
the Borrower to the order of the Security
Agent pursuant to Section 4.1(c), to
evidence the Loan substantially in the form
set out Exhibit A;
"Operator" means, in respect of any Vessel, the Person
who is concerned with the operation of such
Vessel and falls within the definition of
"Company" set out in rule 1.1.2 of the ISM
Code;
"Payment Dates" means the Initial Payment Date and the dates
falling at six month intervals thereafter,
the last of which is the Final Payment Date;
"PBGC" means the Pension Benefit Guaranty
Corporation;
"Permitted Drydocking Costs" means (i) in respect of any one Vessel, $2.0
million in any calendar year, and (ii) in
respect of all Vessels on an aggregated
basis, $5.0 million in any calendar year,
expended for drydocking costs;
"Person" means any individual, sole proprietorship,
corporation, partnership (general or
limited), limited liability company,
business trust, bank, trust company, joint
venture, association, joint stock company,
trust or other unincorporated organization,
whether or not a legal entity, or any
government or agency or political
subdivision thereof;
"Plan" means any employee benefit plan (other than
a Muliemployer Plan or a Multiple Employer
Plan) covered
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by Title IV of ERISA;
"Pledge Agreement" means the pledge agreement to be executed by
the Borrower in favor of the Security Agent
pursuant to Section 4.1(e), and any pledge
agreement executed thereafter pursuant to
Section 9.1(u), each substantially in the
form of Exhibit C;
"Pledged Shares" means the shares of capital stock, limited
liability company interests or other equity
interests of any Guarantor owning a Vessel,
owned by the Borrower and pledged to the
Security Agent pursuant to a Pledge
Agreement;
"Prime Rate" means, from time to time, the rate of
interest publicly announced by the
Administrative Agent in New York City, New
York, as its prime rate;
"Qualified Substitute Vessel" means a vessel or vessels which, as of the
date of the acquisition by the Borrower or a
Guarantor, (i) have aggregate Fair Market
Value at least equal to the Fair Market
Value of the Vessel or Vessels for which
they are being substituted, (ii) each of
which is subject to a Qualified Time Charter
and (iii) each of which is no more than
thirteen (13) years old;
"Qualified Time Charter" means, at any time in respect of a Qualified
Substitute Vessel, a time charter having a
remaining term of not less than twelve (12)
months and providing EBITDA at least equal
to the EBITDA for the immediately preceding
four fiscal quarters attributable to the
Vessel or Vessels for which such Qualified
Substitute Vessel is being substituted;
"Reference Banks" means Den norske Bank ASA,
Christiania Bank og Kreditkasse ASA and
MeesPierson N.V.;
"Required Percentage" shall have the meaning set forth for such
term in Section 9.5;
"Restricted Payment" shall have the meaning attributed thereto in
Section 9.2(j);
"Second Assignments" means the second priority assignments of
earnings and insurance over the Vessels, to
be executed by the respective Guarantors as
listed in Schedule 3 in favor of the
Facility C Security Agent pursuant to the
Facility C Agreement;
"Second Mortgages" means the second preferred Marshall Islands
or Liberian ship mortgages on the Vessels,
to be executed by the respective Guarantors
as listed in Schedule 3 in favor of the
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Facility C Security Agent (as trustee for
the Facility C Banks) pursuant to the
Facility C Agreement;
"Security Agent" shall have the meaning attributed hereto in
the Preamble;
"Security Documents" means the Pledge Agreement, all Guaranties,
the Mortgages, the Assignments and any other
documents that may be executed as security
for the Loan and the Borrower's obligations
in connection therewith;
"Security Party(ies)" the Borrower and each of the Guarantors;
"Ship Mortgage Indemnity" means a ship mortgage indemnity policy in
favor of the Security Agent for the benefit
of the Lenders, issued by underwriters
satisfactory to the Agents and in form and
substance satisfactory to the Agents, for a
term of not less than three (3) years from
the Drawdown Date, covering an amount not
less than the difference between (I) the
amount of the Loan advanced on the Drawdown
Date and (ii) 65% of the aggregate of the
Fair Market Value of the Vessels as of the
Drawdown Date;
"SMC" means the safety management certificate
issued in respect of a Vessel in accordance
with rule 13 of the ISM code;
"SOYANG" means Daewoo Hull No. 5152, currently under
construction by Daewoo Heavy Industries Ltd.
South Korea;
"SOYANG Investment" means the contribution by the Borrower (and
its Subsidiaries on a consolidated basis) of
not more than $10.0 million of cash or Cash
Equivalents (in addition to contributions
made prior to the date of this Agreement) to
the acquisition of the SOYANG, made no
earlier than the date of acquisition thereof
or three (3) days prior thereto as required
by the construction contract for the SOYANG;
"SOYANG Subsidiary" means Soyang Shipping LLC, a limited
liability company organized under the laws
of the Republic of the Marshall Islands;
"Standby Letter of Credit" means the letter of credit to be issued by
the Facility C Issuer on behalf of the
Facility C Banks to the Security Agent for
the benefit of the Lenders in the event that
the Ship Mortgage Indemnity is not issued on
or before the Drawdown Date, such letter of
credit to be substantially in the form of
Exhibit L;
"Subsidiaries" means, with respect to any Person, any
business entity of which more than 50% of
the outstanding voting stock is
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owned directly or indirectly by such Person
and/or one or more other Subsidiaries of
such Person;
"Taxes" means any present or future income or other
taxes, levies, duties, charges, fees,
deductions or withholdings of any nature now
or hereafter imposed, levied, collected,
withheld or assessed by any taxing authority
whatsoever, except for taxes on or measured
by the overall net income of each Lender
imposed by its jurisdiction of incorporation
or applicable lending office, the United
States of America, the State or City of New
York or any governmental subdivision or
taxing authority of any thereof or by any
other taxing authority having jurisdiction
over such Lender (unless such jurisdiction
is asserted by reason of the activities of
the Borrower or any of the Subsidiaries);
"Termination Event" means (i) a "reportable event," as defined
in Section 403 of ERISA (other than a
"reportable event" not subject to the
provision for 30-day notice to the PBGC),
(ii) the withdrawal of the Borrower or any
ERISA Affiliate from a Multiemployer Plan
during a plan year in which it was a
"substantial employer," as defined in
Section 4001(a)(2) of ERISA, or the
incurrence of liability by the Borrower or
any ERISA Affiliate under Section 4064 of
ERISA upon the termination of a Multiple
Employer Plan, (iii) the filing of a notice
of intent to terminate a Plan under Section
4041of ERISA or the treatment of a
Multiemployer Plan amendment as a
termination under Section 4041A of ERISA,
(iv) the institution of proceedings to
terminate a Plan or a Multiemployer Plan, or
(v) any other event or condition which might
constitute grounds under Section 4042 of
ERISA for the termination of, or the
appointment of a trustee to administer, any
Plan or Multiemployer Plan;
"Third Assignments" means the third priority assignments of
earnings and insurance over the Vessels, to
be executed by the respective Guarantors as
listed in Schedule 3 in favor of the
Facility B Security Agent pursuant to the
Facility B Loan Agreement;
"Third Mortgages" means the third preferred Marshall Islands
or Liberian ship mortgages on the Vessels,
to be executed by the respective Guarantors
as listed on Schedule 3 in favor of the
Facility B Security Agent (as trustee for
the Facility B Lenders) pursuant to the
Facility B Loan Agreement;
"Total Capitalization" shall mean the sum of (i) Funded Debt, plus
(ii) Consolidated Net Worth;
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"Total Loss" shall have the meaning ascribed thereto in
the Mortgages;
"Vessel(s)" each of the Vessels listed in Schedule 3,
registered in the name of the relevant
Guarantor as set forth in such Schedule; and
"Withdrawal Liabilities" shall have the meaning given to such term
under Part 1 of Subtitle E of Title IV of
ERISA;
1.2 Computation of Time Periods; Other Definitional Provisions. In this
Agreement, the Note and the other Security Documents, in the computation of
periods of time from a specified date to a later specified date, the word "from"
means "from and including" and the words "to" and "until" each mean "to but
excluding"; words importing either gender include the other gender; references
to "writing" include printing, typing, lithography and other means of
reproducing words in a tangible visible form; the words "including," "includes"
and "include" shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections), exhibits,
annexes or schedules are to this Agreement, the Note or such Security Document,
as applicable; references to agreements and other contractual instruments
(including this Agreement, the Note and the Security Documents) shall be deemed
to include all subsequent amendments, amendments and restatements, supplements,
extensions, replacements and other modifications to such instruments (without,
however, limiting any prohibition on any such amendments, extensions and other
modifications by the terms of this Agreement, the Note or any Security
Document); references to any matter that is "approved" or requires "approval" of
a party shall mean approval given in the sole and absolute discretion of such
party unless otherwise specified.
1.3 Accounting Terms. Unless otherwise specified herein, all accounting terms
used in this Agreement, the Note and in the Security Documents shall be
interpreted, and all financial statements and certificates and reports as to
financial matters required to be delivered to the Administrative Agent or to the
Lenders under this Agreement shall be prepared, in accordance with generally
accepted accounting principles for the United States ("GAAP").
1.4 Certain Matters Regarding Materiality. To the extent that any
representation, warranty, covenant or other undertaking of the Borrower in this
Agreement is qualified by reference to those which are not reasonably expected
to result in a "Material Adverse Effect" or language of similar import, no
inference shall be drawn therefrom that any Agent or Lender has knowledge or
approves of any noncompliance by the Borrower with any governmental rule.
1.5 Forms of Documents. Except as otherwise expressly provided in this
Agreement, references to documents or certificates "substantially in the form"
of Exhibits to another document shall mean that such documents or certificates
are duly completed in the form of the related Exhibits with substantive changes
subject to the provisions of Section 17.6 of this Agreement, as the case may be,
or the correlative provisions of the Security Documents.
2. REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties. In order to induce the Arrangers, the Agents
and the Lenders to enter into this Agreement and to induce the Lenders to make
the Loan available, the
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Borrower hereby represents and warrants to the Arrangers, the Agents and the
Lenders (which representations and warranties shall survive the execution and
delivery of this Agreement and the Note and the drawdown of the Loan hereunder)
that:
(a) Due Organization and Power. each Subsidiary is duly formed and
is validly existing in good standing under the laws of its jurisdiction of
incorporation or formation, has full power to carry on its business as now being
conducted and to enter into and perform its obligations under this Agreement,
the Note and the Security Documents to which it is a party, and has complied
with all statutory, regulatory and other requirements relative to such business
and such agreements;
(b) Authorization and Consents. all necessary corporate action has
been taken to authorize, and all necessary consents and authorities have been
obtained and remain in full force and effect to permit, each Security Party to
enter into and perform its obligations under this Agreement, the Note and the
Security Documents and, in the case of the Borrower, to borrow, service and
repay the Loan and, as of the date of this Agreement, no further consents or
authorities are necessary for the service and repayment of the Loan or any part
thereof;
(c) Binding Obligations. this Agreement, the Note and the Security
Documents constitute or will, when executed and delivered, constitute the legal,
valid and binding obligations of each Security Party as is a party thereto
enforceable against such Security Party in accordance with their respective
terms, except to the extent that such enforcement may be limited by equitable
principles, principles of public policy or applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting generally the enforcement of
creditors' rights;
(d) No Violation. the execution and delivery of, and the performance
of the provisions of, this Agreement, the Note and those of the Security
Documents to which it is to be a party by each Security Party do not contravene
any applicable law or regulation existing at the date hereof or any contractual
restriction binding on such Security Party or the certificate of incorporation
or by-laws (or equivalent instruments) thereof;
(e) Litigation. no action, suit or proceeding is pending or
threatened against the Borrower or any Subsidiary before any court, board of
arbitration or administrative agency which could or might result in any Material
Adverse Effect;
(f) No Default. neither the Borrower nor any Subsidiary is in
default under any material agreement by which it is bound, or is in default in
respect of any material financial commitment or obligation;
(g) Vessels. upon the date of the making of the Loan:
(i) each of the Vessels will be in the sole and absolute
ownership of the respective Guarantor as set forth in
Schedule 3 and duly registered in such Guarantor's name
under Marshall Islands or Liberian flag, unencumbered,
save and except for the Mortgage, the Second Mortgage
and the Third Mortgage recorded against it and as
permitted thereby;
(ii) each Vessel will be classed in the highest
classification and rating for vessels of the same age
and type with the respective classification
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society as set forth in Schedule 3 without any material
outstanding recommendations;
(iii) each Vessel will be operationally seaworthy and in every
way fit for its intended service; and
(iv) each Vessel will be insured in accordance with the
provisions of the Mortgage recorded against it and the
requirements thereof in respect of such insurances will
have been complied with;
(h) Insurance. the Borrower and each Subsidiary has insured its
properties and assets against such risks and in such amounts as are customary
for companies engaged in similar businesses;
(i) Financial Information. except as otherwise disclosed in writing
to the Agents on or prior to the date hereof, all financial statements,
information and other data furnished by the Borrower to the Agents are complete
and correct, such financial statements have been prepared in accordance with
GAAP and accurately and fairly present the financial condition of the parties
covered thereby as of the respective dates thereof and the results of the
operations thereof for the period or respective periods covered by such
financial statements, and since the date of the Borrower's financial statements
most recently delivered to the Administrative Agent there has been no Material
Adverse Effect as to any of such parties and none thereof has any contingent
obligations, liabilities for taxes or other outstanding financial obligations
which are material in the aggregate except as disclosed in such statements,
information and data;
(j) Tax Returns. the Borrower and each Subsidiary has filed all
material tax returns required to be filed thereby and has paid all taxes payable
thereby which have become due, other than those not yet delinquent or the
nonpayment of which would not have a Material Adverse Effect on the Borrower or
such Subsidiary and except for those taxes being contested in good faith and by
appropriate proceedings or other acts and for which adequate reserves shall have
been set aside on its books;
(k) ERISA. the execution and delivery of this Agreement and the
consummation of the transactions hereunder will not involve any prohibited
transaction within the meaning of ERISA or Section 4975 of the Code and no
condition exists or event or transaction has occurred in connection with any
Plan maintained or contributed to by the Borrower or any Subsidiary or any ERISA
Affiliate resulting from the failure of any thereof to comply with ERISA insofar
as ERISA applies thereto which is reasonably likely to result in the Borrower or
any such Subsidiary or any ERISA Affiliate incurring any liability, fine or
penalty which individually or in the aggregate would have a Material Adverse
Effect. Prior to the date hereof, the Borrower has delivered to the
Administrative Agent a list of all the employee benefit plans to which the
Borrower or any Subsidiary or any ERISA Affiliate is a "party in interest"
(within the meaning of Section 3(14) of ERISA) or a "disqualified person"
(within the meaning of Section 4975(e)(2) of the Code);
(l) Chief Executive Office. the Borrower's chief executive office
and chief place of business and the office in which the records relating to the
earnings and other receivables of each Subsidiary are kept is, and will continue
to be, located at One Station Place, Stamford, Fairfield County, Connecticut;
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(m) Foreign Trade Control Regulations. to the best of the Borrower's
knowledge, none of the transactions contemplated herein will violate any of the
provisions of the Foreign Assets Control Regulations of the United States of
America (Title 31, Code of Federal Regulations, Chapter V, Part 500, as
amended), any of the provisions of the Cuban Assets Control Regulations of the
United States of America (Title 31, Code of Federal Regulations, Chapter V, Part
515, as amended), any of the provisions of the Libyan Assets Control Regulations
of the United States of America (Title 31, Code of Federal Regulations, Chapter
V, Part 550, as amended), any of the provisions of the Iranian Transaction
Regulations of the United States of America (Title 31, Code of Federal
Regulations, Chapter V, Part 560, as amended), any of the provisions of the
Iraqi Sanctions Regulations (Title 31, Code of Federal Regulations, Chapter V,
Part 575, as amended), any of the provisions of the Federal Republic of
Yugoslavia (Serbia and Montenegro) Assets Control Regulations (Title 31, Code of
Federal Regulations, Chapter V, Part 585 as amended) or any of the provisions of
the Regulations of the United States of America Governing Transactions in
Foreign Shipping of Merchandise (Title 31, Code of Federal Regulations, Chapter
V, Part 505, as amended);
(n) Equity Ownership. each of the Guarantors is a wholly owned
direct subsidiary of the Borrower; on the Drawdown Date, the Borrower will not
own any shares of capital stock, limited liability company interest, partnership
interest or any other direct or indirect equity interest in any corporation,
limited liability company, partnership or other entity except the Security
Parties and the other companies listed on Schedule 2;
(o) Environmental Matters and Claims. (a) except as heretofore
disclosed in writing to the Agents (i) the Borrower, each of its Subsidiaries
and their Affiliates will, when required to operate their business as then being
conducted, be in compliance with all applicable United States federal and state,
local, foreign and international laws, regulations, conventions and agreements
relating to pollution prevention or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, navigable waters, waters of the contiguous zone, ocean waters and
international waters), including, without limitation, laws, regulations,
conventions and agreements relating to (1) emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous materials, oil, hazardous substances, petroleum and
petroleum products and by-products ("Materials of Environmental Concern"), or
(2) the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern
("Environmental Laws"); (ii) the Borrower, each of its Subsidiaries and their
Affiliates will, when required, have all permits, licenses, approvals, rulings,
variances, exemptions, clearances, consents or other authorizations required
under applicable Environmental Laws ("Environmental Approvals") and will, when
required, be in compliance with all Environmental Approvals required to operate
their business as then being conducted; (iii) none of the Borrower, any
Subsidiary nor any Affiliate thereof has received any notice of any claim,
action, cause of action, investigation or demand by any person, entity,
enterprise or government, or any political subdivision, intergovernmental body
or agency, department or instrumentality thereof, alleging potential liability
for, or a requirement to incur, material investigator costs, cleanup costs,
response and/or remedial costs (whether incurred by a governmental entity or
otherwise), natural resources damages, property damages, personal injuries,
attorneys' fees and expenses, or fines or penalties, in each case arising out
of, based on or resulting from (1) the presence, or release or threat of release
into the environment, of any Materials of Environmental Concern at any location,
whether or not owned by such person, or (2) circumstances forming the basis of
any violation, or alleged violation, of any Environmental Law or Environmental
Approval ("Environmental Claim") (other than Environmental Claims that have
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been fully and finally adjudicated or otherwise determined and all fines,
penalties and other costs, if any, payable by the Security Parties in respect
thereof have been paid in full or which are fully covered by insurance
(including permitted deductibles)); and (iv) there are no circumstances that may
prevent or interfere with such full compliance in the future; and (b) except as
heretofore disclosed in writing to the Agent there is no Environmental Claim
pending or threatened against the Borrower, any Subsidiary or any Affiliate
thereof and there are no past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the release,
emission, discharge or disposal of any Materials of Environmental Concern, that
could form the basis of any Environmental Claim against such persons the adverse
disposition of which may result in a Material Adverse Effect;
(p) Compliance with ISM Code. each Vessel and each Operator complies
with the requirements of the ISM Code including (but not limited to) the
maintenance and renewal of valid certificates pursuant thereto;
(q) Threatened Withdrawal of DOC or SMC. there is no threatened or
actual withdrawal of any Operator's DOC or SMC in respect of any Vessel;
(r) Liens. other than as disclosed on Schedule 6, there are no liens
of any kind on any property owned by the Borrower or any Subsidiary of the
Borrower;
(s) Indebtedness. other than as disclosed in Schedule 6, the
Borrower (and its Subsidiaries on a consolidated basis) has no long-term
Indebtedness; and
(t) Survival. all representations, covenants and warranties made
herein and in any certificate or other document delivered pursuant hereto or in
connection herewith shall survive the making of the Loan and the issuance of the
Note.
3. THE LOAN
3.1 (a) Purpose. The Lenders shall make the Loan available to the Borrower for
the purpose of refinancing the indebtedness currently secured against the
Vessels.
(b) Making of the Loan. Each of the Lenders, relying upon each of the
representations and warranties set out in Section 2, hereby severally and not
jointly agrees with the Borrower that, subject to and upon the terms of this
Agreement, it will on the Drawdown Date make the Loan available through the
Administrative Agent to the Borrower in an aggregate amount not to exceed its
Commitment ratably with the other Lenders according to their respective
Commitments.
3.2 Drawdown Notice. The Borrower shall, at least three (3) Banking Days before
the Drawdown Date, serve a notice (a "Drawdown Notice") substantially in the
form of Exhibit I on the Administrative Agent which notice shall (a) be in
writing addressed to the Administrative Agent, (b) be effective on receipt by
the Administrative Agent, (c) specify the amount of the Loan to be drawn, (d)
specify the Banking Day on which the Loan is to be drawn and the initial
Interest Period, (e) specify the disbursement instructions and (f) be
irrevocable.
3.3 Effect of Drawdown Notice. The Drawdown Notice shall be deemed to constitute
a warranty by the Borrower (a) that the representations and warranties stated in
Section 2 (updated mutatis mutandis) are true and correct on and as of the date
of the Drawdown Notice and will be
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true and correct on and as of the Drawdown Date as if made on such date, and (b)
that no Event of Default nor any event which with the giving of notice or lapse
of time or both would constitute an Event of Default has occurred and is
continuing.
4. CONDITIONS
4.1 Conditions Precedent to Drawdown of the Loan. The obligation of the Lenders
to make the Loan available to the Borrower under this Agreement shall be
expressly subject to the following conditions precedent:
(a) Corporate Authority. the Administrative Agent shall have
received the following documents in form and substance satisfactory to the
Administrative Agent:
(i) copies, certified as true and complete by an officer of
the Borrower, of the resolutions of the board of
directors of the Borrower evidencing approval of this
Agreement and the Note and authorizing an appropriate
officer or officers or attorney-in-fact or
attorneys-in-fact to execute the same on its behalf, or
other evidence of such approvals and authorizations;
(ii) copies, certified as true and complete by an officer of
each Security Party (other than the Borrower), of the
resolutions of the board of directors and shareholder,
or management committee and member, as the case may be,
thereof evidencing approval of the Guaranty and those
Security Documents to which it is to be a party and
authorizing an appropriate officer or officers or
attorney-in-fact or attorneys-in-fact to execute the
same on its behalf, or other evidence of such approvals
and authorizations;
(iii) copies, certified as true and complete by an officer of
the Borrower, of all documents evidencing any other
necessary action (including actions by such parties
thereto other than the Borrower as may be required by
the Administrative Agent), approvals or consents with
respect to this Agreement, the Note and the Security
Documents;
(iv) copies, certified as true and complete by an officer of
the respective Security Party of the certificate of
incorporation and by-laws, certificate of formation and
operating agreement, or equivalent instruments thereof;
(v) certificate of the Secretary of the Borrower certifying
that it legally and beneficially owns, directly or
indirectly, all of the issued and outstanding capital
stock, or limited liability company membership
interests, as the case may be, of each of the other
Security Parties and that such capital stock or
membership interests are free and clear of any liens,
claims, pledges or other encumbrances whatsoever other
than as disclosed to the Administrative Agent in writing
on or before the date hereof;
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(vi) certificate of the Secretary of each Security Party
(other than the Borrower) certifying as to the record
ownership of all of its issued and outstanding capital
stock, or limited liability company membership
interests, as the case may be; and
(vii) certificates of the jurisdiction of incorporation or
formation, as the case may be, of each Security Party as
to the good standing thereof.
(b) The Vessels. the Administrative Agent shall have received
evidence satisfactory to it that:
(i) each of the Vessels is in the sole and absolute
ownership of the respective Guarantor as set forth in
Schedule 3 and duly registered in such Guarantor's name
under Marshall Islands or Liberian flag, unencumbered,
save and except for the Mortgage, the Second Mortgage
and the Third Mortgage recorded against it and as
otherwise permitted thereby;
(ii) each Vessel is classed in the highest classification and
rating for vessels of the same age and type with the
respective classification society as set forth in
Schedule 3 without any material outstanding
recommendations;
(iii) each of the Vessels is operationally seaworthy and in
every way fit for its intended service; and
(iv) each of the Vessels is insured in accordance with the
provisions of the Mortgage recorded against it and the
requirements thereof in respect of such insurances have
been complied with;
(c) The Note. the Borrower shall have duly executed and delivered
this Agreement and the Note;
(d) Guarantor Documents. each Guarantor shall have duly executed and
delivered to the Administrative Agent:
(i) the Guaranty;
(ii) the Mortgage over its Vessel(s);
(iii) an Insurances Assignment with respect to its Vessel(s);
(iv) an Earnings Assignment with respect to its Vessel(s);
(v) its Assignment Notices; and
(vi) Uniform Commercial Code Financing Statements for filing
with the State and County of New York, the State of
Connecticut, Fairfield County, Connecticut and in such
other jurisdictions as the Administrative Agent may
reasonably require;
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(e) Pledge Agreement. the Borrower shall have duly executed and
delivered to the Security Agent the Pledge Agreement and the Pledged Shares;
(f) Intercreditor Agreement. the Intercreditor Agreement shall have
been executed and delivered to the Administrative Agent;
(g) Vessel Appraisals. the Administrative Agent shall have received
appraisals, in form and substance satisfactory to the Agents, of the Fair Market
Value of each Vessel showing the aggregate Fair Market Value of the Vessels to
be not less than one hundred fifteen percent (115%) of the Loan;
(h) Guarantor Solvency. the Administrative Agent shall have received
a certificate of an officer of each Guarantor confirming the representations and
warranties with respect to solvency set forth in its Guaranty and containing
conclusions as to the solvency of such Guarantor;
(i) Environmental Claims. the Administrative Agent shall be
satisfied that neither the Borrower nor any of its Subsidiaries is subject to
any Environmental Claim which could have a Material Adverse Effect;
(j) Fees. the Administrative Agent shall have received payment in
full of all fees and expenses due to the Agents, the Arrangers and the Lenders
under Section 13 and the Fee Letter;
(k) Accounts. each Security Party shall have established an
operating account with the Syndication Agent into which Assigned Moneys are to
be paid;
(l) Vessel Liens. the Administrative Agent shall have received
evidence satisfactory to it and to its legal advisor that, save for the liens
created by the Mortgages, the Assignments, the Second Mortgages, the Second
Assignments, the Third Mortgages and the Third Assignments, there are no liens,
charges or encumbrances of any kind whatsoever on any of the Vessels or on their
respective earnings except as permitted hereby or by any of the Security
Documents;
(m) Ship Mortgage Indemnity/Standby Letter of Credit. the
Administrative Agent shall have received either (i) evidence of the satisfactory
placing of the Ship Mortgage Indemnity or (ii) the Standby Letter of Credit;
(n) Facility B. the Facility B Lenders have advanced Facility B;
(o) Charters; Pooling Agreements. the Borrower shall have delivered
to the Administrative Agent true and complete copies of (i) all charters having
a term longer than twelve (12) months from the date of execution and (ii) all
vessel pooling agreements, in each case to which the Borrower or any Subsidiary
is a party; and
(p) Legal Opinions. the Administrative Agent shall have received
legal opinions addressed to the Agents from (i) Fredric S. London, Esq.,
in-house counsel for the Security Parties, and (ii) Seward & Kissel LLP, special
counsel to the Agents and Lenders, in each case in such form as the
Administrative Agent may require, as well as such other legal opinions as the
Administrative Agent shall have required as to all or any matters under the laws
of the United States of America,
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the State of Delaware, the State of New York, the Republic of Liberia and the
Republic of the Marshall Islands covering the representations and conditions
which are the subjects of Sections 2 and 4.1.
4.2 Further Conditions Precedent. The obligation of the Lenders to make the Loan
available to the Borrower under this Agreement shall be expressly and separately
subject to the following further conditions precedent on the Drawdown Date:
(a) the Administrative Agent having received a Drawdown Notice in
accordance with the terms of Section 3.2;
(b) the representations stated in Section 2 (updated mutatis
mutandis to such date) being true and correct as if made on and as of that date;
(c) no Event of Default having occurred and being continuing and no
event having occurred and being continuing which, with the giving of notice or
lapse of time, or both, would constitute an Event of Default;
(d) the Administrative Agent being satisfied that no change in any
applicable laws, regulations, rules or in the interpretation thereof shall have
occurred which make it unlawful for any Security Party to make any payment as
required under the terms of this Agreement, the Note, the Security Documents or
any of them; and
(e) there having been no Material Adverse Effect since the date
hereof.
4.3 Breakfunding Costs. In the event that, on the date specified for the making
of the Loan in the Drawdown Notice, the Lenders shall not be obliged under this
Agreement to make the Loan available, the Borrower shall indemnify and hold the
Lenders fully harmless against any losses which the Lenders (or any thereof) may
sustain as a result of borrowing or agreeing to borrow funds to meet the
drawdown requirement of the Drawdown Notice and the certificate of the relevant
Lender or Lenders shall, absent manifest error, be conclusive and binding on the
Borrower as to the extent of any such losses.
4.4 Satisfaction after Drawdown. Without prejudice to any of the other terms and
conditions of this Agreement, in the event the Lenders, in their sole
discretion, advance the Loan prior to the satisfaction of all or any of the
conditions referred to in Sections 4.1 or 4.2, the Borrower hereby covenants and
undertakes to satisfy or procure the satisfaction of such condition or
conditions within fourteen (14) days after the Drawdown Date (or such longer
period as the Lenders, in their sole discretion, may agree).
4.5 Cancellation of Standby Letter of Credit. In the event the Ship Mortgage
Indemnity, in form and substance satisfactory to the Administrative Agent, has
been delivered thereto, subsequent to the Drawdown Date but prior to an L/C
Drawing Event, the Standby Letter of Credit shall be surrendered to the Facility
C Issuer for cancellation.
5. REPAYMENT AND PREPAYMENT
5.1 Repayment. Subject to the provisions of Sections 5.3 and 5.5 regarding
application of prepayments, the Borrower shall repay the principal of the Loan
in ten (10) semi-annual
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installments on the Payment Dates, the first four (4) such installments each
being in the amount of Five Million Dollars ($5,000,000), the next five (5) such
installments each being in the amount of Twelve Million Five Hundred Thousand
Dollars ($12,500,000) and the last such installment being in the amount of
Twelve Million Five Hundred Thousand Dollars ($12,500,000) plus the Final
Payment, such last installment to be paid on the Final Payment Date.
5.2 Voluntary Prepayment; no re-borrowing. The Borrower may prepay, upon five
(5) Banking Days written notice, the Loan or any portion thereof. Each
prepayment shall be in a minimum amount of One Million Dollars ($1,000,000) plus
any One Million Dollar ($1,000,000) multiple thereof or the full amount of the
Loan. No part of the Loan will be available for re-borrowing.
5.3 Mandatory Prepayment; Occurrence of an L/C Drawing Event.
Upon the occurrence of a L/C Drawing Event the Security Agent shall
deliver a notice for demand of payment of Thirty-Six Million ($36,000,000)
pursuant to the Standby Letter of Credit. Such amount shall, upon receipt, be
applied to the prepayment of the Loan by reducing the amount of the installments
due on the first four (4) Payment Dates to One Million Dollars ($1,000,000) and
the installments due on the subsequent two Payment Dates to Two Million Five
Hundred Thousand Dollars ($2,500,000), the amounts due thereafter being
unchanged.
5.4 Mandatory Prepayment; Sale or Loss of Vessel.On (i) any sale of a Vessel
(other than sales made pursuant to Section 9.7, Vessel Substitution Sales), or
(ii) the earlier of (x) ninety (90) days after the Total Loss of a Vessel or (y)
the date on which the insurance proceeds in respect of such loss are received by
the Borrower (or a Guarantor) or the Security Agent as assignee thereof, such
proceeds shall be applied as follows:
(a) Required Percentage Not Satisfied. if the aggregate Fair Market
Value of the Vessels remaining immediately after such loss or sale is less than
the then Required Percentage of the Loan and any amounts due and owing by the
Borrower in respect of Facility C (determined pursuant to Section 9.5, Asset
Maintenance), entirely and immediately in prepayment of the Loan and Facility C,
pro rata in accordance with amounts then outstanding thereunder;
(b) Asset Ratio Preserved. to prepayment of the Loan and Facility C,
pro rata in accordance with amounts then outstanding thereunder, in the amount
necessary to provide that the ratio, immediately after such sale or loss (and
application of proceeds), of the aggregate Fair Market Value of the remaining
Vessels to the balance of the Loan and the Borrower's obligations in respect of
Facility C is at least equal to the ratio, immediately prior to such sale, of
the aggregate Fair Market Value of the Vessels to the balance of the Loan and
the Borrower's obligations in respect of Facility C;
(c) Loan-to-Value Reduction. if the Ship Mortgage Indemnity has been
obtained and if the Borrower (on a consolidated basis) has cash or Cash
Equivalents of $30.0 million or greater, to prepayment of the Loan in the amount
necessary to provide that the ratio, immediately after such sale or loss (and
application of proceeds), of the balance of the Loan to the aggregate Fair
Market Value of the remaining Vessels does not exceed 0.65; and
(d) As Excess Cash. Otherwise, in accordance with Section 9.1(q) Use
of Excess Cash.
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5.5 Interest and Costs with Prepayments/Application of Prepayments. Any
prepayment of the Loan made hereunder (including, without limitation, those made
pursuant to Sections 5 and 9) shall be subject to the condition that on the date
of prepayment all accrued interest to the date of such prepayment shall be paid
in full with respect to the Loan or portions thereof being prepaid, together
with any and all actual costs or expenses incurred by any Lender in connection
with any breaking of funding (as certified by such Lender, which certification
shall, absent any manifest error, be conclusive and binding on the Borrower).
All prepayments of the Loan under Section 5.2 or 5.4 shall be applied towards
the installments of the Loan in the inverse order of their due dates for
payment.
6. INTEREST AND RATE
6.1 Applicable Rate. The Loan shall bear interest at the Applicable Rate which
shall be the rate per annum which is equal to the aggregate of (a) LIBOR for the
relevant Interest Period plus (b) the Margin. The Applicable Rate shall be
determined by the Administrative Agent two Banking Days prior to the first day
of the relevant Interest Period, provided, however, that the Margin shall be
determined concurrently with the delivery of each Compliance Certificate to the
Administrative Agent, and as necessary during any Interest Period the Applicable
Rate shall be re-calculated to reflect the current Margin. The Administrative
Agent shall promptly notify the Borrower in writing of the Applicable Rate as
and when determined. Each such determination, absent manifest error, shall be
conclusive and binding upon the Borrower.
6.2 Default Rate. Any amounts due under this Agreement, not paid when due,
whether by acceleration or otherwise, shall bear interest thereafter from the
due date thereof until the date of payment at a rate per annum equal to (i) the
Prime Rate (as notified to the Borrower by the Administrative Agent), plus (ii)
the Margin, plus (iii) two percent (2%) (the "Default Rate"). Following the
occurrence of any Event of Default, the Administrative Agent, upon instruction
of the Majority Lenders, may deliver a notice to the Borrower advising the
Borrower that an Event of Default has occurred. From the date of any such notice
until each such Event of Default is cured to the satisfaction of the Majority
Lenders, the Loan shall bear interest at the Default Rate.
6.3 Interest Periods. The Borrower shall give the Administrative Agent an
Interest Notice specifying the Interest Period selected at least three (3)
Banking Days prior to the end of any then existing Interest Period. If at the
end of any then existing Interest Period the Borrower fails to give an Interest
Notice the relevant Interest Period shall be three (3) months. The Borrower's
right to select an Interest Period shall be subject to the restriction that no
selection of an Interest Period shall be effective unless each Lender is
satisfied that the necessary funds will be available to such Lender for such
period and that no Event of Default or event which, with the giving of notice or
lapse of time, or both, would constitute an Event of Default shall have occurred
and be continuing.
6.4 Interest Payments. Accrued interest on the Loan shall be payable in arrears
on the last day of each Interest Period, except that if the Borrower shall
select an Interest Period in excess of three (3) months, accrued interest shall
be payable during such Interest Period on each three (3) month anniversary of
the commencement of such Interest Period and upon the end of such Interest
Period.
7. PAYMENTS
7.1 Place of Payments, No Set Off. All payments to be made hereunder by the
Borrower shall be made to the Administrative Agent, not later than 11 a.m. New
York time (any payment received
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after 11 a.m. New York time shall be deemed to have been paid on the next
Banking Day) on the due date of such payment, at its office located at 11 West
42nd Street, 7th Floor, New York, New York 10036 or to such other office of the
Administrative Agent as the Administrative Agent may direct, without set-off or
counterclaim and free from, clear of, and without deduction for, any Taxes,
provided, however, that if the Borrower shall at any time be compelled by law to
withhold or deduct any Taxes from any amounts payable to the Lenders hereunder,
then the Borrower shall pay such additional amounts in Dollars as may be
necessary in order that the net amounts received after withholding or deduction
shall equal the amounts which would have been received if such withholding or
deduction were not required and, in the event any withholding or deduction is
made, whether for Taxes or otherwise, the Borrower shall promptly send to the
Administrative Agent such documentary evidence with respect to such withholding
or deduction as may be required from time to time by the Lenders.
7.2 Tax Credits. If any Lender obtains the benefit of a credit against the
liability thereof for federal income taxes imposed by any taxing authority for
all or part of the Taxes as to which the Borrower has paid additional amounts as
aforesaid (and each Lender agrees to use its best efforts to obtain the benefit
of any such credit which may be available to it, provided it has knowledge that
such credit is in fact available to it), then such Lender shall reimburse the
Borrower for the amount of the credit so obtained. Each Lender agrees that in
the event that Taxes are imposed on account of the situs of its loans hereunder,
such Lender, upon acquiring knowledge of such event, shall, if commercially
reasonable, shift such loans on its books to another office of such Lender so as
to avoid the imposition of such Taxes.
7.3 Computations; Banking Days. All computations of interest and fees shall
be made by the Agents or the Lenders, as the case may be, on the basis of a
360-day year, in each case for the actual number of days (including the first
day but excluding the last day) occurring in the period for which interest or
fees are payable. Each determination by the Agents or the Lenders of an interest
rate or fee hereunder shall be conclusive and binding for all purposes, absent
manifest error.
(b) Whenever any payment hereunder or under the Note shall be stated
to be due on a day other than a Banking Day, such payment shall be due and
payable on the next succeeding Banking Day unless the next succeeding Banking
Day falls in the following calendar month, in which case it shall be payable on
the immediately preceding Banking Day,
8. EVENTS OF DEFAULT
8.1 Events of Default. The occurrence of any of the following events shall be an
Event of Default:
(a) Non-Payment of Principal. any payment of principal is not paid
when due; or
(b) Non-Payment of Interest or Other Amounts. any interest or any
other amount becoming payable to the Agents, the Arrangers or any Lender under
this Agreement, under the Note or under any of the Security Documents is not
paid on the due date or date of demand (as the case may be), and such default
continues unremedied for a period of five (5) Banking Days; or
(c) Representations. any representation, warranty or other statement
made by the Borrower in this Agreement or by any Security Party or in any of the
Security Documents or in any other instrument, document or other agreement
delivered in connection herewith or therewith proves
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to have been untrue or misleading in any material respect as at the date as of
which made or confirmed; or
(d) Mortgage. there is an event of default under any Mortgage; or
(e) Covenants. any Security Party defaults in the due and punctual
observance or performance of any other term, covenant or agreement contained in
this Agreement, in the Note, in any of the Security Documents or in any other
instrument, document or other agreement delivered in connection herewith or
therewith, or it becomes impossible or unlawful for any Security Party to
fulfill any such term, covenant or agreement or there occurs any other event
which constitutes a default under this Agreement, under the Note or under any of
the Security Documents, in each case other than an Event of Default referred to
elsewhere in this Section 8.1, and such default, impossibility and/or
unlawfulness, in the reasonable opinion of the Majority Lenders, could have a
material adverse effect on the Lenders' rights hereunder, under the Note and/or
under the Security Documents or on the Lenders' right to enforce this Agreement,
the Note and/or the Security Documents, and continues unremedied or unchanged,
as the case may be, for a period of thirty (30) days; or
(f) Indebtedness. any Security Party, any Subsidiary or any
Affiliate shall default in the payment when due (subject to any applicable grace
period) of any Indebtedness or of any other indebtedness, in either case, in the
outstanding principal amount equal to or exceeding Five Hundred Thousand Dollars
($500,000) or such Indebtedness or indebtedness is, or by reason of such default
is subject to being, accelerated or any party becomes entitled to enforce the
security for any such Indebtedness or indebtedness and such party shall take
steps to enforce the same, unless such default or enforcement is being contested
in good faith and by appropriate proceedings or other acts and the Security
Party, Subsidiary or Affiliate, as the case may be, shall set aside on its books
adequate reserves with respect thereto; or
(g) Ownership of Guarantors. the Borrower shall cease to own (except
as otherwise expressly permitted by this Agreement), directly or indirectly, one
hundred percent (100%) of any of the Guarantors; or
(h) Bankruptcy. the Borrower or any Affiliate commences any
proceeding under any reorganization, arrangement or readjustment of debt,
dissolution, winding up, adjustment, composition, bankruptcy or liquidation law
or statute of any jurisdiction, whether now or hereafter in effect (a
"Proceeding"), or there is commenced against any thereof any Proceeding and such
Proceeding remains undismissed or unstayed for a period of thirty (30) days or
any receiver, trustee, liquidator or sequestrator of, or for, any thereof or any
substantial portion of the property of any thereof is appointed and is not
discharged within a period of thirty (30) days or any thereof by any act
indicates consent to or approval of or acquiescence in any Proceeding or the
appointment of any receiver, trustee, liquidator or sequestrator of, or for,
itself or of, or for, any substantial portion of its property; or
(i) Termination of Operations; Sale of Assets. except as expressly
permitted under this Agreement, any Security Party ceases its operations or
sells or otherwise disposes of all or substantially all of its assets (other
than such a sale by one Guarantor to another) or all or substantially all of the
assets of any Security Party are seized or otherwise appropriated; or
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(j) Judgments. any judgment or order is made the effect whereof
would be to render ineffective or invalid this Agreement, the Note or any of the
Security Documents or any material provision thereof, or the Borrower or any
Security Party asserts that any such agreement or provision thereof is invalid;
or
(k) Inability to Pay Debts. any Security Party is unable to pay or
admits its inability to pay its debts as they fall due or a moratorium shall be
declared in respect of any material indebtedness of any Security Party; or
(l) Change in Financial Position. any change in the financial
position of any Security Party which, in the reasonable opinion of the Majority
Lenders, shall have a Material Adverse Effect; or
(m) Change in Control. a Change of Control shall occur with respect
to the Borrower; or
(n) Cross-Default. any Event of Default (as defined in the Facility
B Loan Agreement or the Facility C Agreement) or event which, with the giving of
notice or passage of time on both, would constitute such an Event of Default,
occurs or the Borrower or any Guarantor defaults under any material contract or
agreement to which it is a party or by which it is bound (including, but not
limited to, the construction contracts in respect of each of the MEGA I and the
SOYANG); or
(o) ERISA Debt. (i) the Borrower or any ERISA Affiliate fails to pay
when due an amount or amounts aggregating in excess of $1,000,000 which it or
they have become liable to pay under Title IV of ERISA or (ii) the Borrower or
any ERISA Affiliate, individually or collectively, incurs, or should reasonably
expect to incur, any Withdrawal Liability or liability upon the happening of a
Termination Event and the aggregate of all such Withdrawal Liabilities and such
other liabilities exceeds $10,000,000; or
(p) Standby Letter of Credit/Ship Mortgage Indemnity. the Standby
Letter of Credit, if provided, shall be cancelled (other than cancellation after
either a drawing has been made thereunder or the Ship Mortgage Indemnity has
been issued) or, at any time prior to the third anniversary of the Drawdown
Date, the Ship Mortgage Indemnity, if issued, is cancelled or is not in full
force and effect or any underwriter of the Ship Mortgage Indemnity asserts that
the Ship Mortgage Indemnity is not in full force and effect.
Upon and during the continuance of any Event of Default, the Lenders' obligation
to make the Loan available shall cease and the Agent on the instructions of the
Majority Lenders may, by notice to the Borrower, declare the entire unpaid
balance of the then outstanding Loan, accrued interest and any other sums
payable by the Borrower hereunder or under the Note due and payable, whereupon
the same shall forthwith be due and payable without presentment, demand, protest
or notice of any kind, all of which are hereby expressly waived; provided that
upon the happening of an event specified in subsections (h) or (k) of this
Section 8.1 with respect to the Borrower, the Note shall be immediately due and
payable without declaration or other notice to the Borrower. In such event, the
Lenders may proceed to protect and enforce their rights by action at law, suit
in equity or in admiralty or other appropriate proceeding, whether for specific
performance of any covenant contained in this Agreement, in the Note or in any
Security Document, or in aid of the exercise of any power granted herein or
therein, or the Lenders may proceed to enforce the payment of the Note
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or to enforce any other legal or equitable right of the Lenders, or proceed to
take any action authorized or permitted under the terms of any Security Document
or by applicable law for the collection of all sums due, or so declared due, on
the Note, including, without limitation, the right to appropriate and hold or
apply (directly, by way of set-off or otherwise) to the payment of the
obligations of the Borrower to the Lenders hereunder and/or under the Note
(whether or not then due) all moneys and other amounts of the Borrower then or
thereafter in possession of any Lender, the balance of any deposit account
(demand or time, mature or unmatured) of the Borrower then or thereafter with
any Lender and every other claim of the Borrower then or thereafter against any
of the Lenders.
8.2 Indemnification. The Borrower agrees to, and shall, indemnify and hold the
Agents, the Arrangers and the Lenders harmless against any loss, as well as
against any reasonable costs or expenses (including reasonable legal fees and
expenses), which any of the Agents, the Arrangers or the Lenders sustains or
incurs as a consequence of any default in payment of the principal amount of the
Loan, interest accrued thereon or any other amount payable hereunder, under the
Note or under any Security Documents including, but not limited to, all actual
losses incurred in liquidating or re-employing fixed deposits made by third
parties or funds acquired to effect or maintain the Loan or any portion thereof.
Any Lenders' certification of such costs and expenses shall, absent any manifest
error, be conclusive and binding on the Borrower.
8.3 Application of Moneys. Except as otherwise provided in any Security
Document, all moneys received by the Agents, the Arrangers or the Lenders under
or pursuant to this Agreement, the Note or any of the Security Documents after
the happening of any Event of Default (unless cured to the satisfaction of the
Majority Lenders) shall be applied by the Agents in the following manner:
(a) first, in or towards the payment or reimbursement of any
expenses or liabilities incurred by the Agents, the Arrangers or the Lenders in
connection with the ascertainment, protection or enforcement of its rights and
remedies hereunder, under the Note and under any of the Security Documents,
(b) secondly, in or towards payment of any interest owing in respect
of the Loan,
(c) thirdly, in or towards repayment of principal of the Loan,
(d) fourthly, in or towards payment of all other sums which may be
owing to the Agents, the Arrangers or the Lenders under this Agreement, under
the Note, under the Fee Letter or under any of the Security Documents,
(e) fifthly, to the Facility C Security Agent in or towards payment
of any sums which may be owing by the Borrower under or in connection with
Facility C, the Facility C Agreement, or the documents executed in connection
therewith;
(f) sixthly, to the Facility B Security Agent in or towards payment
of any sums which may be owing by the Borrower under or in connection with
Facility B, the Facility B Loan Agreement, or the documents executed in
connection therewith; and
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(g) seventhly, the surplus (if any) shall be paid to the Borrower or
to whosoever else may be entitled thereto.
9. COVENANTS
9.1 Affirmative Covenants. The Borrower hereby covenants and undertakes with the
Lenders that, from the date hereof and so long as any principal, interest or
other moneys are owing in respect of this Agreement, under the Note or under any
of the Security Documents, the Borrower will:
(a) Performance of Agreements. duly perform and observe, and procure
the observance and performance by all other parties thereto (other than the
Lenders) of, the terms of this Agreement, the Note and the Security Documents;
(b) Notice of Default, etc. promptly upon obtaining knowledge
thereof, inform the Administrative Agent of the occurrence of (a) any Event of
Default or of any event which, with the giving of notice or lapse of time, or
both, would constitute an Event of Default, (b) any litigation or governmental
proceeding pending or threatened against it or against any of its Subsidiaries
which could reasonably be expected to have a Material Adverse Effect, (c) the
withdrawal of any Vessel's rating by its Classification Society or the issuance
by the Classification Society of any material recommendation or notation
affecting class and (d) any other event or condition which is reasonably likely
to have a Material Adverse Effect;
(c) Obtain Consents. without prejudice to Section 2.1 and this
Section 9.1, obtain every consent and do all other acts and things which may
from time to time be necessary or advisable for the continued due performance of
all its and the other Security Parties' respective obligations under this
Agreement, under the Note and under the Security Documents;
(d) Financial Information. deliver to each Lender and the
underwriters of the Ship Mortgage Indemnity as identified by the Administrative
Agent:
(i) as soon as available but not later than ninety (90) days
after the end of each fiscal year of the Borrower,
complete copies of the consolidated financial reports of
the Borrower and its Subsidiaries (together with a
Compliance Certificate), all in reasonable detail, which
shall include at least the consolidated balance sheet of
the Borrower and its Subsidiaries as of the end of such
year and the related consolidated statements of income
and sources and uses of funds for such year, which shall
be audited reports prepared by an Acceptable Accounting
Firm;
(ii) as soon as available but not less than forty-five (45)
days after the end of each of the first three quarters
of each fiscal year of the Borrower, a quarterly interim
consolidated balance sheet of the Borrower and its
Subsidiaries and the related consolidated profit and
loss statements and sources and uses of funds (together
with a Compliance Certificate), all in reasonable
detail, unaudited, but certified to be true and complete
by the chief financial officer of the Borrower;
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(iii) within ten (10) days of the filing thereof, copies of
all registration statements and reports on Forms 10-K,
10-Q and 8-K (or their equivalents) and other material
filings which the Borrower shall have filed with the
Securities and Exchange Commission or any similar
governmental authority;
(iv) promptly upon the mailing thereof to the shareholders of
the Borrower, copies of all financial statements,
reports, proxy statements and other communications
provided to the Borrower's shareholders;
(v) within ten (10) days of the Borrower's receipt thereof,
copies of all audit letters or other correspondence from
any external auditors including material financial
information in respect of the Borrower;
(vi) at any time upon the request of any Agent, a Compliance
Certificate; and
(vii) such other statements (including, without limitation,
monthly consolidated statements of operating revenues
and expenses), lists of assets and accounts, budgets,
forecasts, reports and other financial information with
respect to its business as the Administrative Agent may
from time to time reasonably request, certified to be
true and complete by the chief financial officer of the
Borrower;
(e) Corporate Existence. do or cause to be done, and procure that
each Subsidiary shall do or cause to be done, all things necessary to preserve
and keep in full force and effect its corporate existence, or limited liability
company existence, as the case may be, and all licenses, franchises, permits and
assets necessary to the conduct of its business;
(f) Books and Records. at all times keep, and cause each Subsidiary
to keep, proper books of record and account into which full and correct entries
shall be made in accordance with GAAP;
(g) Taxes and Assessments. pay and discharge, and cause each
Subsidiary to pay and discharge, all material taxes, assessments and
governmental charges or levies imposed upon it or upon its income or property
prior to the date upon which penalties attach thereto; provided, however, that
it shall not be required to pay and discharge, or cause to be paid and
discharged, any such tax, assessment, charge or levy so long as the legality
thereof shall be contested in good faith and by appropriate proceedings or other
acts and it shall set aside on its books adequate reserves with respect thereto;
(h) Inspection. allow, and cause each Subsidiary to allow, any
representative or representatives designated by any Agent, subject to applicable
laws and regulations, to visit and inspect any of its properties, and, on
request, to examine its books of account, records, reports and other papers and
to discuss its affairs, finances and accounts with its officers, all at such
reasonable times and as often as any Agent reasonably requests;
(i) Compliance with Statutes, Agreements, etc. do or cause to be
done, and cause each Subsidiary to do and cause to be done, all things necessary
to comply with all material
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contracts or agreements to which it, or any Subsidiary is a party, and all
material laws, and the rules and regulations thereunder, applicable to the
Borrower or such Subsidiary, including, without limitation, those laws, rules
and regulations relating to employee benefit plans and environmental matters;
(j) Environmental Matters. promptly upon the occurrence of any of
the following conditions, provide to the Administrative Agent a certificate of a
chief executive officer thereof, specifying in detail the nature of such
condition and its proposed response or the response of its Environmental
Affiliates: (a) its receipt or the receipt by any other Security Party or any
Environmental Affiliates of the Borrower or any other Security Party of any
written communication whatsoever that alleges that such person is not in
compliance with any applicable Environmental Law or Environmental Approval, if
such noncompliance could reasonably be expected to have a Material Adverse
Effect, (b) knowledge by it, or by any other Security Party or any Environmental
Affiliates of the Borrower or any other Security Party that there exists any
Environmental Claim pending or threatened against any such person, which could
reasonably be expected to have a Material Adverse Effect, or (c) any release,
emission, discharge or disposal of any material that could form the basis of any
Environmental Claim against it, any other Security Party or against any
Environmental Affiliates of the Borrower or any other Security Party, if such
Environmental Claim could reasonably be expected to have a Material Adverse
Effect. Upon the written request by the Administrative Agent, it will submit to
the Administrative Agent at reasonable intervals, a report providing an update
of the status of any issue or claim identified in any notice or certificate
required pursuant to this subsection;
(k) ERISA. forthwith upon learning of the occurrence of any material
liability of the Borrower, any Subsidiary or any ERISA Affiliate pursuant to
ERISA in connection with the termination of any Plan or withdrawal or partial
withdrawal of any multi-employer plan (as defined in ERISA) or of a failure to
satisfy the minimum funding standards of Section 412 of the Code or Part 3 of
Title I of ERISA by any Plan for which the Borrower, any Subsidiary or any ERISA
Affiliate is plan administrator (as defined in ERISA), furnish or cause to be
furnished to the Lenders written notice thereof;
(l) Vessel Management. cause each of the Vessels to be managed both
commercially and technically by the Borrower, a wholly-owned subsidiary thereof
or its existing manager;
(m) Funded Debt to Total Capitalization Ratio. maintain at all times
on a consolidated basis a ratio of Funded Debt to Total Capitalization of not
more than 0.6 to 1 provided, that for purposes of compliance with this covenant
only, Funded Debt shall (i) exclude unsecured, subordinated debt, and (ii)
include the present value of the Borrower's (or any of the Borrower's
Subsidiaries') liability for all payments under synthetic leases other than the
Columbia Lease;
(n) Cash. maintain at all times on a consolidated basis readily
available cash and/or Cash Equivalents as follows:
(i) through December 31, 2000, not less than Ten Million
Dollars ($10,000,000);
(ii) thereafter, through June 30, 2001, not less than Fifteen
Million Dollars ($15,000,000);
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(iii) thereafter, not less than Twenty Million Dollars
($20,000,000);
(o) Consolidated Net Worth. maintain at all times a Consolidated Net
Worth of not less than One Hundred Sixty Million Dollars ($160,000,000) plus 50%
of the Borrower's positive net income (on a consolidated basis) earned after
December 31, 1999 plus 100% of the net proceeds received by the Borrower (or any
of the Borrower's Subsidiaries) from the issuance of new equity securities after
the Drawdown Date;
(p) EBITDA to Interest Expense. maintain a ratio of EBITDA to
Interest Expense as follows:
(i) through December 31, 2000, not less than 1.1 to 1.0;
(ii) thereafter, through December 31, 2002, not less than
1.75 to 1.0;
(iii) thereafter, not less than 2.5 to 1.0;
measured not less than quarterly, in each instance based on the four
most recent fiscal quarters for which financial information is available;
(q) Use of Excess Cash. apply all cash and Cash Equivalents of the
Borrower (on a consolidated basis), proceeds from the issuance of securities by
the Borrower or any Guarantor, and proceeds from the sale of any vessels by the
Borrower or any Guarantor (net of indebtedness secured by a mortgage on such
vessel) as follows:
(A) to the extent the Borrower chooses to do so, to
retention by the Borrower as cash or Cash Equivalents up
to $20.0 million until Facility C has been repaid or
cancelled, and thereafter up to $30.0 million; and then
(B) to prepayment of Facility C until Facility C is fully
repaid; and then;
(C) to prepayment of Facility B until Facility B is fully
repaid; and then
(D) to prepayment of the Loan until the ratio of the balance
of the Loan to the aggregate Fair Market Value of the
Vessels is no greater than 0.65; and then
(E) to the Borrower.
(r) Brokerage Commissions, etc. indemnify and hold the Arrangers,
the Agents and the Lenders harmless from any claim for any brokerage commission,
fee, or compensation from any broker or third party resulting from the
transactions contemplated hereby;
(s) Deposit Accounts; Assignment. maintain, and procure that each
other Security Party shall maintain, its operating accounts with the Syndication
Agent and shall procure, and shall cause each other Security Party to procure,
that all earnings of any Vessels shall be paid into such operating accounts and
the Borrower, and by its execution of the Consent and Agreement
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hereto, each other Security Party, hereby pledges, assigns and grants to the
Syndication Agent, for the benefit of the Lenders, a security interest in all
funds from time to time in such accounts;
(t) Future Guaranties. procure that each of the owners of the
Facility B Vessels identified on Schedule 5 executes a Guaranty (and other
relevant Security Documents in respect of its Facility B Vessel) within five (5)
Banking Days following full repayment of Facility B, and further procure that
all other Subsidiaries of the Borrower (other than Designated Subsidiaries, but
only for so long as they remain Designated Subsidiaries), shall execute a
Guaranty and other relevant Security Documents in respect of any vessel owned
thereby within thirty (30) days of formation, acquisition or otherwise becoming
a Subsidiary, or ceasing to be a Designated Subsidiary, of the Borrower;
(u) Future Pledge Agreements. concurrent with the execution of any
Guaranty pursuant to Section 9.1(t), execute and deliver to the Security Agent a
Pledge Agreement and the Pledged Shares in respect of the relevant Guarantor;
(v) Insurance. maintain, and cause each other Security Party to
maintain, with financially sound and reputable insurance companies insurance on
all their respective properties and against all such risks and in at least such
amounts as are usually insured against by companies of established reputation
engaged in the same or similar business from time to time; and
(w) Ship Mortgage Indemnity. until the third anniversary of the
Drawdown Date, from time to time as requested by the Administrative Agent
provide such information and take such action as necessary to maintain the Ship
Mortgage Indemnity in full force and effect.
9.2 Negative Covenants. The Borrower hereby covenants and undertakes with the
Lenders that, from the date hereof and so long as any principal, interest or
other moneys are owing in respect of this Agreement, under the Note or under any
of the Security Documents, the Borrower will not, and will procure that no
Subsidiary, to the extent applicable, will, without the prior written consent of
the Administrative Agent (or the Majority Lenders or all of the Lenders if
required by Section 15.8):
(a) Liens. create, assume or permit to exist, any mortgage, pledge,
lien, charge, encumbrance or any security interest whatsoever upon any
Collateral or other property except:
(i) liens disclosed in Schedule 6;
(ii) liens on the Designated Vessel securing the Designated
Vessel Indebtedness;
(iii) liens for taxes not yet payable for which adequate
reserves have been maintained;
(iv) the Mortgages, the Assignments, the Second Mortgages,
the Second Assignments, the Third Mortgages, the Third
Assignments and other liens in favor of the Security
Agent;
(v) liens, charges and encumbrances against their respective
Vessels permitted to exist under the terms of the
Mortgages;
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(vi) pledges of certificates of deposit or other cash
collateral securing any Security Party's reimbursement
obligations in connection with letters of credit now or
hereafter issued for the account of such Security Party
in connection with the establishment of the financial
responsibility of the Security Parties under 33 C.F.R.
Part 130 or 46 C.F.R. Part 540, as the case may be, as
the same may be amended or replaced;
(vii) pledges or deposits to secure obligations under
workmen's compensation laws or similar legislation,
deposits to secure public or statutory obligations,
warehousemen's or other like liens, or deposits to
obtain the release of such liens and deposits to secure
surety, appeal or customs bonds on which the Borrower or
any of the Guarantors is the principal, as to all of the
foregoing, only to the extent arising and continuing in
the ordinary course of business; and
(viii) other liens, charges and encumbrances incidental to the
conduct of the business of each such party, the
ownership of any such party's property and assets and
which do not in the aggregate materially detract from
the value of each such party's property or assets or
materially impair the use thereof in the operation of
its business;
(b) Change in Business. materially change the nature of its business
or commence any business materially different from its current business;
(c) Sale or Pledge of Shares. sell, assign, transfer, pledge or
otherwise convey or dispose of any of the shares (including by way of spin-off,
installment sale or otherwise) of the capital stock, or limited liability
company interests, as the case may be, of any Guarantor other than as may be
allowed in accordance with the Pledge Agreement;
(d) Sale of Assets. sell, or otherwise dispose of, any Vessel (other
than the Designated Vessel) or any other asset (including by way of spin-off,
installment sale or otherwise) which is substantial in relation to its assets
taken as a whole including without limitation, any material foreign Subsidiary
or foreign assets or interest in an Affiliate, other than such sales by one
Guarantor to another;
(e) Changes in Offices or Names. change the location of the chief
executive office of any Security Party, the office of the chief place of
business any such parties, the office of the Security Parties in which the
records relating to the earnings or insurances of the Vessels are kept unless
the Lenders shall have received sixty (60) days prior written notice of such
change;
(f) Consolidation and Merger. consolidate with, or merge into, any
corporation or other entity, or merge any corporation or other entity into it
provided, however that any Guarantor shall be permitted to merge into or
consolidate with any other Guarantor, so long as no Event of Default would
result therefrom;
(g) Chartering-in. other than pursuant to charters disclosed in
Schedule 6, charter, as charterer, any vessel for a charter period exceeding
twelve (12) months, or permit any vessel to
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be chartered into any vessel pool (in which the Borrower or any Subsidiary is a
member) for a term exceeding three (3) months;
(h) Chartering-out. and will procure that each Subsidiary will not,
other than pursuant to charters disclosed in Schedule 6, charter, as owner, any
vessel (other than the Designated Vessel) on demise or bareboat charter, or on
time charter for a period in excess of twelve (12) months;
(i) Vessel Pooling. and will procure that each Subsidiary will not,
enter any vessel into any vessel pooling arrangement other than as disclosed in
Schedule 6, or at any time amend any existing vessel pooling agreement;
(j) Distributions on Stock. in the case of the Borrower only,
directly or indirectly declare or pay any dividend or make any distribution on
its capital stock (a "Restricted Payment"), provided, however, that the Borrower
may make a Restricted Payment so long as, at the time of and after giving effect
to the proposed Restricted Payment, no Event of Default has occurred and is
continuing or would occur as a consequence of such Restricted Payment, and
(i) the ratio of the Borrower's Funded Debt to EBITDA is
less than 5.0 to 1.0 but greater than 3.5 to 1.0 and the
aggregate amount of all Restricted Payments (to the
extent made other than in cash, the amount thereof to be
determined in good faith by the Board of Directors of
the Borrower) would not exceed twenty-five percent (25%)
of the Borrower's consolidated net income for the
Borrower's most recently completed fiscal year, or
(ii) the ratio of the Borrower's Funded Debt to EBITDA is
less than 3.5 to 1.0 and the aggregate amount of all
Restricted Payments (to the extent made other than in
cash, the amount thereof to be determined in good faith
by the Board of Directors of the Borrower) would not
exceed fifty percent (50%) of the Borrower's
consolidated net income for the Borrower's most recently
completed fiscal year;
(k) Indebtedness. incur any Indebtedness, provided, however, that so
long as, at the time of and after giving effect to the incurrence of any
proposed Indebtedness, no Event of Default has occurred and is continuing or
would occur as a consequence of the incurrence of such Indebtedness,
(i) if the ratio of the Borrower's Funded Debt to EBITDA is
less than 5.0 to 1.0 but greater than 3.5 to 1.0, the
Borrower and its Subsidiaries on a consolidated basis
may incur up to $50.0 million of Indebtedness at any
time outstanding (excluding the Loan, Facility B and
Facility C);
(ii) if the ratio of the Borrower's Funded Debt to EBITDA is
less than 3.5 to 1.0, the Borrower and its Subsidiaries
may incur such proposed Indebtedness; and
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(iii) provided that the other Designated Vessel Conditions are
met, the Designated Vessel Owner may incur the
Designated Vessel Indebtedness at the time of the
Designated Vessel Acquisition;
(l) Investments. make any Investment, provided, however, that so
long as, at the time of and after giving effect to the making of any proposed
Investment, no Event of Default has occurred and is continuing or would occur as
a consequence of the making of such Investment,
(i) if the ratio of the Borrower's Funded Debt to EBITDA is
less than 5.0 to 1.0 but greater than 3.5 to 1.0, the
Borrower (and its Subsidiaries on a consolidated basis)
may make such proposed Investment provided that the
aggregate of the Borrower's (and its Subsidiaries' on a
consolidated basis) Investments since the Drawdown Date
does not exceed $10.0 million;
(ii) if the ratio of the Borrower's Funded Debt to EBITDA is
less than 3.5 to 1.0, the Borrower (and its Subsidiaries
on a consolidated basis) may make such proposed
Investment; and
(iii) the Borrower may make the SOYANG Investment at the time
the SOYANG is acquired;
(m) Capital Expenditures. make any Capital Expenditure (other than
as provided in Section 9.2(1)(iii) above), provided, however, that so long as,
at the time of and after giving effect to the making of any proposed Capital
Expenditure, no Event of Default has occurred and is continuing or would occur
as a consequence of the making of such Capital Expenditure,
(i) if the ratio of the Borrower's Funded Debt to EBITDA is
less than 5.0 to 1.0 but greater than 3.5 to 1.0, the
Borrower (and its Subsidiaries on a consolidated basis)
may make such proposed Capital Expenditure provided that
the aggregate of the Borrower's (and its Subsidiaries'
on a consolidated basis) Capital Expenditures since the
Drawdown Date does not exceed $30.0 million;
(ii) if the ratio of the Borrower's Funded Debt to EBITDA is
less than 3.5 to 1.0, the Borrower (and its Subsidiaries
on a consolidated basis) may make such proposed Capital
Expenditure;
(n) Deposit Accounts. other than as disclosed in Schedule 6,
maintain any deposit account other than with the Syndication Agent, provided,
that this covenant shall not apply to the Designated Vessel Owner; and
(o) Change Fiscal Year. change its fiscal year.
9.3 Subsidiary Negative Covenants. The Borrower hereby covenants and undertakes
with the Lenders that, from the date hereof and so long as any principal,
interest or other moneys are owing in respect of this Agreement, under the Note
or under any of the Security Documents, the Borrower will procure that no
Subsidiary will:
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(a) Limitations on Ability to Make Distributions. create or
otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Subsidiary (other than a
Designated Subsidiary) to (i) pay dividends or make any other distributions on
its capital stock or limited liability company interests, as the case may be, to
the Borrower or any Subsidiary or pay any Indebtedness owed to the Borrower,
(ii) make any loans or advances to the Borrower, or (iii) transfer any of its
property or assets to the Borrower;
(b) Use of Corporate Funds. (except for the SOYANG Investment and
Permitted Drydocking Costs) pay out any funds to any company or person except
(i) in the ordinary course of business in connection with the management of the
business of the Borrower and its Subsidiaries, including the operation and/or
repair of the Vessels and other vessels owned or operated by such parties and
(ii) the servicing of the Indebtedness permitted hereunder (but excluding, any
prepayments of any Indebtedness other than the Loan);
(c) Issuance of Shares. issue or dispose of any shares of its own
capital stock or limited liability company interests, as the case may be to any
person other than the Borrower.
9.4 Vessel Valuations. For inclusion with each Compliance Certificate delivered
pursuant to Section 9.1(d)(i), and each Compliance Certificate in respect of the
second quarter of each fiscal year delivered pursuant to Section 9.1(d)(ii), and
in any event upon the request of any Agent, the Borrower shall obtain appraisals
of the Fair Market Value of the Vessels. The first three such valuations in any
year are to be at the Borrower's cost, provided, that following and during the
continuance of any Event of Default, all such valuations are to be at the
Borrower's cost. In the event the Borrower fails or refuses to obtain the
valuations requested pursuant to this Section 9.4 within ten (10) days of an
Agent's request therefor, any Agent will be authorized to obtain such
valuations, at the Borrower's cost, from three independent shipbrokers selected
by the Agents, which valuations shall be deemed the equivalent of valuations
duly obtained by the Borrower pursuant to this Section 9.4, but any Agent's
actions in doing so shall not excuse any default of the Borrower under this
Section 9.4.
9.5 Asset Maintenance. If at any time
(a) after the Drawdown Date but prior to December 31, 2001, the
aggregate Fair Market Value of the Vessels then mortgaged to the Security Agent
(based upon the valuations obtained pursuant to Section 9.4) (together with the
value of any additional collateral theretofore provided under this Section) is
less than one hundred fifteen percent (115%) of the Loan, or
(b) if at any time after December 31, 2001 but prior to December 31,
2002 such aggregate Fair Market Value is less than one hundred twenty percent
(120%) of the Loan, or
(c) if at any time thereafter the aggregate Fair Market Value of the
Vessels is less than one hundred thirty percent (130%) of the Loan,
(in each case as applicable, such percentage being the "Required Percentage")
the Borrower shall, within a period of thirty (30) days following receipt by the
Borrower of written notice from the Administrative Agent notifying the Borrower
of such shortfall and specifying the amount thereof (which amount shall, in the
absence of manifest error, be deemed to be conclusive and binding on the
Borrower), either (i) deliver to the Security Agent, upon the Administrative
Agent's request, such additional collateral as may be satisfactory to the
Lenders in their sole discretion of sufficient
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value to restore compliance with the Required Percentage or (ii) the Borrower
shall prepay such amount of the Loan (together with interest thereon and any
other monies payable in respect of such prepayment pursuant to Section 5.4) as
shall result in the Fair Market Value of the Vessels then mortgaged to the
Security Agent being not less than the Required Percentage.
9.6 Inspection and Survey Reports. If the Lenders shall so request, the
Borrowers shall provide the Lenders with copies of all internally generated
inspection or survey reports on the Vessels.
9.7 Vessel Substitution Sales. The Borrower will not, and will procure that each
Guarantor will not, sell, assign, convey, transfer or otherwise dispose of
(including through a bareboat charter with a purchase option but excluding
chartering in the ordinary course of business) any Vessel; provided, however,
that a Guarantor may sell a Vessel if such sale is made in compliance with each
of the following conditions:
(a) no Event of Default, or event which, with the giving of notice
or the passage of time, or both, would constitute an Event of
Default, shall have occurred or be continuing;
(b) not later than ten (10) Banking Days prior to such sale, the
Borrower or a Guarantor has entered into a binding contract
for the purchase of a Qualified Substitute Vessel identified
to the Agents;
(c) the entire consideration for such sale shall be cash, in an
amount not less than the Fair Market Value of such Vessel as
of the date of sale;
(d) the cash, net of expenses directly related to the sale,
received for such sale is immediately deposited with the
Syndication Agent in an account as collateral for the Loan;
and
(e) the Majority Lenders as of ten (10) Banking Days prior to such
sale give their written consent prior to such sale.
9.8 Tender of Qualified Substitute Vessel. In the event that the Borrower or any
Guarantor sells a Vessel pursuant to Section 9.7 above, then within thirty (30)
days following the date of such sale, the Borrower or a Guarantor consummates
the acquisition of the Qualified Substitute Vessel identified to the Agents in
respect of such sold Vessel and grants in favor of the Security Agent a
Mortgage, Earnings Assignment, Insurances Assignment and such other Security
Documents as the Security Agent requires in respect of such Qualified Substitute
Vessel. The Syndication Agent will release sale proceeds for use by the Borrower
or a Guarantor in the acquisition of an identified Qualified Substitute Vessel
pursuant to the terms hereof; provided, however, that if the tender of the
identified Qualified Substitute Vessel is not accomplished within thirty (30)
days after the date of sale, the Syndication Agent shall apply all such sale
proceeds in accordance with Section 8.3; provided, further, however, that if the
Borrower identified the MEGA I as a Qualified Substitute Vessel pursuant to
Section 9.7, the above-stated thirty day requirement shall be extended to one
hundred twenty (120) days. In any case where a Qualified Substitute Vessel is
identified in respect of more than one Vessel, the timing requirements of this
Section shall count from the date of sale of the first of such Vessels sold.
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10. ASSIGNMENT.
This Agreement shall be binding upon, and inure to the benefit of,
the Borrower and the Lenders, the Arrangers and the Agents and their respective
successors and assigns, except that the Borrower may not assign any of its
rights or obligations hereunder. Each Lender shall be entitled to assign its
rights and obligations under this Agreement or grant participation(s) in the
Loan to any subsidiary, holding company or other affiliate of such Lender, to
any subsidiary or other affiliate company of any thereof or, with the consent of
the Borrower and the Agents, not to be unreasonably withheld, to any other bank
or financial institution (in a minimum amount of not less than $5,000,000), and
such Lender shall forthwith give notice of any such assignment or participation
to the Borrower; provided, however, that any such assignment must be made
pursuant to an Assignment and Assumption Agreement. The Borrower will take all
reasonable actions requested by any Agent or any Lender to effect such
assignment, including, without limitation, the execution of a written consent to
any Assignment and Assumption Agreement.
11. ILLEGALITY, INCREASED COST, NON-AVAILABILITY, ETC.
11.1 Illegality. In the event that by reason of any change in any applicable
law, regulation or regulatory requirement or in the interpretation thereof, a
Lender has a reasonable basis to conclude that it has become unlawful for any
Lender to maintain or give effect to its obligations as contemplated by this
Agreement, such Lender shall inform the Agent and the Borrower to that effect,
whereafter the liability of such Lender to make its Commitment available shall
forthwith cease and the Borrower shall be required either to repay to such
Lender that portion of the Loan advanced by such Lender immediately or, if such
Lender so agrees, to repay such portion of the Loan to the Lender on the last
day of any then current Interest Period in accordance with and subject to the
provisions of Section 11.5. In any such event, but without prejudice to the
aforesaid obligations of the Borrower to repay such portion of the Loan, the
Borrower and the relevant Lender shall negotiate in good faith with a view to
agreeing on terms for making such portion of the Loan available from another
jurisdiction or otherwise restructuring such portion of the Loan on a basis
which is not unlawful.
11.2 Increased Costs. If any change in applicable law, regulation or regulatory
requirement, or in the interpretation or application thereof by any governmental
or other authority, shall:
(i) subject any Lender to any Taxes with respect to its
income from the Loan, or any part thereof, or
(ii) change the basis of taxation to any Lender of payments
of principal or interest or any other payment due or to
become due pursuant to this Agreement (other than a
change in the basis effected by the jurisdiction of
organization of such Lender, the jurisdiction of the
principal place of business of such Lender, the United
States of America, the State or City of New York or any
governmental subdivision or other taxing authority
having jurisdiction over such Lender (unless such
jurisdiction is asserted by reason of the activities of
the Borrower or any of the other Security Parties) or
such other jurisdiction where the Loan may be payable),
or
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(iii) impose, 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, a Lender, or
(iv) impose on any Lender any other condition affecting the
Loan or any part thereof,
and the result of the foregoing is either to increase the cost to such Lender of
making available or maintaining its Commitment or any part thereof or to reduce
the amount of any payment received by such Lender, then and in any such case if
such increase or reduction in the opinion of such Lender materially affects the
interests of such Lender under or in connection with this Agreement:
(a) the Lender shall notify the Agent and the Borrower of the
happening of such event, and
(b) the Borrower agrees forthwith upon demand to pay to such Lender
such amount as such Lender certifies to be necessary to compensate such Lender
for such additional cost or such reduction; PROVIDED, however, that the
foregoing provisions shall not be applicable in the event that increased costs
to the Lender result from the exercise by the Lender of its right to assign its
rights or obligations under Section 10.
11.3 Nonavailability of Funds. If the Administrative Agent shall determine that,
by reason of circumstances affecting the London Interbank Market generally,
adequate and reasonable means do not or will not exist for ascertaining the
Applicable Rate for the Loan for any Interest Period, the Administrative Agent
shall give notice of such determination to the Borrower. The Borrower and the
Administrative Agent shall then negotiate in good faith in order to agree upon a
mutually satisfactory interest rate and/or Interest Period to be substituted for
those which would otherwise have applied under this Agreement. If the Borrower
and the Administrative Agent are unable to agree upon such a substituted
interest rate and/or Interest Period within thirty (30) days of the giving of
such determination notice, the Administrative Agent shall set an interest rate
and Interest Period to take effect from the expiration of the Interest Period in
effect at the date of determination, which rate shall be equal to the Margin
plus the cost to the Lenders (as certified by each Lender) of funding the Loan.
In the event the state of affairs referred to in this Section 11.3 shall extend
beyond the end of the Interest Period, the foregoing procedure shall continue to
apply until circumstances are such that the Applicable Rate may be determined
pursuant to Section 6.
11.4 Lender's Certificate Conclusive. A certificate or determination notice of
any Lender as to any of the matters referred to in this Section 11 shall, absent
manifest error, be conclusive and binding on the Borrower.
11.5 Compensation for Losses. Where the Loan or any portion thereof is to be
repaid by the Borrower pursuant to this Section 11, the Borrower agrees
simultaneously with such repayment to pay to the relevant Lender all accrued
interest to the date of actual payment on the amount repaid and all other sums
then payable by the Borrower to the relevant Lender pursuant to this Agreement,
together with such amounts as may be certified by the relevant Lender to be
necessary to compensate such Lender for any actual loss, premium or penalties
incurred or to be incurred thereby on account of funds borrowed to make, fund or
maintain its Commitment or such portion thereof for
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the remainder (if any) of the then current Interest Period or Periods, if any,
but otherwise without penalty or premium.
12. CURRENCY INDEMNITY
12.1 Currency Conversion. If for the purpose of obtaining or enforcing a
judgment in any court in any country it becomes necessary to convert into any
other currency (the "judgment currency") an amount due in Dollars under this
Agreement, the Note or any of the Security Documents then the conversion shall
be made, in the discretion of the Agent, at the rate of exchange prevailing
either on the date of default or on the day before the day on which the judgment
is given or the order for enforcement is made, as the case may be (the
"conversion date"), provided that the Agent shall not be entitled to recover
under this section any amount in the judgment currency which exceeds at the
conversion date the amount in Dollars due under this Agreement, the Note, the
Guaranty and/or any of the Security Documents.
12.2 Change in Exchange Rate. If there is a change in the rate of exchange
prevailing between the conversion date and the date of actual payment of the
amount due, the Borrower shall pay such additional amounts (if any, but in any
event not a lesser amount) as may be necessary to ensure that the amount paid in
the judgment currency when converted at the rate of exchange prevailing on the
date of payment will produce the amount then due under this Agreement, the Note
and/or any of the Security Documents in Dollars; any excess over the amount due
received or collected by the Lenders shall be remitted to the Borrower.
12.3 Additional Debt Due. Any amount due from the Borrower under this Section 12
shall be due as a separate debt and shall not be affected by judgment being
obtained for any other sums due under or in respect of this Agreement, the Note
and/or any of the Security Documents.
12.4 Rate of Exchange. The term "rate of exchange" in this Section 12 means the
rate at which the Agent in accordance with its normal practices is able on the
relevant date to purchase Dollars with the judgment currency and includes any
premium and costs of exchange payable in connection with such purchase.
13. FEES AND EXPENSES
13.1 Fees. The Borrower shall pay to the Arrangers and the Agents such fees as
the parties have agreed pursuant to the Fee Letter.
13.2 Expenses. The Borrower agrees, whether or not the transactions hereby
contemplated are consummated, on demand to pay, or reimburse the Agents and the
Arrangers for their payment of, the reasonable expenses of the Agents, the
Arrangers and (after the occurrence and during the continuance of an Event of
Default) the Lenders incident to said transactions (and in connection with any
supplements, amendments, waivers or consents relating thereto or incurred in
connection with the enforcement or defense of any of the Agents', the Arrangers'
and the Lenders' rights or remedies with respect thereto or in the preservation
of the Agents', the Arrangers' and the Lenders' priorities under the
documentation executed and delivered in connection therewith) including, without
limitation, all reasonable costs and expenses of preparation, negotiation,
execution and administration of this Agreement and the documents referred to
herein, the reasonable fees and disbursements of the Agents' counsel in
connection therewith, as well as the reasonable fees and expenses of any
independent appraisers, surveyors, engineers and other consultants retained by
the
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Agents, or the Arrangers in connection with this transaction, all reasonable
costs and expenses, if any, in connection with the enforcement of this
Agreement, the Note and the Security Documents and stamp and other similar
taxes, if any, incident to the execution and delivery of the documents
(including, without limitation, the Note) herein contemplated and to hold the
Agents, the Arrangers and the Lenders free and harmless in connection with any
liability arising from the nonpayment of any such stamp or other similar taxes.
Such taxes and, if any, interest and penalties related thereto as may become
payable after the date hereof shall be paid immediately by the Borrower to the
Agents, the Arrangers or the Lenders, as the case may be, when liability
therefor is no longer contested by such party or parties or reimbursed
immediately by the Borrower to such party or parties after payment thereof (if
the Agents, the Arrangers or the Lenders, at their sole discretion, chooses to
make such payment).
14. APPLICABLE LAW, JURISDICTION AND WAIVER
14.1 Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
14.2 Jurisdiction. The Borrower hereby irrevocably submits to the jurisdiction
of the courts of the State of New York and of the United States District Court
for the Southern District of New York in any action or proceeding brought
against it by any of the Lenders, the Agents or the Arrangers under this
Agreement or under any document delivered hereunder and hereby irrevocably
agrees that valid service of summons or other legal process on it may be
effected by serving a copy of the summons and other legal process in any such
action or proceeding on the Borrower by mailing or delivering the same by hand
to the Borrower at the address indicated for notices in Section 16.1. The
service, as herein provided, of such summons or other legal process in any such
action or proceeding shall be deemed personal service and accepted by the
Borrower as such, and shall be legal and binding upon the Borrower for all the
purposes of any such action or proceeding. Final judgment (a certified or
exemplified copy of which shall be conclusive evidence of the fact and of the
amount of any indebtedness of the Borrower to the Lenders, the Agents or the
Arrangers) against the Borrower in any such legal action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment.
The Borrower will advise the Administrative Agent promptly of any change of
address for the purpose of service of process. Notwithstanding anything herein
to the contrary, the Lenders may bring any legal action or proceeding in any
other appropriate jurisdiction.
14.3 WAIVER OF JURY TRIAL. IT IS MUTUALLY AGREED BY AND AMONG THE BORROWER, THE
OTHER SECURITY PARTIES, THE ARRANGERS, THE AGENTS AND THE LENDERS THAT EACH OF
THEM HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
BROUGHT BY ANY PARTY HERETO AGAINST ANY OTHER PARTY HERETO ON ANY MATTER
WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT, THE NOTE
OR THE SECURITY DOCUMENTS.
15. THE AGENTS
15.1 Appointment of Agents. Each of the Lenders irrevocably appoints and
authorizes the Agents severally each to take such action as agent on its behalf
and to exercise such powers under this Agreement, the Note and the Security
Documents as are delegated to such Agent by the terms hereof and thereof,
including execution of the Intercreditor Agreement. No Agent nor any of their
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respective directors, officers, employees or agents shall be liable for any
action taken or omitted to be taken by it or them under this Agreement, the Note
or the Security Documents or in connection therewith, except for its or their
own gross negligence or willful misconduct.
15.2 Security Agent as Trustee. Each of the Lenders irrevocably appoints the
Security Agent as trustee on its behalf with regard to (i) the security, powers,
rights, titles, benefits and interests (both present and future) constituted by
and conferred on the Lenders or any of them or for the benefit thereof under or
pursuant to this Agreement, the Note or any of the Security Documents
(including, without limitation, the benefit of all covenants, undertakings,
representations, warranties and obligations given, made or undertaken to any
Lender in the Agreement, the Note or any Security Document), (ii) all moneys,
property and other assets paid or transferred to or vested in any Lender or any
agent of any Lender or received or recovered by any Lender or any agent of any
Lender pursuant to, or in connection with, this Agreement, the Note or the
Security Documents whether from any Security Party or any other person and (iii)
all money, investments, property and other assets at any time representing or
deriving from any of the foregoing, including all interest, income and other
sums at any time received or receivable by any Lender or any agent of any Lender
in respect of the same (or any part thereof). The Security Agent hereby accepts
such appointment.
15.3 Distribution of Payments. Whenever any payment is received by any Agent
from the Borrower or any other Security Party for the account of the Lenders, or
any of them, whether of principal or interest on the Note, commissions, fees
under Section 13 or otherwise, it will thereafter cause to be distributed on the
same day if received before 11 a.m. New York time, or on the next day if
received thereafter, like funds relating to such payment ratably to the Lenders
according to their respective Commitments, in each case to be applied according
to the terms of this Agreement.
15.4 Holder of Interest in Note. The Agents may treat each Lender as the holder
of all of the interest of such Lender in the Note.
15.5 No Duty to Examine, Etc. The Agents shall not be under a duty to examine or
pass upon the validity, effectiveness or genuineness of any of this Agreement,
the Note, the Security Documents or any instrument, document or communication
furnished pursuant to this Agreement or in connection therewith or in connection
with the Note or any Security Document, and the Agents shall be entitled to
assume that the same are valid, effective and genuine, have been signed or sent
by the proper parties and are what they purport to be.
15.6 Agents as Lenders. With respect to that portion of the Loan made available
by it, each Agent shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not an Agent, and the term
"Lender" or "Lenders" shall include each Agent in its capacity as a Lender. Each
Agent and its affiliates may accept deposits from, lend money to and generally
engage in any kind of business with, the Borrower and the other Security Parties
as if it were not an Agent.
15.7 Acts of the Agents. Each Agent shall have duties and discretion, and shall
act as follows:
(a) Obligations of the Agents. The obligations of each Agent under
this Agreement, under the Note and under the Security
Documents are only those expressly set forth herein and
therein.
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(b) No Duty to Investigate. No Agent shall at any time be under
any duty to investigate whether an Event of Default, or an
event which with the giving of notice or lapse of time, or
both, would constitute an Event of Default, has occurred or to
investigate the performance of this Agreement, the Note or any
Security Document by any Security Party.
(c) Discretion of the Agents. Each Agent shall be entitled to use
its discretion with respect to exercising or refraining from
exercising any rights which may be vested in it by, and with
respect to taking or refraining from taking any action or
actions which it may be able to take under or in respect of,
this Agreement, the Note and the Security Documents, unless
the Agent shall have been instructed by the Majority Lenders
to exercise such rights or to take or refrain from taking such
action; provided, however, that no Agent shall be required to
take any action which exposes such Agent to personal liability
or which is contrary to this Agreement or applicable law.
(d) Instructions of Majority Lenders. Each Agent shall in all
cases be fully protected in acting or refraining from acting
under this Agreement, under the Note or under any Security
Document in accordance with the instructions of the Majority
Lenders, and any action taken or failure to act pursuant to
such instructions shall be binding on all of the Lenders.
15.8 Certain Amendments. Neither this Agreement, the Note nor any of the
Security Documents nor any terms hereof or thereof may be amended unless such
amendment is approved by the Borrower and the Majority Lenders, provided that no
such amendment shall, without the consent of each Lender affected thereby, (i)
reduce the interest rate or extend the time of payment of principal or interest
or fees on the Loan, or reduce the principal amount of the Loan or any fees
hereunder, (ii) increase or decrease the Commitment of any Lender or subject any
Lender to any additional obligation (it being understood that a waiver of any
Event of Default or any mandatory repayment of Loan shall not constitute a
change in the terms of any Commitment of any Lender), (iii) amend, modify or
waive any provision of this Section 15.8, (iv) amend the definition of Majority
Lenders, (v) consent to the assignment or transfer by the Borrower of any of its
rights and obligations under this Agreement, (vi) release any Security Party
from any of its obligations under any Security Document except as expressly
provided herein or in such Security Document or (vii) amend any provision
relating to the maintenance of collateral under Section 9.5. All amendments
approved by the Majority Lenders under this Section 15.8 must be in writing and
signed by the Borrower and each of the Lenders. In the event that any Lender is
unable to or refuses to sign an amendment approved by the Majority Lenders
hereunder, such Lender hereby appoints the Administrative Agent as its
Attorney-In-Fact for the purposes of signing such amendment. No provision of
this Section 15 or any other provisions relating to the Agents may be modified
without the consent of each Agent.
15.9 Assumption re Event of Default. Except as otherwise provided in Section
15.15, each Agent shall be entitled to assume that no Event of Default, or event
which with the giving of notice or lapse of time, or both, would constitute an
Event of Default, has occurred and is continuing, unless such Agent has been
notified by any Security Party of such fact, or has been notified by a Lender
that such Lender considers that an Event of Default or such an event (specifying
in detail the nature thereof) has occurred and is continuing. In the event that
an Agent shall have been notified by any
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<PAGE>
Security Party or any Lender in the manner set forth in the preceding sentence
of any Event of Default or of an event which with the giving of notice or lapse
of time, or both, would constitute an Event of Default, such Agent shall notify
the Lenders and shall take action and assert such rights under this Agreement,
under the Note and under Security Documents as the Majority Lenders shall
request in writing.
15.10 Limitations of Liability. Neither any Agent nor any of the Lenders shall
be under any liability or responsibility whatsoever:
(a) to any Security Party or any other person or entity as a
consequence of any failure or delay in performance by, or any
breach by, any other Lenders or any other person of any of its
or their obligations under this Agreement or under any
Security Document;
(b) to any Lender or Lenders as a consequence of any failure or
delay in performance by, or any breach by, any Security Party
of any of its respective obligations under this Agreement,
under the Note or under the Security Documents; or
(c) to any Lender or Lenders for any statements, representations
or warranties contained in this Agreement, in any Security
Document or in any document or instrument delivered in
connection with the transaction hereby contemplated; or for
the validity, effectiveness, enforceability or sufficiency of
this Agreement, the Note, any Security Document or any
document or instrument delivered in connection with the
transactions hereby contemplated.
15.11 Indemnification of the Agents. The Lenders agree to indemnify each Agent
(to the extent not reimbursed by the Security Parties or any thereof), pro rata
according to the respective amounts of their Commitments, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever (including legal fees and expenses incurred in investigating claims
and defending itself against such liabilities) which may be imposed on, incurred
by or asserted against, such Agent in any way relating to or arising out of this
Agreement, the Note or any Security Document, any action taken or omitted by
such Agent thereunder or the preparation, administration, amendment or
enforcement of, or waiver of any provision of, this Agreement, the Note or any
Security Document, except that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from such Agent's gross negligence or
willful misconduct.
15.12 Consultation with Counsel. Each Agent may consult with legal counsel
selected by such Agent and shall not be liable for any action taken, permitted
or omitted by it in good faith in accordance with the advice or opinion of such
counsel.
15.13 Resignation. Any Agent may resign at any time by giving sixty (60) days'
written notice thereof to the other Agents, the Lenders and the Borrower. Upon
any such resignation, the Lenders shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Lenders and
shall have accepted such appointment within sixty (60) days after the retiring
Agent's giving notice of resignation, then the retiring Agent may, on behalf of
the Lenders,
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appoint a successor Agent which shall be a bank or trust company of recognized
standing. The appointment of any successor Agent shall be subject to the prior
written consent of the Borrower, such consent not to be unreasonably withheld.
After any retiring Agent's resignation as Agent hereunder, the provisions of
this Section 15 shall continue in effect for its benefit with respect to any
actions taken or omitted by it while acting as Agent.
15.14 Representations of Lenders. Each Lender represents and warrants to each
other Lender and each Agent that:
(a) in making its decision to enter into this Agreement and to
make its Commitment available hereunder, it has independently
taken whatever steps it considers necessary to evaluate the
financial condition and affairs of the Security Parties, that
it has made an independent credit judgment and that it has not
relied upon any statement, representation or warranty by any
other Lender or any Agent; and
(b) so long as any portion of its Commitment remains outstanding,
it will continue to make its own independent evaluation of the
financial condition and affairs of the Security Parties.
15.15 Notification of Event of Default. Each Agent hereby undertakes to promptly
notify the Lenders, and the Lenders hereby promptly undertake to notify each
Agent and the other Lenders, of the existence of any Event of Default which
shall have occurred and be continuing of which such Agent or Lender has actual
knowledge.
16. NOTICES AND DEMANDS
16.1 Notices. All notices, requests, demands and other communications to any
party hereunder shall be in writing (including prepaid overnight courier,
facsimile transmission or similar writing) and shall be given to the Borrower at
the address or telecopy number set forth below and to the Lenders and the Agents
at their address and telecopy numbers set forth in Schedule 1 or at such other
address or telecopy numbers as such party may hereafter specify for the purpose
by notice to each other party hereto. Each such notice, request or other
communication shall be effective (i) if given by telecopy, when such telecopy is
transmitted to the telecopy number specified in this Section and telephonic
confirmation of receipt thereof is obtained or (ii) if given by mail, prepaid
overnight courier or any other means, when received at the address specified in
this Section or when delivery at such address is refused.
If to the Borrower:
OMI Corporation
One Station Place
Stamford, Connecticut 06902
Telecopy No.: (203) 602-6701
Attention: Vincent de Sostoa
Senior Vice President - Treasurer
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17. MISCELLANEOUS
17.1 Time of Essence. Time is of the essence of this Agreement but no failure or
delay on the part of any Lender, the Agents or the Arrangers to exercise any
power or right under this Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise by any Lender, the Agents or the Arrangers of any
power or right hereunder preclude any other or further exercise thereof or the
exercise of any other power or right. The remedies provided herein are
cumulative and are not exclusive of any remedies provided by law.
17.2 Unenforceable, etc., Provisions - Effect. In case any one or more of the
provisions contained in this Agreement, the Note or in any Security Document
would, if given effect, be invalid, illegal or unenforceable in any respect
under any law applicable in any relevant jurisdiction, said provision shall not
be enforceable against the relevant Security Party, but the validity, legality
and enforceability of the remaining provisions herein or therein contained shall
not in any way be affected or impaired thereby.
17.3 References. References herein to Sections, Exhibits and Schedules are to be
construed as references to sections of, exhibits to, and schedules to, this
Agreement, unless the context otherwise requires.
17.4 Further Assurances. The Borrower agrees that if this Agreement or any
Security Document shall, in the reasonable opinion of the Lenders, at any time
be deemed by the Lenders for any reason insufficient in whole or in part to
carry out the true intent and spirit hereof or thereof, it will execute or cause
to be executed such other and further assurances and documents as in the opinion
of the Lenders may be required in order to more effectively accomplish the
purposes of this Agreement, the Note or any Security Document.
17.5 Prior Agreements, Merger. Any and all prior understandings and agreements
heretofore entered into between the Security Parties on the one part, and the
Agents, the Arrangers or the Lenders, on the other part, whether written or
oral, other than the Fee Letter, are superseded by and merged into this
Agreement and the other agreements (the forms of which are exhibited hereto) to
be executed and delivered in connection herewith to which the Security Parties,
the Arrangers, the Agents and/or the Lenders are parties, which alone fully and
completely express the agreements between the Security Parties, the Arrangers,
the Agents and the Lenders.
17.6 Entire Agreement; Amendments. This Agreement constitutes the entire
agreement of the parties hereto including all parties added hereto pursuant to
an Assignment and Assumption Agreement. Subject to Section 15.8, any provision
of this Agreement, the Note or any Security Document may be amended or waived
if, but only if, such amendment or waiver is in writing and is signed by the
Borrower, the Administration Agent and the Majority Lenders (and, if the rights
or duties of the Security Agent or the Syndication Agent are affected thereby,
by such Agent, as applicable). This Agreement may be executed in any number of
counterparts, each of will shall be deemed an original, but all such
counterparts together shall constitute one and the same instrument. The parties
hereto agree that no amendment affecting the rights of the underwriters of the
Ship Mortgage Indemnity shall be effective without the prior written consent of
such underwriters.
17.7 Indemnification. The Borrower and, by its execution and delivery of the
Consent and Agreement set forth below, each of the other Security Parties
jointly and severally agree to indemnify each Lender, each Agent and each
Arranger, their respective successors and assigns, and
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<PAGE>
their respective officers, directors, employees, representatives and agents
(each an "Indemnitee") from, and hold each of them harmless against, any and all
losses, liabilities, claims, damages, expenses, obligations, penalties, actions,
judgments, suits, costs or disbursements of any kind or nature whatsoever
(including, without limitation, the fees and disbursements of counsel for such
Indemnitee in connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not such Indemnitee shall be
designated a party thereto) that may at any time (including, without limitation,
at any time following the payment of the obligations of the Borrower hereunder)
be imposed on, asserted against or incurred by, any Indemnitee as a result of,
or arising out of or in any way related to or by reason of, (a) any violation by
any Security Party (or any charterer or other operator of any Vessel) of any
applicable Environmental Law, (b) any Environmental Claim arising out of the
management, use, control, ownership or operation of property or assets by any
Security Party (or, after foreclosure, by any Lender, any Agent or any Arranger
or any of their respective successors or assigns), (c) the breach of any
representation, warranty or covenant set forth in Sections 2.1 (o) or 9.1(j),
(d) the Loan (including the use of the proceeds of the Loan and any claim made
for any brokerage commission, fee or compensation from any Person), of (e) the
execution, delivery, performance or non-performance of this Agreement, the Note,
any Security Document, or any of the documents referred to herein or
contemplated hereby (whether or not the Indemnitee is a party thereto). If and
to the extent that the obligations of the Security Parties under this Section
are unenforceable for any reason, the Borrower and, by its execution and
delivery of the Consent and Agreement set forth below, each of the other
Security Parties jointly and severally agree to make the maximum contribution to
the payment and satisfaction of such obligations which is permissible under
applicable law. The obligations of the Security Parties under this Section 17.7
shall survive the termination of this Agreement and the repayment to the Lenders
of all amounts owing thereto under or in connection herewith.
17.8 Release of Designated Vessel Owner Guaranty. Notwithstanding Section 17.6,
Entire Agreement; Amendments, upon the Designated Vessel Acquisition, the
Security Agent shall release the Designated Vessel Owner from its Guaranty.
17.9 Headings. In this Agreement, Section headings are inserted for convenience
of reference only and shall not be taken into account in the interpretation of
this Agreement.
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<PAGE>
IN WITNESS whereof the parties hereto have caused this Agreement to
be duly executed by their duly authorized representatives as of the day and year
first above written.
OMI CORPORATION
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
CHRISTIANIA BANK OG KREDITKASSE ASA,
as Arranger and Administrative Agent
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
DEN NORSKE BANK ASA,
as Arranger and Syndication Agent
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
MEESPIERSON CAPITAL CORP.,
as Arranger and Security Agent
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
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<PAGE>
The Lenders:
CHRISTIANIA BANK OG KREDITKASSE ASA
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
DEN NORSKE BANK ASA
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
MEESPIERSON CAPITAL CORP.
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
52
<PAGE>
HAMBURGISCHE LANDESBANK - GIROZENTRALE-
By:___________________________________
Name:
Title:
LANDESBANK SCHLESWIG-HOLSTEIN
By:___________________________________
Name:
Title:
DE NATIONALE INVESTERINGSBANK (NA) N.V.
By:___________________________________
Name:
Title:
VEREINS-UND WESTBANK AG
By:___________________________________
Name:
Title:
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<PAGE>
CONSENT AND AGREEMENT
Each of the undersigned, referred to in the foregoing Loan Agreement
as the "Guarantors", hereby consents and agrees to said Agreement and to the
documents contemplated thereby and to the provisions contained therein relating
to conditions to be fulfilled and obligations to be performed by the undersigned
pursuant to or in connection with said Agreement and agrees particularly to be
bound by the representations, warranties and covenants relating to the
undersigned contained in Sections 2 and 9 of said Agreement to the same extent
as if the undersigned were a party to said Agreement, and expressly agrees to
the grant of a security interest in favor of the Syndication Agent in the
undersigned's accounts pursuant to Section 9.1(s) of said Agreement.
ALMA SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
CAIRO SEA SHIPPING LLC
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
CZANTORIA SHIPPING LLC
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
DANUBE SHIPPING LLC
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
<PAGE>
ISERE SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
LAUREL SHIPPING LLC
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
LIMAR SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
LOIRE SHIPPING LLC
By OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
MENDALA II TRANSPORT, INC.
By OMI Corporation, sole shareholder
By:_____________________________________
Vincent de Sostoa
Treasurer
<PAGE>
PAGODA SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
PECOS SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
SABINE SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
SACRAMENTO SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
<PAGE>
SEINE SHIPPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
SEVERN SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
SHANNON SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
SOKOLICA SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
SOYANG SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
<PAGE>
TIBER SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
TRENT SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
TRINIDAD SEA SHIPPING LLC
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
UBC CHARTERING LTD.
by OMI Corporation, sole shareholder
By:_____________________________________
Vincent de Sostoa
Treasurer
================================================================================
LOAN AGREEMENT PROVIDING FOR A
US$46,500,000
SECURED TERM LOAN FACILITY
TO BE MADE AVAILABLE TO
OMI CORPORATION
BY
CHRISTIANIA BANK OG KREDITKASSE ASA,
acting through its New York branch,
as Arranger and Administrative Agent,
DEN NORSKE BANK ASA,
acting through its New York branch,
as Arranger and Syndication Agent,
MEESPIERSON CAPITAL CORP.,
as Arranger and Security Agent,
and the Banks and Financial Institutions
identified on Schedule 1, as Lenders
================================================================================
as of February 4, 2000
<PAGE>
CONTENTS
PAGE
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1. DEFINITIONS..............................................................1
1.1 Specific Definitions...................................................1
1.2 Computations of Time Periods; Other Definitional Provisions...........18
1.3 Accounting Terms......................................................18
1.4 Certain Matter Regarding Materiality..................................18
1.5 Forms of Documents....................................................18
2. REPRESENTATIONS AND WARRANTIES..........................................18
2.1 Representations and Warranties........................................18
(a) Due Organization and Power......................................18
(b) Authorization and Consents......................................19
(c) Binding Obligations.............................................19
(d) No Violation....................................................19
(e) Litigation......................................................19
(f) No Default......................................................19
(g) Vessels.........................................................19
(h) Insurance.......................................................20
(i) Financial Information...........................................20
(j) Tax Returns.....................................................20
(k) ERISA...........................................................20
(l) Chief Executive Office..........................................20
(m) Foreign Trade Control Regulations...............................20
(n) Equity Ownership................................................21
(o) Environmental Matters and Claims................................21
(p) Compliance with ISM Code........................................22
(q) Threatened Withdrawal of DOC or SMC.............................22
(r) Approved Business Plan..........................................22
(s) Liens...........................................................22
(t) Indebtedness....................................................22
(u) Survival........................................................22
3. THE LOAN................................................................22
3.1 (a) Purpose...........................................................22
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(b) Making of the Loan..............................................22
3.2 Drawdown Notice.......................................................22
3.3 Effect of Drawdown Notice.............................................23
4. CONDITIONS..............................................................23
4.1 Conditions Precedent to Drawdown of the Loan..........................23
(a) Corporate Authority...............................................23
(b) The Vessels.......................................................24
(c) The Note..........................................................24
(d) Guarantor and Subordinated Guarantor Documents....................24
(e) Pledge Agreement..................................................25
(f) Coordination Agreement............................................25
(g) Vessel Appraisals.................................................25
(h) Guarantor and Subordinated Guarantor Solvency.....................25
(i) Environmental Claims..............................................25
(j) Fees..............................................................25
(k) Accounts..........................................................25
(l) Vessel Liens......................................................25
(m) Approved Business Plan............................................26
(n) Facility A........................................................26
(o) Charters; Pooling Agreements......................................26
(p) Legal Opinions....................................................26
4.2 Further Conditions Precedent..........................................26
4.3 Breakfunding Costs....................................................26
4.4 Satisfaction after Drawdown...........................................27
5. REPAYMENT AND PREPAYMENT................................................27
5.1 Repayment.............................................................27
5.2 Voluntary Prepayment; no re-borrowing.................................27
5.3 Mandatory Prepayment; Sale or Loss of Vessel..........................27
(a) First Vessel....................................................27
(b) Third Vessel....................................................27
5.4 Mandatory Prepayment; New Capital.....................................27
5.5 Demand Conversion.....................................................28
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5.6 Interest and Costs with Prepayments...................................28
6. INTEREST AND RATE.......................................................28
6.1 Applicable Rate.......................................................28
6.2 Default Rate..........................................................28
6.3 Interest Periods......................................................28
6.4 Interest Payments.....................................................28
7. PAYMENTS................................................................29
7.1 Place of Payments, No Set Off.........................................29
7.2 Tax Credits...........................................................29
7.3 Computations; Banking Days. (a)......................................29
8. EVENTS OF DEFAULT.......................................................29
8.1 Events of Default.....................................................29
(a) Non-Payment of Principal........................................29
(b) Non-Payment of Interest or Other Amounts........................29
(c) Representations.................................................30
(d) Mortgage........................................................30
(e) Covenants.......................................................30
(f) Indebtedness....................................................30
(g) Ownership of Guarantors and Subordinated Guarantors.............30
(h) Bankruptcy......................................................30
(i) Termination of Operations; Sale of Assets.......................31
(j) Judgments.......................................................31
(k) Inability to Pay Debts..........................................31
(l) Change in Financial Position....................................31
(m) Change in Control...............................................31
(n) ERISA Debt......................................................31
(o) Approved Business Plan..........................................31
(p) Cross-Default...................................................31
8.2 Indemnification.......................................................32
8.3 Application of Moneys.................................................32
(a) first,..........................................................32
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(b) secondly,.......................................................32
(c) thirdly,........................................................32
(d) fourthly,.......................................................32
(e) fifthly,........................................................32
9. COVENANTS...............................................................33
9.1 Affirmative Covenants.................................................33
(a) Performance of Agreements.......................................33
(b) Notice of Default, etc..........................................33
(c) Obtain Consents.................................................33
(d) Financial Information...........................................33
(e) Corporate Existence.............................................34
(f) Books and Records...............................................34
(g) Taxes and Assessments...........................................34
(h) Inspection......................................................34
(i) Compliance with Statutes, Agreements, etc.......................34
(j) Environmental Matters...........................................35
(k) ERISA...........................................................35
(l) Vessel Management...............................................35
(m) Funded Debt to Total Capitalization Ratio.......................35
(n) Cash............................................................36
(o) Consolidated Net Worth..........................................36
(p) EBITDA to Interest Expense......................................36
(q) Use of Excess Cash..............................................36
(r) Brokerage Commissions, etc......................................37
(s) Deposit Accounts; Assignment....................................37
(t) Future Guaranties...............................................37
(u) Future Pledge Agreements........................................37
(v) Insurance.......................................................37
9.2 Negative Covenants....................................................37
(a) Liens...........................................................37
(b) Change in Business..............................................38
(c) Sale or Pledge of Shares........................................38
(d) Sale of Assets..................................................38
(e) Changes in Offices or Names.....................................38
(f) Consolidation and Merger........................................39
(g) Chartering-in...................................................39
(h) Chartering-out..................................................39
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(i) Vessel Pooling..................................................39
(j) Distributions on Stock..........................................39
(k) Indebtedness....................................................39
(l) Investments.....................................................39
(m) Capital Expenditures............................................39
(n) Deposit Accounts................................................39
(o) Change Fiscal Year..............................................39
9.3 Subsidiary Negative Covenants.........................................39
(a) Limitations on Ability to Make Distributions....................39
(b) Use of Corporate Funds..........................................40
(c) Issuance of Shares..............................................40
9.4 First Vessel Valuations...............................................40
9.5 Asset Maintenance.....................................................40
9.6 Inspection and Survey Reports.........................................40
10. ASSIGNMENT..............................................................41
11. ILLEGALITY, INCREASED COST, NON-AVAILABILITY, ETC.......................41
11.1 Illegality............................................................41
11.2 Increased Costs.......................................................41
11.3 Nonavailability of Funds..............................................42
11.4 Lender's Certificate Conclusive.......................................42
11.5 Compensation for Losses...............................................42
12. CURRENCY INDEMNITY......................................................43
12.1 Currency Conversion...................................................43
12.2 Change in Exchange Rate...............................................43
12.3 Additional Debt Due...................................................43
12.4 Rate of Exchange......................................................43
13. FEES AND EXPENSES.......................................................43
13.1 Fees..................................................................43
13.2 Expenses..............................................................43
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14. APPLICABLE LAW, JURISDICTION AND WAIVER.................................44
14.1 Applicable Law........................................................44
14.2 Jurisdiction..........................................................44
14.3 WAIVER OF JURY TRIAL..................................................44
15. THE AGENTs..............................................................44
15.1 Appointment of Agents.................................................44
15.2 Security Agent as Trustee.............................................45
15.3 Distribution of Payments..............................................45
15.4 Holder of Interest in Note............................................45
15.5 No Duty to Examine, Etc...............................................45
15.6 Agents as Lenders.....................................................45
15.7 Acts of the Agents....................................................45
15.8 Certain Amendments....................................................46
15.9 Assumption re Event of Default........................................46
15.10 Limitations of Liability.............................................47
15.11 Indemnification of the Agents........................................47
15.12 Consultation with Counsel............................................47
15.13 Resignation..........................................................47
15.14 Representations of Lenders...........................................48
15.15 Notification of Event of Default.....................................48
16. NOTICES AND DEMANDS.....................................................48
16.1 Notices...............................................................48
17. MISCELLANEOUS...........................................................49
17.1 Time of Essence.......................................................49
17.2 Unenforceable, etc., Provisions - Effect..............................49
17.3 References............................................................49
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17.4 Further Assurances....................................................49
17.5 Prior Agreements, Merger..............................................49
17.6 Entire Agreement; Amendments..........................................49
17.7 Indemnification.......................................................49
17.8 Release of Designated Vessel Owner Guaranty...........................50
17.9 Headings..............................................................50
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SCHEDULE
1 The Lenders and the Commitments
2 OMI and Affiliates
3 The First Vessels
4 The Third Vessels
5 Planned Reduction Dates and Amounts
6 Disclosure
EXHIBITS
A Form of Note
B Form of Guaranty
C Form of Subordinated Guaranty
D Form of Pledge Agreement
E Form of First Mortgage
F Form of Third Mortgage
G Form of First Earnings Assignment
H Form of Third Earnings Assignment
I Form of First Insurances Assignment
J Form of Third Insurances Assignment
K Form of Assignment and Assumption Agreement
L Form of Compliance Certificate
M Form of Drawdown Notice
N Form of Interest Notice
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LOAN AGREEMENT
THIS LOAN AGREEMENT is made as of the 4th day of February, 2000, by
and among (1) OMI CORPORATION, a corporation incorporated under the laws of the
Republic of the Marshall Islands (the "Borrower"), (2) the banks and financial
institutions listed on Schedule 1, as lenders (together with any bank or
financial institution which becomes a Lender pursuant to Article 10, the
"Lenders"), (3) CHRISTIANIA BANK OG KREDITKASSE ASA, acting through its New York
branch ("CBK"), as Administrative Agent for the Lenders (in such capacity, the
"Administrative Agent") and as arranger, (4) DEN NORSKE BANK ASA, acting through
its New York branch ("DnB"), as syndication agent for the Lenders (in such
capacity, the "Syndication Agent") and as arranger, and (5) MEESPIERSON CAPITAL
CORP. ("MeesPierson"), as arranger (in such capacity, together with CBK and DnB
as arrangers, the "Arrangers") and as security agent for the Lenders (in such
capacity, the "Security Agent" and, together with the Administrative Agent and
the Syndication Agent, the "Agents").
WITNESSETH THAT:
WHEREAS, at the request of the Borrower, the Arrangers have arranged
for the Agents to serve in their respective capacities under the terms of this
Agreement and for the Lenders to provide to the Borrower a secured term loan
facility in the amount of up to US$46,500,000;
NOW, THEREFORE, in consideration of the premises set forth above,
the covenants and agreements hereinafter set forth, and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as set forth below:
1. DEFINITIONS
1.1 Specific Definitions. In this Agreement the words and expressions specified
below shall, except where the context otherwise requires, have the meanings
attributed to them below:
"Acceptable Accounting Firm" means Deloitte & Touche LLP, or such other
recognized international accounting firm as shall
be approved by the Administrative Agent, such
approval not to be unreasonably withheld;
"Affiliate" means with respect to any Person, any other
Person directly or indirectly controlled by or
under common control with such Person. For the
purposes of this definition, "control"
(including, with correlative meanings, the terms
"controlled by" and "under common control with")
as applied to any Person means the possession
directly or indirectly of the power to direct or
cause the direction of the management and
policies of that Person whether through ownership
of voting securities or by contract or otherwise;
for purposes of Section 8.1(f), "Affiliate" shall
also include each of Alliance Chartering LLC,
International Product Carriers Limited, Geraldton
Navigation Company Incorporated, Amazon
Transport, Inc. and Hayes Navigation Co. Pte.
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Ltd. unless and until the Borrower's direct or
indirect interest in and to such company has
ceased;
"Agreement" means this Agreement, as the same shall be
amended, modified or supplemented from time to
time;
"Applicable Rate" means any rate of interest applicable to the Loan
from time to time pursuant to Section 6.1;
"Approved Business Plan" means a detailed business plan for reducing
leverage and increasing liquidity, in form and in
substance satisfactory to the Agents, specifying,
among other things, the Planned Reduction Dates
and Planned Reduction Amounts;
"Assigned Moneys" means sums assigned to or received by any Agent
pursuant to any Security Document;
"Assignment and Assumption means the Assignment and Assumption Agreement(s)
Agreement(s)" executed pursuant to Section 10 substantially in
the form set out in Exhibit K;
"Assignment Notices" means
(i) notices with respect to the First Earnings
Assignments substantially in the form of
Exhibit 1 thereto;
(ii) notices with respect to the Third Earnings
Assignments, substantially in the form of
Exhibit 1 thereto;
(iii) notices with respect to the First
Insurances Assignments substantially in
the form of Exhibit 3 thereto; and
(iv) notices with respect to the Third
Insurances Assignments in the form of
Exhibit 3 thereto;
"Assignments" means the First Assignments and the Third
Assignments;
"Availability Period" means the period commencing the date hereof and
ending February 29, 2000;
"Banking Day(s)" means day(s) on which banks are open for the
transaction of business in London, England, Hong
Kong, Frankfurt, Germany and New York, New York;
"Capital Expenditures" means all capital expenditures except for (i)
normal maintenance of Vessels and other
properties and (ii) Permitted Drydocking Costs;
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"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
(provided that the full faith and credit of the
United States of America is pledged in support
thereof), and (ii) time deposits, certificates of
deposit or deposits in the interbank market of
any commercial bank of recognized standing
organized under the laws of the United States of
America, any state thereof or any foreign
jurisdiction having capital and surplus in excess
of $500,000,000, and rated at least A or the
equivalent thereof by Standard & Poor's Rating
Services in respect of both (i) and (ii) above,
in each case having maturities of not more than
ninety (90) days from the date of acquisition;
"Change of Control" means (a) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act)
becomes the beneficial owner (as defined in Rules
13d-3 and 13d-5 under the Exchange Act), directly
or indirectly, of more than 35% of the total
voting power of the Borrower or (b) the Board of
Directors of the Borrower ceases to consist of a
majority of the directors existing on the
Drawdown Date or directors nominated by at least
two-thirds (2/3) of the then existing directors;
"Classification Society" shall mean a member of the International
Association of Classification Societies with whom
the Vessels are entered and who conducted
periodic physical surveys and/or inspections of
the Vessels;
"Code" means the Internal Revenue Code of 1986, as
amended, and any successor statute and regulation
promulgated thereunder;
"Collateral" means, all property or other assets, real or
personal, tangible or intangible, whether now
owned or hereafter acquired in which any Agent or
Lender has been granted a security interest
pursuant to a Security Document;
"Columbia Lease" means that certain charter agreement dated as of
June 30, 1999 made by and between Sea Trade
Limited, as owner, and Columbia Shipping, as
charterer, in respect of the Marshall
Islands-registered suezmax tanker COLUMBIA,
official number 1272;
"Columbia Shipping" means Columbia Shipping LLC, a limited liability
company organized under the laws of the Republic
of the Marshall Islands;
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"Commitment(s)" means in relation to a Lender, the portion of the
Loan set out opposite its name in Schedule 1 or,
as the case may be, in any relevant Assignment
and Assumption Agreement;
"Compliance Certificate" means a certificate certifying the compliance by
the Borrower with all of its covenants contained
herein and showing the calculations thereof in
reasonable detail, delivered by the chief
financial officer of the Borrower to the
Administrative Agent from time to time pursuant
to Section 9.1(d) in the form set out in Exhibit
L, or in such other form as the Administrative
Agent may agree;
"Consolidated Net Worth" means, at any time, shareholders equity
(excluding treasury stock) of the Borrower on a
consolidated basis determined in accordance with
GAAP;
"Default Rate" shall have the meaning ascribed thereto in
Section 6.2;
"Designated Indebtedness" means Indebtedness that is
(i) incurred by the Designated Vessel Owner to
finance the Designated Vessel Acquisition,
(ii) non-recourse to the Borrower and the
Borrower's Subsidiaries (other than the
Designated Vessel Owner),
and
(iii) in an amount not exceeding $30.0 million;
"Designated Subsidiary" means (i) during the term of the Columbia Lease,
Columbia Shipping, (ii) while the Designated
Indebtedness is outstanding, the Designated
Vessel Owner, and (iii) any Subsidiary of the
Borrower (A) which is not a Guarantor or a
Subordinated Guarantor, (B) which has total
assets of $1,000 or less, (C) which is not
engaged in any financing that is recourse to the
Borrower or any other Subsidiary of the
Borrower, (D) in respect of which the Borrower
has requested that the Administrative Agent
permit such Subsidiary's designation as a
Designated Subsidiary, and (E) in respect of
which the Administrative Agent had consented in
writing to such designation;
"Designated Vessel" means the MEGA I or the SOYANG, whichever thereof
is designated by the Borrower by written notice
to the
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Administrative Agent as the vessel to be financed
on a non-recourse basis in accordance with the
terms and conditions herein provided;
"Designated Vessel means the acquisition of the Designated Vessel by
Acquisition" the Designated Vessel Owner, occurring not later
than June 30, 2000, or such other date as may be
agreed by the Administrative Agent;
"Designated Vessel means, upon or prior to the Designated Vessel
Conditions" Acquisition,
(i) the Borrower having received not less than
$18.0 million net cash proceeds from the
issuance of equity securities of the
Borrower after the Drawdown Date;
(ii) in the event the Designated Vessel is the
SOYANG, the Borrower (and its Subsidiaries
on a consolidated basis) not having
contributed more than the amount of the
SOYANG Investment to the Designated Vessel
Acquisition;
(iii) the Borrower (and its Subsidiaries on a
consolidated basis) not having incurred any
Indebtedness other than the Designated
Vessel Indebtedness to finance the
Designated Vessel Acquisition;
(iv) the Designated Vessel being accepted for
service under a time charter of not less
than twelve (12) months duration at a rate
of hire sufficient to pay reasonably
anticipated operating expenses and to
amortize (on a level-debt service basis),
on a maximum 15-years profile, all
Indebtedness incurred to finance the
Designated Vessel Acquisition for the
duration of such time charter;
(v) true and complete copies of all contracts,
agreements or other documents entered into
by the Borrower or any Subsidiary in
connection with the Designated Vessel
Acquisition being delivered to and approved
by the Administrative Agent;
(vi) not later than ten (10) Banking Days prior
to the date of the Designated Vessel
Acquisition, the Borrower having delivered
to the Administration Agent a Compliance
Certificate as of such date and after
considering the effect of the Designated
Vessel Acquisition; and
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(vii) immediately prior to the Designated Vessel
Acquisition, the Designated Vessel owner
has total assets of less that $500,000 and
has no Subsidiaries;
"Designated Vessel Owner" means the Subsidiary which is the owner of the
Designated Vessel;
"DOC" means a document of compliance issued to an
Operator in accordance with rule 13 of the ISM
Code;
"Dollars" and the sign "$" means the legal currency, at any relevant time
hereunder, of the United States of America and,
in relation to all payments hereunder, in same
day funds settled through the New York Clearing
House Interbank Payments System (or such other
Dollar funds as may be determined by the
Administrative Agent to be customary for the
settlement in New York City of banking
transactions of the type herein involved);
"Drawdown Date" means the date, being a Banking Day during the
Availability Period, upon which the Borrower has
requested that the Loan be made available to the
Borrower, and the Loan is made, as provided in
Section 3;
"Drawdown Notice" shall have the meaning ascribed thereto in
Section 3.2;
"EBITDA" means, with respect to any Person for any period,
operating income, plus depreciation, amortization
and other non-cash charges, but excluding any
gains or losses on vessel sales, any writedown
amounts, or any impairment reserves;
"Environmental Affiliate" means any person or entity, the liability of
which for Environmental Claims any Security Party
or Subsidiary of any Security Party may have
assumed by contract or operation of law;
"Environmental Approvals" shall have the meaning ascribed thereto in
Section 2.1(o);
"Environmental Claim(s)" shall have the meaning ascribed thereto in
Section 2.1(o);
"Environmental Laws" shall have the meaning ascribed thereto in
Section 2.1(o);
"ERISA" means the Employment Retirement Income Security
Act of 1974, as amended;
"ERISA Affiliate" means a trade or business (whether or not
incorporated) which is under common control with
the Borrower within the meaning of Sections
414(b), (c), (m) or (o) of the Code;
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"Event(s) of Default" means any of the events set out in Section 8.1;
"Exchange Act" shall mean the Securities and Exchange Act of
1934, as amended;
"Facility A" means the loan facility in the principal
amount of up to $218,000,000 to be made available
to the Borrower pursuant to the Facility A Loan
Agreement;
"Facility A means CBK, in its capacity as administrative
Administrative Agent" agent for the Facility A Lenders;
"Facility A Agents" means the Facility A Administrative Agent, the
Facility A Syndication Agent and the Facility A
Security Agent;
"Facility A Guaranty" means the guaranty made by each of the guarantors
of the obligations of the Borrower under the
Facility A Loan Agreement;
"Facility A Lenders" means the banks and financial institutions
identified in Schedule 1 to the Facility A Loan
Agreement, each in its capacity as a lender
pursuant to the Facility A Loan Agreement;
"Facility A Loan Agreement" means the loan agreement to be dated on or about
the date hereof made by and among, inter alios,
the Borrower, as borrower, and the Facility A
Lenders, as lenders, pursuant to which the
Facility A Lenders will make Facility A available
to the Borrower for the purpose of refinancing
existing indebtedness secured by the Third
Vessels;
"Facility A Mortgages" means the first preferred Liberian and/or
Marshall Islands ship mortgages on the Third
Vessels, to be executed by the relevant
Subordinated Guarantor in favor of the Facility A
Security Agent pursuant to the Facility A Loan
Agreement;
"Facility A Pledge Agreement" means any pledge agreement executed by the
Borrower in favor of the Facility A Security
Agent pursuant to the Facility A Loan Agreement
and pursuant to which the Borrower pledges
shares, limited liability company interests or
other equity interests in any Guarantor or
Subordinated Guarantor;
"Facility A Security Agent" means MeesPierson, in its capacity as security
agent for the Facility A Lenders;
"Facility A Security means the Security Documents as defined in the
Documents" Facility A Loan Agreement;
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"Facility A Syndication Agent" means DnB, in its capacity as syndication agent
for the Facility A Lenders;
"Facility C" means the convertible letter of credit facility
in the principal amount of $36,00,000 to be made
available to the Borrower pursuant to the
Facility C Agreement;
"Facility C Administrative means CBK, in its capacity as administrative
Agent" agent for the Facility C Banks;
"Facility C Agents" means the Facility C Administrative Agent, the
Facility C Security Agent and the Facility C
Syndication Agent;
"Facility C Agreement" means the facility agreement to be dated on or
about the date hereof made by and among, inter
alia, the Borrower and the Facility C Banks,
pursuant to which the Facility C Banks will make
Facility C available to the Borrower for the
purpose of issuing a standby letter of credit in
favor of the Facility A Security Agent;
"Facility C Banks" means the banks and other financial institutions
identified on Schedule 1 to the Facility C
Agreement;
"Facility C Security Agent" means MeesPierson, in its capacity as security
agent for the Facility C Banks;
"Facility C Security means the Security Documents as defined in the
Documents" Facility C Agreement;
"Facility C Syndication Agent" means DnB, in its capacity as syndication agent
for the Facility C Banks;
"Fair Market Value" means, in respect of any vessel, means the
average of three charter-free appraisals of such
vessel from independent ship brokers approved by
the Administrative Agent, no such appraisal to be
dated more than thirty (30) days prior to the
date on which such appraisal is required pursuant
to this Agreement unless the Administrative Agent
consents in writing (on each occasion) to the use
of an older appraisal;
"Fee Letter" means the letter dated November 15, 1999 and
entered into by the Borrower, the Arrangers and
the Agents in respect of the fees referred to
therein;
"Final Payment Date" means the date that is two years after the
Drawdown Date, provided, however, that if the
Loan is converted to a
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demand loan pursuant to Section 5.5, then the
Final Payment Date shall be such date as the
Administrative Agent demands repayment of the
Loan;
"First Assignments" means the First Earnings Assignments and the
First Insurances Assignments;
"First Earnings Assignments" means the first priority assignments in respect
of the earnings of each First Vessel (other than
the SETTEBELLO) from any and all sources, to be
executed in favor of the Security Agent pursuant
to Section 4.1(d), substantially in the form of
Exhibit G;
"First Insurances Assignments" means the first priority assignments in respect
of the insurances over the First Vessels (other
than the SETTEBELLO), to be executed by the
relevant Guarantor in favor of the Security Agent
pursuant to Section 4.1(d), substantially in the
form of Exhibit I;
"First Mortgages" means the first preferred Liberian ship mortgages
on the First Vessels, to be executed by the
relevant Guarantor in favor of the Security Agent
(as trustee for the Lenders), substantially in
the form of Exhibit E;
"First Vessels" means the vessels listed in Schedule 3,
registered in the ownership of the relevant
Guarantor as set forth in Schedule 3;
"Funded Debt" shall mean on a consolidated basis for the
Borrower (without duplication), the sum of (i)
all Indebtedness of the Borrower (on a
consolidated basis), (ii) all obligations to pay
a specific purchase price for goods or services
whether or not delivered or accepted, i.e.,
take-or-pay and similar obligations which in
accordance with GAAP would be shown on the
liability side of the balance sheet, (iii) all
net obligations under Interest Rate Agreements,
and (iv) all guarantees of non-consolidated
entity obligations; provided, however, that
balance sheet accruals for future drydock
expenses shall not be classified as Funded Debt;
"GAAP" shall have the meaning ascribed thereto in
Section 1.3;
"Guarantor(s)" means, as of the date of this Agreement, each of
the companies listed in Schedule 2 as Guarantors
(including the SETTEBELLO Guarantor) and
thereafter shall also mean such companies as may
execute a Guaranty pursuant to Section 9.1(t) or
otherwise;
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"Guaranty(ies)" means the guaranty to be executed by each
Guarantor in respect of the obligations of the
Borrower under and in connection with this
Agreement and the Note in favor of the Security
Agent pursuant to Section 4.l(d), and any
guaranty executed thereafter pursuant to Section
9.1(t) or otherwise, each substantially in the
form of Exhibit B;
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all
indebtedness of such Person for borrowed money,
(ii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar
instruments, (iii) all obligations of such Person
in respect of letters of credit or other similar
instruments (including reimbursement obligations
with respect thereto), (iv) all obligations of
such Person to pay the deferred and unpaid
purchase price of property or services, which
purchase price is due more than six months after
the date of placing such property in service or
taking delivery thereof or the completion of such
services, except trade payables, (v) all
obligations on account of principal of such
Person as lessee under capitalized leases, (vi)
all indebtedness of other Persons secured by a
lien on any asset of such Person, whether or not
such indebtedness is assumed by such Person;
provided that the amount of such indebtedness
shall be the lesser of (a) the fair market value
of such asset at such date of determination and
(b) the amount of such indebtedness, and (vii)
all indebtedness of other Persons guaranteed by
such Person to the extent guaranteed; the amount
of Indebtedness of any Person at any date shall
be the outstanding balance at such date of all
unconditional obligations as described above and,
with respect to contingent obligations, the
maximum liability upon the occurrence of the
contingency giving rise to the obligation,
provided that the amount outstanding at any time
of any indebtedness issued with original issue
discount is the face amount of such indebtedness
less the remaining unamortized portion of the
original issue discount of such indebtedness at
such time as determined in conformity with GAAP;
and provided further that Indebtedness shall not
include any liability for current or deferred
federal, state, local or other taxes, or any
trade payables;
"Initial Payment Date" means the date which is six months after the
Drawdown Date;
"Intercreditor Agreement" means the intercreditor agreement dated on or
about the date hereof entered into by and among
the Agents, the
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Facility A Agents and the Facility C Agents;
"Interest Expense" means for any period, all interest charges,
including the interest component of capitalized
leases;
"Interest Notice" means a notice from the Borrower to the
Administrative Agent specifying the duration of
any relevant Interest Period, each substantially
in the form of Exhibit N;
"Interest Period(s)" means period(s) of one, three or six months
selected by the Borrower or, in the Lenders'
discretion, such other period(s) as may be
agreed;
"Interest Rate Agreements" means any interest rate protection agreement,
interest rate future agreement, interest rate
option agreement, interest rate swap agreement,
interest rate cap agreement, interest rate collar
agreement, interest rate hedge agreement or other
similar agreement or arrangement designed to
protect the Borrower or any of its Subsidiaries
against fluctuations in interest rates to or
under which the Borrower or any of its
Subsidiaries is a party or a beneficiary on the
date of this Agreement or becomes a party or a
beneficiary hereafter;
"Investment" means any direct or indirect advance, loan or
other extension of credit (including by way of
guarantee or similar arrangement) or capital
contribution to (by means of any transfer of cash
or other property to others or any payment for
property or services for the account or use of
others), or any purchase or acquisition of
capital stock (or other equity interest),
Indebtedness or other similar instruments;
"ISM Code" means the International Safety Management Code
for the Safe Operating of Ships and for Pollution
Prevention constituted pursuant to Resolution
A.741(18) of the International Maritime
Organization and incorporated into the Safety of
Life at Sea Convention and includes any
amendments or extensions thereto and any
regulation issued pursuant thereto;
"LIBOR" means the rate (rounded upward to the nearest
1/16th of one percent) for deposits of Dollars
for a period equivalent to the relevant Interest
Period at or about 11:00 a.m. (London time) on
the second London Banking Day before the first
day of such period as displayed on Telerate page
3750 (British Bankers' Association Interest
Settlement Rates) (or such other page as may
replace such page 3750 on such system or on any
other system of the
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information vendor for the time being designated
by the British Bankers' Association to calculate
the BBA Interest Settlement Rate (as defined in
the British Bankers' Association's Recommended
Terms and Conditions ("BBAIRS" terms) dated
August 1985)), provided that if on such date no
such rate is so displayed for the relevant
Interest Period, LIBOR for such period shall be
the arithmetic mean (rounded upward if necessary
to four decimal places) of the rates respectively
quoted to the Administrative Agent by each of the
Reference Banks at the request of the
Administrative Agent as the offered rate for
deposits of Dollars in an amount approximately
equal to the amount in relation to which LIBOR is
to be determined for a period equivalent to the
relevant Interest Period to prime banks in the
London Interbank Market at or about 11:00 a.m.
(London time) on the second Banking Day before
the first day of such period;
"Loan" means the loan facility to be made available by
the Lenders to the Borrower pursuant to Section 3
in the original principal amount of up to
Forty-Six Million Five Hundred Thousand Dollars
(US$46,500,000), or the balance thereof from time
to time outstanding;
"Majority Lenders" at any time means Lenders holding an aggregate of
more then 50% of the Loan then outstanding;
"Margin" means
(i) until the first anniversary of the
Drawdown Date, three percent (3%) per
annum; and
(ii) thereafter, four percent (4%) per annum;
provided, however, that after the first Planned
Reduction Date, if and so long as (A) no Event of
Default has occurred and is continuing, (B) each
Planned Reduction Amount has been paid to the
Administrative Agent in full not later than the
relevant Planned Reduction Date, and (C) the
ratio of the Loan to the aggregate of the most
recently determined Fair Market Values of the
First Vessels is less than 0.65 to 1.0, the
Margin shall be one and three-quarter percent
(1.75%) per annum;
"Material Adverse Effect" means a material adverse effect on (I) the
ability of the Borrower to repay the Loan or
perform any of its obligations hereunder or under
the Note, (ii) the ability of any Security Party
to perform its obligations under any Security
Documents or (iii) the business, property,
assets,
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liabilities, operations, condition (financial or
otherwise) or prospects of the Borrower and the
other Security Parties taken as a whole;
"Materials of Environmental shall have the meaning ascribed thereto in
Concern" Section 2.1(o);
"Mortgages" means the First Mortgages and the Third
Mortgages;
"Multiemployer Plan" means, at any time, a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA to which
the Borrower or any ERISA Affiliate is making or
accruing an obligation to make contributions or
has within any of the three preceding plan years
made or accrued an obligation to make
contributions;
"Multiple Employer Plan" means, at any time, an employee benefit plan,
other than a Multiemployer Plan, subject to Title
IV or ERISA, to which the Borrower or any ERISA
Affiliate, and one or more employers other than
the Borrower or an ERISA Affiliate, is making or
accruing an obligation to make contributions or,
in the event that any such plan has been
terminated, to which the Borrower or any ERISA
Affiliate made or accrued an obligation to make
contributions during any of the five plan years
preceding the date of termination of such plan;
"Note" means the promissory note to be executed by the
Borrower to the order of the Security Agent
pursuant to Section 4.1(c), to evidence the Loan,
substantially in the form of Exhibit A;
"Operator" means, in respect of any Vessel, the Person who
is concerned with the operation of such Vessel
and falls within the definition of "Company" set
out in rule 1.1.2 of the ISM Code;
"PBGC" means the Pension Benefit Guaranty Corporation;
"Permitted Drydocking Costs" means (i) in respect of any one Vessel, $2.0
million in any calendar year, and (ii) in respect
of all Vessels on an aggregated basis, $5.0
million in any calendar year, expended for
drydocking costs;
"Person" means any individual, sole proprietorship,
corporation, partnership (general or limited),
limited liability company, business trust, bank,
trust company, joint venture, association, joint
stock company, trust or other
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unincorporated organization, whether or not a
legal entity, or any government or agency or
political subdivision thereof;
"Plan" means any employee benefit plan (other than a
Multiemployer Plan or a Multiple Employer Plan)
covered by Title IV of ERISA;
"Planned Reduction Amounts" means the Dollar amounts specified in the
Approved Business Plan to be applied in repayment
of the Loan by the Planned Reduction Dates, as
set forth in Schedule 5;
"Planned Reduction Dates" means the dates specified in the Approved
Business Plan by which the Planned Reduction
Amounts will be applied in repayment of the Loan,
as set forth in Schedule 5;
"Pledge Agreement(s)" means the pledge agreements in respect of the
Pledged Shares to be executed by the Borrower and
the SETTEBELLO Guarantor in favor of the Security
Agent pursuant to Section 4.1(e), and any pledge
agreement executed thereafter pursuant to Section
9.1(u), each substantially in the form of Exhibit
D;
"Pledged Shares" means the shares of capital stock, limited
liability company interests or other equity
interests of the Guarantors that own the Facility
B Vessels and the SETTEBELLO Pledged Shares,
owned by the Borrower (or, in respect of the
SETTEBELLO Pledged Shares, by the SETTEBELLO
Guarantor) and pledged to the Security Agent
pursuant to a Pledge Agreement;
"Prime Rate" means, from time to time, the rate of interest
publicly announced by the Administrative Agent in
New York City, New York, as its prime rate;
"Reference Banks" means Den norske Bank ASA, Christiania Bank og
Kreditkasse ASA and MeesPierson N.V.;
"Required Percentage" shall have the meaning set forth for such term in
Section 9.5;
"Restricted Payments" shall have the meaning attributed thereto in
Section 9.2(j);
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"Security Documents" means the Pledge Agreement, the Guaranties, the
Subordinated Guaranties, the Mortgages, the
Assignments and any other documents that may be
executed as security for the Loan and the
Borrower's obligations in connection therewith;
"Security Party(ies)" means the Borrower, each of the Guarantors and
each of the Subordinated Guarantors;
"SETTEBELLO Guarantor" means Loire Shipping LLC, a limited liability
company organized under the laws of the Republic
of the Marshall Islands;
"SETTEBELLO Owner" means Amazon Transport, Inc., a corporation
organized under the laws of the Republic of
Liberia;
"SETTEBELLO Partner" means Bergesen d.y. ASA, a corporation organized
under the laws of the Kingdom of Norway;
"SETTEBELLO Partner Consent" means a written consent of the SETTEBELLO Partner
to the pledge by the SETTEBELLO Guarantor of its
shares in the SETTEBELLO Owner in favor of the
Security Agent, which consent may be conditioned
upon a purchase option for such shares in favor
of the SETTEBELLO Partner at a price to be
determined by the Administrative Agent based on
the Administrative Agent's assessment of the
value of such shares;
"SETTEBELLO Pledged Shares" means the shares of capital stock of the
SETTEBELLO Owner owned by the SETTEBELLO
Guarantor;
"SMC" means the safety management certificate issued in
respect of a Vessel in accordance with rule 13 of
the ISM code;
"SOYANG" means Daewoo Hull No. 5152, currently under
construction by Daewoo Heavy Industries Ltd.,
South Korea;
"SOYANG Investment" means the contribution by the Borrower (and its
Subsidiaries on a consolidated basis) of not more
than $10.0 million of cash or Cash Equivalents
(in addition to contributions made prior to the
date of this Agreement) to the acquisition of the
SOYANG, made no earlier than the date of
acquisition thereof or three (3) days prior
thereto as required by the construction contract
for the SOYANG;
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"SOYANG Subsidiary" means Soyang Shipping LLC, a limited liability
company organized under the laws of the Republic
of the Marshall Islands;
"Subordinated Guarantor(s)" means, as of the date of this Agreement, each of
the companies listed in Schedule 2 as
Subordinated Guarantors and thereafter shall also
mean such companies as may execute a Subordinated
Guaranty pursuant to Section 9.1(t) or otherwise;
"Subordinated Guaranty" means the guaranty to be executed by each
Subordinated Guarantor in respect to the
obligations of the Borrower under and in
connection with this Agreement and the Note in
favor of the Security Agent pursuant of Section
4.1(d), and any subordinated guaranty executed
thereafter pursuant to Section 9.1(t) or
otherwise, each substantially in the form of
Exhibit C, the Security Agent's rights in respect
of each such guaranty being subordinated to the
rights of the Facility B Lenders pursuant to the
Intercreditor Agreement;
"Subsidiaries" means, with respect to any Person, any business
entity of which more than 50% of the outstanding
voting stock is owned directly or indirectly by
such Person and one or more other Subsidiaries of
such Person;
"Taxes" means any present or future income or other
taxes, levies, duties, charges, fees, deductions
or withholdings of any nature now or hereafter
imposed, levied, collected, withheld or assessed
by any taxing authority whatsoever, except for
taxes on or measured by the overall net income of
each Lender imposed by its jurisdiction of
incorporation or applicable lending office, the
United States of America, the State or City of
New York or any governmental subdivision or
taxing authority of any thereof or by any other
taxing authority having jurisdiction over such
Lender (unless such jurisdiction is asserted by
reason of the activities of the Borrower or any
of the Subsidiaries);
"Termination Event" means (i) a "reportable event," as defined in
Section 403 of ERISA (other than a "reportable
event" not subject to the provision for 30-day
notice to the PBGC), (ii) the withdrawal of the
Borrower or any ERISA Affiliate from a
Multiemployer Plan during a plan year in which it
was a "substantial employer," as defined in
Section 4001(a)(2) of ERISA, or the incurrence of
liability by the Borrower or any ERISA Affiliate
under Section 4064 of ERISA upon the termination
of a Multiple Employer Plan, (iii) the filing
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<PAGE>
of a notice of intent to terminate a Plan under
Section 4041of ERISA or the treatment of a
Multiemployer Plan amendment as a termination
under Section 4041A of ERISA, (iv) the
institution of proceedings to terminate a Plan or
a Multiemployer Plan, or (v) any other event or
condition which might constitute grounds under
Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any
Plan or Multiemployer Plan;
"Third Assignments" means the Third Earnings Assignments and the
Third Insurances Assignments;
"Third Earnings Assignments" means the third priority assignments in respect
of the earnings of each Third Vessel from any and
all sources, to be executed by the relevant
Subordinated Guarantor in favor of the Security
Agent pursuant to Section 4.1(d), substantially
in the form of Exhibit H;
"Third Insurances Assignments" means the third priority assignments in respect
of the insurances over the Third Vessels, to be
executed by the relevant Subordinated Guarantor
in favor of the Security Agent pursuant to
Section 4.1(d), substantially in the form of
Exhibit J;
"Third Mortgages" means the third preferred Liberian and/or
Marshall Islands ship mortgages on the Third
Vessels, to be executed by the relevant
Subordinated Guarantor in favor of the Security
Agent (as trustee for the Lenders) substantially
in the form of Exhibit F;
"Third Vessels" means the vessels listed in Schedule 4,
registered in the ownership of the relevant
Subordinated Guarantor as set forth in Schedule
4;
"Total Capitalization" shall mean the sum of (i) Funded Debt, plus (ii)
Consolidated Net Worth;
"Total Loss" shall have the meaning ascribed thereto in the
Mortgages;
"Vessel(s)" means the First Vessels and the Third Vessels, or
any thereof, as the context may require;
"Withdrawal Liabilities" shall have the meaning given to such term under
Part 1 of Subtitle E of Title IV of ERISA;
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1.2 Computations of Time Periods; Other Definitional Provisions. In this
Agreement, the Note and the other Security Documents, in the computation of
periods of time from a specified date to a later specified date, the word "from"
means "from and including" and the words "to" and "until" each mean "to but
excluding"; words importing either gender include the other gender; references
to "writing" include printing, typing, lithography and other means of
reproducing words in a tangible visible form; the words "including," "includes"
and "include" shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections), exhibits,
annexes or schedules are to this Agreement, the Note or such Security Document,
as applicable; references to agreements and other contractual instruments
(including this Agreement, the Note and the Security Documents) shall be deemed
to include all subsequent amendments, amendments and restatements, supplements,
extensions, replacements and other modifications to such instruments (without,
however, limiting any prohibition on any such amendments, extensions and other
modifications by the terms of this Agreement, the Note or any Security
Document); references to any matter that is "approved" or requires "approval" of
a party shall mean approval given in the sole and absolute discretion of such
party unless otherwise specified.
1.3 Accounting Terms. Unless otherwise specified herein, all accounting terms
used in this Agreement, the Note and in the Security Documents shall be
interpreted, and all financial statements and certificates and reports as to
financial matters required to be delivered to the Administrative Agent or to the
Lenders under this Agreement shall be prepared, in accordance with generally
accepted accounting principles for the United States ("GAAP").
1.4 Certain Matter Regarding Materiality. To the extent that any representation,
warranty, covenant or other undertaking of the Borrower in this Agreement is
qualified by reference to those which are not reasonably expected to result in a
"Material Adverse Effect" or language of similar import, no inference shall be
drawn therefrom that any Agent or Lender has knowledge or approves of any
noncompliance by the Borrower with any governmental rule.
1.5 Forms of Documents. Except as otherwise expressly provided in this
Agreement, references to documents or certificates "substantially in the form"
of Exhibits to another document shall mean that such documents or certificates
are duly completed in the form of the related Exhibits with substantive changes
subject to the provisions of Section 17.6 of this Agreement, as the case may be,
or the correlative provisions of the Security Documents.
2. REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties. In order to induce the Arrangers, the Agents
and the Lenders to enter into this Agreement and to induce the Lenders to make
the Loan available, the Borrower hereby represents and warrants to the
Arrangers, the Agents and the Lenders (which representations and warranties
shall survive the execution and delivery of this Agreement and the Note and the
drawdown of the Loan hereunder) that:
(a) Due Organization and Power. each Subsidiary is duly formed and
is validly existing in good standing under the laws of its jurisdiction of
incorporation or formation, has full power to carry on its business as now being
conducted and to enter into and perform its obligations under this Agreement,
the Note and the Security Documents to which it is a party, and has complied
with all statutory, regulatory and other requirements relative to such business
and such agreements;
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<PAGE>
(b) Authorization and Consents. all necessary corporate action has
been taken to authorize, and all necessary consents and authorities have been
obtained and remain in full force and effect to permit, each Security Party to
enter into and perform its obligations under this Agreement, the Note and the
Security Documents and, in the case of the Borrower, to borrow, service and
repay the Loan and, as of the date of this Agreement, no further consents or
authorities are necessary for the service and repayment of the Loan or any part
thereof;
(c) Binding Obligations. this Agreement, the Note and the Security
Documents constitute or will, when executed and delivered, constitute the legal,
valid and binding obligations of each Security Party as is a party thereto
enforceable against such Security Party in accordance with their respective
terms, except to the extent that such enforcement may be limited by equitable
principles, principles of public policy or applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting generally the enforcement of
creditors' rights;
(d) No Violation. the execution and delivery of, and the performance
of the provisions of, this Agreement, the Note, and those of the Security
Documents to which it is to be a party by each Security Party do not contravene
any applicable law or regulation existing at the date hereof or any contractual
restriction binding on such Security Party or the certificate of incorporation
or by-laws, certificate of formation and operating agreement (or equivalent
instruments) thereof;
(e) Litigation. no action, suit or proceeding is pending or
threatened against the Borrower or any Subsidiary before any court, board of
arbitration or administrative agency which could or might result in any Material
Adverse Effect;
(f) No Default. Neither the Borrower nor any Subsidiary is in
default under any material agreement by which it is bound, or is in default in
respect of any material financial commitment or obligation;
(g) Vessels. upon the date of the making of the Loan:
(i) each of the First Vessels will be in the sole and
absolute ownership of the relevant Guarantor as set
forth in Schedule 3 and duly registered in such
Guarantor's name under Liberian flag, unencumbered, save
and except for the First Mortgage and the Facility C
Mortgage recorded against it and as permitted thereby;
(ii) each of the Third Vessels will be in the sole and
absolute ownership of the relevant Subordinated
Guarantor as set forth in Schedule 4 and duly registered
in such Subordinated Guarantor's name under Liberian
and/or Marshall Islands flag, unencumbered, save and
except for the Facility A Mortgage, the Facility C
Mortgage and the Third Mortgage recorded against it and
as permitted thereby;
(iii) each Vessel will be classed in the highest
classification and rating for vessels of the same age
and type with the respective classification society as
set forth in Schedule 3 or Schedule 4, as the case may
be, without any material outstanding recommendations;
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(iv) each Vessel will be operationally seaworthy and in every
way fit for its intended service; and
(v) each Vessel will be insured in accordance with the
provisions of the Mortgage recorded against it and the
requirements thereof in respect of such insurances will
have been complied with;
(h) Insurance. the Borrower and each Subsidiary has insured its
properties and assets against such risks and in such amounts as are customary
for companies engaged in similar businesses;
(i) Financial Information. except as otherwise disclosed in writing
to the Agents on or prior to the date hereof, all financial statements,
information and other data furnished by the Borrower to the Agents are complete
and correct, such financial statements have been prepared in accordance with
GAAP and accurately and fairly present the financial condition of the parties
covered thereby as of the respective dates thereof and the results of the
operations thereof for the period or respective periods covered by such
financial statements, and since the date of the Borrower's financial statements
most recently delivered to the Administrative Agent, there has been no Material
Adverse Effect as to any of such parties and none thereof has any contingent
obligations, liabilities for taxes or other outstanding financial obligations
which are material in the aggregate except as disclosed in such statements,
information and data;
(j) Tax Returns. the Borrower and each Subsidiary has filed all
material tax returns required to be filed thereby and has paid all taxes payable
thereby which have become due, other than those not yet delinquent or the
nonpayment of which would not have a Material Adverse Effect on the Borrower and
or such Subsidiary and except for those taxes being contested in good faith and
by appropriate proceedings or other acts and for which adequate reserves shall
have been set aside on its books;
(k) ERISA. the execution and delivery of this Agreement and the
consummation of the transactions hereunder will not involve any prohibited
transaction within the meaning of ERISA or Section 4975 of the Code and no
condition exists or event or transaction has occurred in connection with any
Plan maintained or contributed to by any the Borrower or any Subsidiary or any
ERISA Affiliate resulting from the failure of any thereof to comply with ERISA
insofar as ERISA applies thereto which is reasonably likely to result in the
Borrower or any such Subsidiary or any ERISA Affiliate incurring any liability,
fine or penalty which individually or in the aggregate would have a Material
Adverse Effect. Prior to the date hereof, the Borrower has delivered to the
Administrative Agent a list of all the employee benefit plans to which the
Borrower or any Subsidiary or any ERISA Affiliate is a "party in interest"
(within the meaning of Section 3(14) of ERISA) or a "disqualified person"
(within the meaning of Section 4975(e)(2) of the Code);
(l) Chief Executive Office. the Borrower's chief executive office
and chief place of business and the office in which the records relating to the
earnings and other receivables of each Security Party are kept is, and will
continue to be, located at One Station Place, Stamford, Fairfield County,
Connecticut;
(m) Foreign Trade Control Regulations to the best of the Borrower's
knowledge, none of the transactions contemplated herein will violate any of the
provisions of the Foreign Assets
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Control Regulations of the United States of America (Title 31, Code of Federal
Regulations, Chapter V, Part 500, as amended), any of the provisions of the
Cuban Assets Control Regulations of the United States of America (Title 31, Code
of Federal Regulations, Chapter V, Part 515, as amended), any of the provisions
of the Libyan Assets Control Regulations of the United States of America (Title
31, Code of Federal Regulations, Chapter V, Part 550, as amended), any of the
provisions of the Iranian Transaction Regulations of the United States of
America (Title 31, Code of Federal Regulations, Chapter V, Part 560, as
amended), any of the provisions of the Iraqi Sanctions Regulations (Title 31,
Code of Federal Regulations, Chapter V, Part 575, as amended), any of the
provisions of the Federal Republic of Yugoslavia (Serbia and Montenegro) Assets
Control Regulations (Title 31, Code of Federal Regulations, Chapter V, Part 585
as amended) or any of the provisions of the Regulations of the United States of
America Governing Transactions in Foreign Shipping of Merchandise (Title 31,
Code of Federal Regulations, Chapter V, Part 505, as amended);
(n) Equity Ownership. each of the Guarantors and each of the
Subordinated Guarantors is a wholly owned direct subsidiary of the Borrower; the
SETTEBELLO Guarantor owns 49.0% of the issued and outstanding capital stock of
the SETTEBELLO Owner; on the Drawdown Date, the Borrower will not own any shares
of capital stock, limited liability company interest, partnership interest or
any other direct or indirect equity interest in any corporation, limited
liability company, partnership or other entity except the Security Parties and
the other companies listed on Schedule 2;
(o) Environmental Matters and Claims. (a) except as heretofore
disclosed in writing to the Agents (i) the Borrower, each of its Subsidiaries
and their Affiliates will, when required to operate their business as then being
conducted, be in compliance with all applicable United States federal and state,
local, foreign and international laws, regulations, conventions and agreements
relating to pollution prevention or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, navigable waters, waters of the contiguous zone, ocean waters and
international waters), including, without limitation, laws, regulations,
conventions and agreements relating to (1) emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous materials, oil, hazardous substances, petroleum and
petroleum products and by-products ("Materials of Environmental Concern"), or
(2) the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern
("Environmental Laws"); (ii) the Borrower, each of its Subsidiaries and their
Affiliates will, when required, have all permits, licenses, approvals, rulings,
variances, exemptions, clearances, consents or other authorizations required
under applicable Environmental Laws ("Environmental Approvals") and will, when
required, be in compliance with all Environmental Approvals required to operate
their business as then being conducted; (iii) none of the Borrower, any
Subsidiary nor any Affiliate thereof has received any notice of any claim,
action, cause of action, investigation or demand by any person, entity,
enterprise or government, or any political subdivision, intergovernmental body
or agency, department or instrumentality thereof, alleging potential liability
for, or a requirement to incur, material investigator costs, cleanup costs,
response and/or remedial costs (whether incurred by a governmental entity or
otherwise), natural resources damages, property damages, personal injuries,
attorneys' fees and expenses, or fines or penalties, in each case arising out
of, based on or resulting from (1) the presence, or release or threat of release
into the environment, of any Materials of Environmental Concern at any location,
whether or not owned by such person, or (2) circumstances forming the basis of
any violation, or alleged violation, of any Environmental Law or
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Environmental Approval ("Environmental Claim") (other than Environmental Claims
that have been fully and finally adjudicated or otherwise determined and all
fines, penalties and other costs, if any, payable by the Security Parties in
respect thereof have been paid in full or which are fully covered by insurance
(including permitted deductibles)); and (iv) there are no circumstances that may
prevent or interfere with such full compliance in the future; and (b) except as
heretofore disclosed in writing to the Agent there is no Environmental Claim
pending or threatened against the Borrower, any Subsidiary or any Affiliate
thereof and there are no past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the release,
emission, discharge or disposal of any Materials of Environmental Concern, that
could form the basis of any Environmental Claim against such persons the adverse
disposition of which may result in a Material Adverse Effect;
(p) Compliance with ISM Code. each Vessel and each Operator complies
with the requirements of the ISM Code including (but not limited to) the
maintenance and renewal of valid certificates pursuant thereto;
(q) Threatened Withdrawal of DOC or SMC. there is no threatened or
actual withdrawal of any Operator's DOC or SMC in respect of any Vessel;
(r) Approved Business Plan. the Approved Business Plan has been duly
approved by resolution of the Board of Directors of the Borrower, which approval
has not been amended or rescinded and remains in full force and effect;
(s) Liens. other than as disclosed on Schedule 6, there are no liens
of any kind on any property owned by the Borrower or the Subsidiary;
(t) Indebtedness. other than as disclosed in Schedule 6, the
Borrower (and its Subsidiaries on a consolidated basis) has no long-term
Indebtedness; and
(u) Survival. all representations, covenants and warranties made
herein and in any certificate or other document delivered pursuant hereto or in
connection herewith shall survive the making of the Loan and the issuance of the
Note.
3. THE LOAN
3.1 (a) Purpose. The Lenders shall make the Loan available to the Borrower for
the purpose of refinancing the indebtedness currently secured against the First
Vessels.
(b) Making of the Loan. Each of the Lenders, relying upon each of
the representations and warranties set out in Section 2, hereby severally and
not jointly agrees with the Borrower that, subject to and upon the terms of this
Agreement, it will on the Drawdown Date make the Loan available through the
Administrative Agent to the Borrower in an aggregate amount not to exceed its
Commitment ratably with the other Lenders according to their respective
Commitments.
3.2 Drawdown Notice. The Borrower shall, at least three (3) Banking Days before
the Drawdown Date, serve a notice (a "Drawdown Notice") substantially in the
form of Exhibit M on the Administrative Agent which notice shall (a) be in
writing addressed to the Administrative Agent, (b) be effective on receipt by
the Administrative Agent, (c) specify the amount of the Loan to be
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drawn, (d) specify the Banking Day on which the Loan is to be drawn and the
initial Interest Period, (e) specify the disbursement instructions and (f) be
irrevocable.
3.3 Effect of Drawdown Notice. The Drawdown Notice shall be deemed to constitute
a warranty by the Borrower (a) that the representations and warranties stated in
Section 2 (updated mutatis mutandis) are true and correct on and as of the date
of the Drawdown Notice and will be true and correct on and as of the Drawdown
Date as if made on such date, and (b) that no Event of Default nor any event
which with the giving of notice or lapse of time or both would constitute an
Event of Default has occurred and is continuing.
4. CONDITIONS
4.1 Conditions Precedent to Drawdown of the Loan. The obligation of the Lenders
to make the Loan available to the Borrower under this Agreement shall be
expressly subject to the following conditions precedent:
(a) Corporate Authority. The Administrative Agent shall have
received the following documents in form and substance satisfactory to the
Administrative Agent:
(i) copies, certified as true and complete by an officer of
the Borrower, of the resolutions of the board of
directors of the Borrower evidencing approval of this
Agreement and the Note and authorizing an appropriate
officer or officers or attorney-in-fact or
attorneys-in-fact to execute the same on its behalf, or
other evidence of such approvals and authorizations;
(ii) copies, certified as true and complete by an officer of
each Security Party (other than the Borrower), of the
resolutions of the board of directors and shareholder,
or management committee and member, as the case may be,
thereof evidencing approval of those Security Documents
to which it is to be a party and authorizing an
appropriate officer or officers or attorney-in-fact or
attorneys-in-fact to execute the same on its behalf, or
other evidence of such approvals and authorizations;
(iii) copies, certified as true and complete by an officer of
the Borrower, of all documents evidencing any other
necessary action (including actions by such parties
thereto other than the Borrower as may be required by
the Administrative Agent), approvals or consents with
respect to this Agreement, the Note and the Security
Documents;
(iv) copies, certified as true and complete by an officer of
the respective Security Party of the certificate of
incorporation and by-laws, certificate of formation and
operating agreement, or equivalent instruments thereof;
(v) certificate of the Secretary of the Borrower certifying
that it legally and beneficially owns, directly or
indirectly, all of the issued and
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outstanding capital stock, or limited liability company
membership interests, as the case may be, of each of the
other Security Parties and that such capital stock or
membership interests are free and clear of any liens,
claims, pledges or other encumbrances whatsoever other
than as disclosed to the Administrative Agent in writing
on or before the date hereof;
(vi) certificate of the Secretary of each Security Party
(other than the Borrower) certifying as to the record
ownership of all of its issued and outstanding capital
stock, or limited liability company membership
interests, as the case may be; and
(vii) certificates of the jurisdiction of incorporation or
formation, as the case may be, of each Security Party as
to the good standing thereof.
(b) The Vessels. the Administrative Agent shall have received
evidence satisfactory to it that:
(i) each of the First Vessels is in the sole and absolute
ownership of the relevant Guarantor as set forth in
Schedule 3 and duly registered in such Guarantor's name
under Liberian flag, unencumbered, save and except for
the First Mortgage and the Facility C Mortgage recorded
against it and as otherwise permitted thereby;
(ii) each of the Third Vessels is in the sole and absolute
ownership of the relevant Subordinated Guarantor as set
forth in Schedule 4 and duly registered in such
Subordinated Guarantor's name under Marshall Islands or
Liberian flag, unencumbered, save and except for the
Facility A Mortgage, the Facility C Mortgage and the
Third Mortgage recorded against it and as permitted
thereby;
(iii) each Vessel is classed in the highest classification and
rating for vessels of the same age and type with the
respective classification society as set forth in
Schedule 3 or Schedule 4, as the case may be, without
any material outstanding recommendations;
(iv) each of the Vessels is operationally seaworthy and in
every way fit for its intended service; and
(v) each of the Vessels is insured in accordance with the
provisions of the Mortgage recorded against it and the
requirements thereof in respect of such insurances have
been complied with;
(c) The Note. the Borrower shall have duly executed and delivered
this Agreement and the Note;
(d) Guarantor and Subordinated Guarantor Documents. each Guarantor
and each Subordinated Guarantor shall have duly executed and delivered to the
Administrative Agent:
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(i) the Guaranty or the Subordinated Guaranty, as
appropriate;
(ii) the Mortgage over its Vessel(s);
(iii) an Insurances Assignment with respect to its Vessel(s);
(iv) an Earnings Assignment with respect to its Vessel(s);
(v) its Assignment Notices; and
(vi) Uniform Commercial Code Financing Statements for filing
with the State and County of New York, the State of
Connecticut, Fairfield County, Connecticut and in such
other jurisdictions as the Administrative Agent may
reasonably require;
(e) Pledge Agreements. each of the Borrower and the SETTEBELLO
Guarantor shall have duly executed and delivered to the Security Agent a Pledge
Agreement and its Pledged Shares, and the SETTEBELLO Partner shall have duly
executed and delivered to the Administrative Agent the SETTEBELLO Partner
Consent;
(f) Intercreditor Agreement. the Intercreditor Agreement shall have
been executed and delivered to the Administrative Agent;
(g) Vessel Appraisals. the Administrative Agent shall have received
appraisals, in form and substance satisfactory to the Agents, of the Fair Market
Value of each First Vessel showing the aggregate Fair Market Value of the First
Vessels to be not less than one hundred percent (100%) of the Loan;
(h) Guarantor and Subordinated Guarantor Solvency. the
Administrative Agent shall have received a certificate of an officer of each
Guarantor and of each Subordinated Guarantor confirming the representations and
warranties with respect to solvency set forth in its Guaranty or its
Subordinated Guaranty, as the case may be, and containing conclusions as to the
solvency of such Guarantor or Subordinated Guarantor;
(i) Environmental Claims. the Administrative Agent shall be
satisfied that neither the Borrower nor any of its Subsidiaries is subject to
any Environmental Claim which could have a Material Adverse Effect;
(j) Fees. the Administrative Agent shall have received payment in
full of all fees and expenses due to the Agents, the Arrangers and the Lenders
under Section 13 and the Fee Letter;
(k) Accounts. each Security Party shall have established an
operating account with the Syndication Agent into which Assigned Moneys are to
be paid;
(l) Vessel Liens. the Administrative Agent shall have received
evidence satisfactory to it and to its legal advisor that, save for the liens
created by the Mortgages, the Assignments, the Facility A Mortgages, the other
Facility A Security Documents, the Facility C Mortgages and the other Facility C
Security Documents there are no liens, charges or encumbrances
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of any kind whatsoever on any of the Vessels or on their respective earnings
except as permitted hereby or by any of the Security Documents;
(m) Approved Business Plan. not later than fourteen (14) days prior
to the Drawdown Date, the Administrative Agent shall have received a copy of the
Approved Business Plan, certified by the Secretary of the Borrower to be true
and complete;
(n) Facility A. the Facility A Lenders have advanced Facility A;
(o) Charters; Pooling Agreements. the Borrower shall have delivered
to the Administrative Agent true and complete copies of (i) all charters having
a term longer than twelve (12) months from the date of execution and (ii) all
vessel pooling agreements, in each case to which the Borrower or any Subsidiary
is a party; and
(p) Legal Opinions. the Administrative Agent shall have received
legal opinions addressed to the Agents from (i) Fredric S. London, Esq.,
in-house counsel for the Security Parties, and (ii) Seward & Kissel LLP, special
counsel to the Agents and Lenders, in each case in such form as the
Administrative Agent may require, as well as such other legal opinions as the
Administrative Agent shall have required as to all or any matters under the laws
of the United States of America, the State of Delaware, the State of New York,
the Republic of Liberia and the Republic of the Marshall Islands covering the
representations and conditions which are the subjects of Sections 2 and 4.1.
4.2 Further Conditions Precedent. The obligation of the Lenders to make the Loan
available to the Borrower under this Agreement shall be expressly and separately
subject to the following further conditions precedent on the Drawdown Date:
(a) the Administrative Agent having received a Drawdown Notice in
accordance with the terms of Section 3.2;
(b) the representations stated in Section 2 (updated mutatis
mutandis to such date) being true and correct as if made on and as of that date;
(c) no Event of Default having occurred and being continuing and no
event having occurred and being continuing which, with the giving of notice or
lapse of time, or both, would constitute an Event of Default;
(d) the Administrative Agent being satisfied that no change in any
applicable laws, regulations, rules or in the interpretation thereof shall have
occurred which make it unlawful for any Security Party to make any payment as
required under the terms of this Agreement, the Note, the Security Documents or
any of them; and
(e) there having been no Material Adverse Effect since the date
hereof.
4.3 Breakfunding Costs. In the event that, on the date specified for the making
of the Loan in the Drawdown Notice, the Lenders shall not be obliged under this
Agreement to make the Loan available, the Borrower shall indemnify and hold the
Lenders fully harmless against any losses which the Lenders (or any thereof) may
sustain as a result of borrowing or agreeing to borrow funds
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to meet the drawdown requirement of the Drawdown Notice and the certificate of
the relevant Lender or Lenders shall, absent manifest error, be conclusive and
binding on the Borrower as to the extent of any such losses.
4.4 Satisfaction after Drawdown. Without prejudice to any of the other terms and
conditions of this Agreement, in the event the Lenders, in their sole
discretion, advance the Loan prior to the satisfaction of all or any of the
conditions referred to in Sections 4.1 or 4.2, the Borrower hereby covenants and
undertakes to satisfy or procure the satisfaction of such condition or
conditions within fourteen (14) days after the Drawdown Date (or such longer
period as the Lenders, in their sole discretion, may agree).
5. REPAYMENT AND PREPAYMENT
5.1 Repayment. On the Final Payment Date, the Borrower shall repay in full the
then outstanding principal balance of the Loan, together with accrued but unpaid
interest and any other amounts owing by the Borrower or any other Security Party
to any Arranger, Agent or Lender pursuant to this Agreement, the Note or any
Security Document.
5.2 Voluntary Prepayment; no re-borrowing. The Borrower may prepay, upon five
(5) Banking Days written notice, the Loan or any portion thereof. Each
prepayment shall be in a minimum amount of One Million Dollars ($1,000,000) plus
any One Million Dollar ($1,000,000) multiple thereof or the full amount of the
Loan. No part of the Loan will be available for re-borrowing.
5.3 Mandatory Prepayment; Sale or Loss of Vessel. On (i) any sale of a Vessel
(which in any event shall require the prior consent of the Agents) or (ii) the
earlier of (x) ninety (90) days after the Total Loss of a Vessel or (y) the date
on which the insurance proceeds in respect of such loss are received by the
Borrower (or a Guarantor or Subordinated Guarantor) or the Security Agent as
assignee thereof, such proceeds shall be applied as follows:
(a) First Vessel. in respect of a First Vessel immediately to
repayment of the Loan in accordance with Section 8.3, provided, however, that in
respect of the sale of either of the SETTEBELLO or COLORADO, after repayment of
the indebtedness secured by the mortgages against them in favor of CBK, (i) if
such sale occurs prior to the Drawdown Date, up to $8,000,000 of such sale
proceeds may be retained by the Borrower and (ii) if such sales occur on or
after the Drawdown Date, up to 30% of such sale proceeds may be retained by the
Borrower;
(b) Third Vessel. in respect of a Third Vessel first in accordance
with the terms of the Facility A Loan Agreement, if any amounts thereunder
remain outstanding, otherwise in accordance with the Facility C Agreement, and
thereafter any remaining proceeds shall be applied to repayment of the Loan in
accordance with Section 9.1(q).
5.4 Mandatory Prepayment; New Capital. In the event that the Borrower or any
Subsidiary issues securities whether debt or equity, after the date thereof, the
proceeds (which proceeds must be entirely cash), net of reasonable expenses
directly related to such issuance, shall be applied immediately to repayment of
the Loan in accordance with Section 8.3; provided, however, that provided that
the Designated Vessel is the SOYANG, and the Designated Vessel Conditions are
met, the Borrower may apply up to $10.0 million from the proceeds of issuance
after the Drawdown Date of equity securities of the Borrower to making the
SOYANG Investment.
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5.5 Demand Conversion. In the event that the Administrative Agent determines
that (a) a Material Adverse Effect has occurred, (b) any Planned Reduction
Amount has not been paid in full to the Administrative Agent on or before the
corresponding Planned Reduction Date, or (c) the Borrower has failed to meet any
objective specified in the Approved Business Plan by the target date thereof
specified in the Approved Business Plan to the satisfaction of the Majority
Lenders, then the Administrative Agent may on such date or any time thereafter
convert the Loan to a demand loan by sending notice to the Borrower. Upon the
sending of such a notice, the Loan shall be converted to a demand loan, and full
repayment of the Loan and all other obligations of the Borrower or any other
Security Party under this Agreement, the Note or any Security Document shall be
due upon demand by the Administrative Agent.
5.6 Interest and Costs with Prepayments. Any repayment or prepayment of the Loan
made pursuant to this Agreement (including, without limitation, those made
pursuant to Sections 5 and 9) shall be subject to the condition that on the date
of prepayment all accrued interest to the date of such prepayment shall be paid
in full with respect to the Loan or portions thereof being prepaid, together
with any and all actual costs or expenses incurred by any Lender in connection
with any breaking of funding (as certified by such Lender, which certification
shall, absent any manifest error, be conclusive and binding on the Borrower).
6. INTEREST AND RATE
6.1 Applicable Rate. The Loan shall bear interest at the Applicable Rate which
shall be the rate per annum which is equal to the aggregate of (a) LIBOR for the
relevant Interest Period plus (b) the Margin. The Applicable Rate shall be
determined by the Administrative Agent two Banking Days prior to the first day
of the relevant Interest Period. The Administrative Agent shall promptly notify
the Borrower in writing of the Applicable Rate as and when determined. Each such
determination, absent manifest error, shall be conclusive and binding upon the
Borrower.
6.2 Default Rate. Any amounts due under this Agreement, not paid when due,
whether by acceleration or otherwise, shall bear interest thereafter from the
due date thereof until the date of payment at a rate per annum equal to (i) the
Prime Rate (as notified to the Borrower by the Administrative Agent), plus (ii)
the Margin, plus (iii) two percent (2%) (the "Default Rate"). Following the
occurrence of any Event of Default, the Administrative Agent, upon instruction
of the Majority Lenders, may deliver a notice to the Borrower advising the
Borrower than an Event of Default has occurred. From the date of any such notice
until each such Event of Default is cured to the satisfaction of the Majority
Lenders, the Loan shall bear interest at the Default Rate.
6.3 Interest Periods. The Borrower shall give the Administrative Agent an
Interest Notice specifying the Interest Period selected at least three (3)
Banking Days prior to the end of any then existing Interest Period. If at the
end of any then existing Interest Period the Borrower fails to give an Interest
Notice the relevant Interest Period shall be three (3) months. The Borrower's
right to select an Interest Period shall be subject to the restriction that no
selection of an Interest Period shall be effective unless each Lender is
satisfied that the necessary funds will be available to such Lender for such
period and that no Event of Default or event which, with the giving of notice or
lapse of time, or both, would constitute an Event of Default shall have occurred
and be continuing.
6.4 Interest Payments. Accrued interest on the Loan shall be payable in arrears
on the last day of each Interest Period, except that if the Borrower shall
select an Interest Period in excess of three (3)
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months, accrued interest shall be payable during such Interest Period on each
three (3) month anniversary of the commencement of such Interest Period and upon
the end of such Interest Period.
7. PAYMENTS
7.1 Place of Payments, No Set Off. All payments to be made hereunder by the
Borrower shall be made to the Syndication Agent, not later than 11 a.m. New York
time (any payment received after 11 a.m. New York time shall be deemed to have
been paid on the next Banking Day) on the due date of such payment, at its
office located at 200 Park Avenue, New York, New York 10166 or to such other
office of the Syndication Agent as the Syndication Agent may direct, without
set-off or counterclaim and free from, clear of, and without deduction for, any
Taxes, provided, however, that if the Borrower shall at any time be compelled by
law to withhold or deduct any Taxes from any amounts payable to the Lenders
hereunder, then the Borrower shall pay such additional amounts in Dollars as may
be necessary in order that the net amounts received after withholding or
deduction shall equal the amounts which would have been received if such
withholding or deduction were not required and, in the event any withholding or
deduction is made, whether for Taxes or otherwise, the Borrower shall promptly
send to the Administrative Agent such documentary evidence with respect to such
withholding or deduction as may be required from time to time by the Lenders.
7.2 Tax Credits. If any Lender obtains the benefit of a credit against the
liability thereof for federal income taxes imposed by any taxing authority for
all or part of the Taxes as to which the Borrower has paid additional amounts as
aforesaid (and each Lender agrees to use its best efforts to obtain the benefit
of any such credit which may be available to it, provided it has knowledge that
such credit is in fact available to it), then such Lender shall reimburse the
Borrower for the amount of the credit so obtained. Each Lender agrees that in
the event that Taxes are imposed on account of the situs of its loans hereunder,
such Lender, upon acquiring knowledge of such event, shall, if commercially
reasonable, shift such loans on its books to another office of such Lender so as
to avoid the imposition of such Taxes.
7.3 Computations; Banking Days. (a) All computations of interest and fees shall
be made by the Agents or the Lenders, as the case may be, on the basis of a
360-day year, in each case for the actual number of days (including the first
day but excluding the last day) occurring in the period for which interest or
fees are payable. Each determination by the Agents or the Lenders of an interest
rate or fee hereunder shall be conclusive and binding for all purposes, absent
manifest error.
(b) Whenever any payment hereunder or under the Note shall be stated
to be due on a day other than a Banking Day, such payment shall be due and
payable on the next succeeding Banking Day unless the next succeeding Banking
Day falls in the following calendar month, in which case it shall be payable on
the immediately preceding Banking Day.
8. EVENTS OF DEFAULT
8.1 Events of Default. The occurrence of any of the following events shall be an
Event of Default:
(a) Non-Payment of Principal. any payment of principal is not paid
when due; or
(b) Non-Payment of Interest or Other Amounts. any interest or any
other amount becoming payable to the Agents, the Arrangers or any Lender under
this Agreement, under the
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Note, or under any of the Security Documents is not paid on the due date or date
of demand (as the case may be), and such default continues unremedied for a
period of five (5) Banking Days; or
(c) Representations. any representation, warranty or other statement
made by the Borrower in this Agreement or by any Security Party in any of the
Security Documents or in any other instrument, document or other agreement
delivered in connection herewith or therewith proves to have been untrue or
misleading in any material respect as at the date as of which made or confirmed;
or
(d) Mortgage. there is an event of default under any Mortgage; or
(e) Covenants. any Security Party defaults in the due and punctual
observance or performance of any other term, covenant or agreement contained in
this Agreement, in the Note, in any of the Security Documents or in any other
instrument, document or other agreement delivered in connection herewith or
therewith, or it becomes impossible or unlawful for any Security Party to
fulfill any such term, covenant or agreement or there occurs any other event
which constitutes a default under this Agreement, under the Note or under any of
the Security Documents, in each case other than an Event of Default referred to
elsewhere in this Section 8.1, and such default, impossibility and/or
unlawfulness, in the reasonable opinion of the Majority Lenders, could have a
material adverse effect on the Lenders' rights hereunder, under the Note or
under the Security Documents or on the Lenders' right to enforce this Agreement,
the Note, and/or the Security Documents, and continues unremedied or unchanged,
as the case may be, for a period of thirty (30) days; or
(f) Indebtedness. any Security Party, any Subsidiary or any
Affiliate shall default in the payment when due (subject to any applicable grace
period) of any Indebtedness or of any other indebtedness, in either case, in the
outstanding principal amount equal to or exceeding Five Hundred Thousand Dollars
($500,000) or such Indebtedness or indebtedness is, or by reason of such default
is subject to being, accelerated or any party becomes entitled to enforce the
security for any such Indebtedness or indebtedness and such party shall take
steps to enforce the same, unless such default or enforcement is being contested
in good faith and by appropriate proceedings or other acts and the Security
Party, Subsidiary or Affiliate, as the case may be, shall set aside on its books
adequate reserves with respect thereto; or
(g) Ownership of Guarantors and Subordinated Guarantors. the
Borrower shall cease to own (except as otherwise expressly permitted by this
Agreement), directly or indirectly, one hundred percent (100%) of any of the
Guarantors or Subordinated Guarantors; the SETTEBELLO Guarantor shall cease to
own, directly or indirectly, 49.0% of the SETTEBELLO Owner; or
(h) Bankruptcy. the Borrower or any Affiliate commences any
proceeding under any reorganization, arrangement or readjustment of debt,
dissolution, winding up, adjustment, composition, bankruptcy or liquidation law
or statute of any jurisdiction, whether now or hereafter in effect (a
"Proceeding"), or there is commenced against any thereof any Proceeding and such
Proceeding remains undismissed or unstayed for a period of thirty (30) days or
any receiver, trustee, liquidator or sequestrator of, or for, any thereof or any
substantial portion of the property of any thereof is appointed and is not
discharged within a period of thirty (30) days or any thereof by any act
indicates consent to or approval of or acquiescence in any Proceeding or the
appointment of any
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receiver, trustee, liquidator or sequestrator of, or for, itself or of, or for,
any substantial portion of its property; or
(i) Termination of Operations; Sale of Assets. except as expressly
permitted under this Agreement, any Security Party ceases its operations or
sells or otherwise disposes of all or substantially all of its assets (other
than such a sale by one Guarantor to another or by one Subordinated Guarantor to
another) or all or substantially all of the assets of any Security Party are
seized or otherwise appropriated; or
(j) Judgments. any judgment or order is made the effect whereof
would be to render ineffective or invalid this Agreement, the Note or any of the
Security Documents or any material provision thereof, or the Borrower or any
Security Party asserts that any such agreement or provision thereof is invalid;
or
(k) Inability to Pay Debts. any Security Party is unable to pay or
admits its inability to pay its debts as they fall due or a moratorium shall be
declared in respect of any material indebtedness of any Security Party; or
(l) Change in Financial Position. any change in the financial
position of any Security Party which, in the reasonable opinion of the Majority
Lenders, shall have a Material Adverse Effect; or
(m) Change in Control. a Change of Control shall occur with respect
to the Borrower; or
(n) ERISA Debt. (i) the Borrower or any ERISA Affiliate fails to pay
when due an amount or amounts aggregating in excess of $1,000,000 which it or
they have become liable to pay under Title IV of ERISA or (ii) the Borrower or
any ERISA Affiliate, individually or collectively, incurs, or should reasonably
expect to incur, any Withdrawal Liability or liability upon the happening of a
Termination Event and the aggregate of all such Withdrawal Liabilities and such
other liabilities exceeds $10,000,000; or
(o) Approved Business Plan. at any time the Board of Directors of
the Borrower passes any resolution amending or rescinding any part of the
Approved Business Plan or the Borrower otherwise rejects or rescinds any part of
the Approved Business Plan; or
(p) Cross-Default. any Event of Default (as defined in the Facility
A Loan Agreement or the Facility C Agreement) or event which, with the giving of
notice or passage of time on both, would constitute such an Event of Default,
occurs or the Borrower, any Guarantor or any Subordinated Guarantor defaults
under any material contract or agreement to which it is a party or by which it
is bound.
Upon and during the continuance of any Event of Default, the Lenders' obligation
to make the Loan available shall cease and the Administrative Agent on the
instructions of the Majority Lenders may, by notice to the Borrower, declare the
entire unpaid balance of the then outstanding Loan, accrued interest and any
other sums payable by the Borrower hereunder or under the Note due and payable,
whereupon the same shall forthwith be due and payable without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived;
provided that upon the happening of
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an event specified in subsections (h) or (k) of this Section 8.1 with respect to
the Borrower, the Note shall be immediately due and payable without declaration
or other notice to the Borrower. In such event, the Lenders may proceed to
protect and enforce their rights by action at law, suit in equity or in
admiralty or other appropriate proceeding, whether for specific performance of
any covenant contained in this Agreement, in the Note or in any Security
Document, or in aid of the exercise of any power granted herein or therein, or
the Lenders may proceed to enforce the payment of the Note or to enforce any
other legal or equitable right of the Lenders, or proceed to take any action
authorized or permitted under the terms of any Security Document or by
applicable law for the collection of all sums due, or so declared due, on the
Note, including, without limitation, the right to appropriate and hold or apply
(directly, by way of set-off or otherwise) to the payment of the obligations of
the Borrower to the Lenders hereunder and/or under the Note (whether or not then
due) all moneys and other amounts of the Borrower then or thereafter in
possession of any Lender, the balance of any deposit account (demand or time,
mature or unmatured) of the Borrower then or thereafter with any Lender and
every other claim of the Borrower then or thereafter against any of the Lenders.
8.2 Indemnification. The Borrower agrees to, and shall, indemnify and hold the
Agents, the Arrangers and the Lenders harmless against any loss, as well as
against any reasonable costs or expenses (including reasonable legal fees and
expenses), which any of the Agents, the Arrangers or the Lenders sustains or
incurs as a consequence of any default in payment of the principal amount of the
Loan, interest accrued thereon or any other amount payable hereunder, under the
Note or under any Security Documents including, but not limited to, all actual
losses incurred in liquidating or re-employing fixed deposits made by third
parties or funds acquired to effect or maintain the Loan or any portion thereof.
Any Lenders' certification of such costs and expenses shall, absent any manifest
error, be conclusive and binding on the Borrower.
8.3 Application of Moneys. Except as otherwise provided in any Security
Document, all moneys received by the Agents, the Arrangers or the Lenders under
or pursuant to this Agreement, the Note or any of the Security Documents after
the happening of any Event of Default (unless cured to the satisfaction of the
Majority Lenders) shall be applied by the Agents in the following manner:
(a) first, in or towards the payment or reimbursement of any
expenses or liabilities incurred by the Agents, the Arrangers or the Lenders in
connection with the ascertainment, protection or enforcement of its rights and
remedies hereunder, under the Note and under any of the Security Documents,
(b) secondly, in or towards payment of any interest owing in respect
of the Loan,
(c) thirdly, in or towards repayment of principal of the Loan,
(d) fourthly, in or towards payment of all other sums which may be
owing to the Agents, the Arrangers or the Lenders under this Agreement, under
the Note, under the Fee Letter or under any of the Security Documents, and
(e) fifthly, the surplus (if any) shall be paid to the Borrower or
to whosoever else may be entitled thereto.
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9. COVENANTS
9.1 Affirmative Covenants. The Borrower hereby covenants and undertakes with the
Lenders that, from the date hereof and so long as any principal, interest or
other moneys are owing in respect of this Agreement, under the Note or under any
of the Security Documents, the Borrower will:
(a) Performance of Agreements. duly perform and observe, and procure
the observance and performance by all other parties thereto (other than the
Lenders) of, the terms of this Agreement, the Note and the Security Documents;
(b) Notice of Default, etc. promptly upon obtaining knowledge
thereof, inform the Administrative Agent of the occurrence of (a) any Event of
Default or of any event which, with the giving of notice or lapse of time, or
both, would constitute an Event of Default, (b) any litigation or governmental
proceeding pending or threatened against it or against any of its Subsidiaries
which could reasonably be expected to have a Material Adverse Effect, (c) the
withdrawal of any Vessel's rating by its Classification Society or the issuance
by the Classification Society of any material recommendation or notation
affecting class and (d) any other event or condition which is reasonably likely
to have a Material Adverse Effect;
(c) Obtain Consents. without prejudice to Section 2.1 and this
Section 9.1, obtain every consent and do all other acts and things which may
from time to time be necessary or advisable for the continued due performance of
all its and the other Security Parties' respective obligations under this
Agreement, under the Note and under the Security Documents;
(d) Financial Information. deliver to each Lender:
(i) as soon as available but not later than ninety (90) days
after the end of each fiscal year of the Borrower,
complete copies of the consolidated financial reports of
the Borrower and its Subsidiaries (together with a
Compliance Certificate), all in reasonable detail, which
shall include at least the consolidated balance sheet of
the Borrower and its Subsidiaries as of the end of such
year and the related consolidated statements of income
and sources and uses of funds for such year, which shall
be audited reports prepared by an Acceptable Accounting
Firm;
(ii) as soon as available but not less than forty-five (45)
days after the end of each of the first three quarters
of each fiscal year of the Borrower, a quarterly interim
consolidated balance sheet of the Borrower and its
Subsidiaries and the related consolidated profit and
loss statements and sources and uses of funds (together
with a Compliance Certificate), all in reasonable
detail, unaudited, but certified to be true and complete
by the chief financial officer of the Borrower;
(iii) within ten (10) days of the filing thereof, copies of
all registration statements and reports on Forms 10-K,
10-Q and 8-K (or their equivalents) and other material
filings which the Borrower shall have
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filed with the Securities and Exchange Commission or any
similar governmental authority;
(iv) promptly upon the mailing thereof to the shareholders of
the Borrower, copies of all financial statements,
reports, proxy statements and other communications
provided to the Borrower's shareholders;
(v) within ten (10) days of the Borrower's receipt thereof,
copies of all audit letters or other correspondence from
any external auditors including material financial
information in respect of the Borrower;
(vi) at any time upon the request of any Agent, a Compliance
Certificate; and
(vii) such other statements (including, without limitation,
monthly consolidated statements of operating revenues
and expenses), lists of assets and accounts, budgets,
forecasts, reports and other financial information with
respect to its business as the Administrative Agent may
from time to time reasonably request, certified to be
true and complete by the chief financial officer of the
Borrower;
(e) Corporate Existence. do or cause to be done, and procure that
each Subsidiary shall do or cause to be done, all things necessary to preserve
and keep in full force and effect its corporate existence, or limited liability
company existence, as the case may be, and all licenses, franchises, permits and
assets necessary to the conduct of its business;
(f) Books and Records. at all times keep, and cause each Subsidiary
to keep, proper books of record and account into which full and correct entries
shall be made in accordance with GAAP;
(g) Taxes and Assessments. pay and discharge, and cause each
Subsidiary to pay and discharge, all material taxes, assessments and
governmental charges or levies imposed upon it or upon its income or property
prior to the date upon which penalties attach thereto; provided, however, that
it shall not be required to pay and discharge, or cause to be paid and
discharged, any such tax, assessment, charge or levy so long as the legality
thereof shall be contested in good faith and by appropriate proceedings or other
acts and it shall set aside on its books adequate reserves with respect thereto;
(h) Inspection. allow, and cause each Subsidiary to allow, any
representative or representatives designated by any Agent, subject to applicable
laws and regulations, to visit and inspect any of its properties, and, on
request, to examine its books of account, records, reports and other papers and
to discuss its affairs, finances and accounts with its officers, all at such
reasonable times and as often as any Agent reasonably requests;
(i) Compliance with Statutes, Agreements, etc. do or cause to be
done, and cause each Subsidiary to do and cause to be done, all things necessary
to comply with all material contracts or agreements to which it or any
Subsidiary is a party, and all material laws, and the rules and regulations
thereunder, applicable to the Borrower or such Subsidiary, including, without
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limitation, those laws, rules and regulations relating to employee benefit plans
and environmental matters;
(j) Environmental Matters. promptly upon the occurrence of any of
the following conditions, provide to the Administrative Agent a certificate of a
chief executive officer thereof, specifying in detail the nature of such
condition and its proposed response or the response of its Environmental
Affiliates: (a) its receipt or the receipt by any other Security Party or any
Environmental Affiliates of the Borrower or any other Security Party of any
written communication whatsoever that alleges that such person is not in
compliance with any applicable Environmental Law or Environmental Approval, if
such noncompliance could reasonably be expected to have a Material Adverse
Effect, (b) knowledge by it, or by any other Security Party or any Environmental
Affiliates of the Borrower or any other Security Party that there exists any
Environmental Claim pending or threatened against any such person, which could
reasonably be expected to have a Material Adverse Effect, or (c) any release,
emission, discharge or disposal of any material that could form the basis of any
Environmental Claim against it, any other Security Party or against any
Environmental Affiliates of the Borrower or any other Security Party, if such
Environmental Claim could reasonably be expected to have a Material Adverse
Effect. Upon the written request by the Agent, it will submit to the Agent at
reasonable intervals, a report providing an update of the status of any issue or
claim identified in any notice or certificate required pursuant to this
subsection;
(k) ERISA. forthwith upon learning of the occurrence of any material
liability of the Borrower, any Subsidiary or any ERISA Affiliate pursuant to
ERISA in connection with the termination of any Plan or withdrawal or partial
withdrawal of any multi-employer plan (as defined in ERISA) or of a failure to
satisfy the minimum funding standards of Section 412 of the Code or Part 3 of
Title I of ERISA by any Plan for which the Borrower, any Subsidiary or any ERISA
Affiliate is plan administrator (as defined in ERISA), furnish or cause to be
furnished to the Lenders written notice thereof;
(l) Vessel Management. cause each of the Vessels to be managed both
commercially and technically by the Borrower, a wholly-owned subsidiary thereof
or its existing manager;
(m) Funded Debt to Total Capitalization Ratio. maintain at all times
on a consolidated basis a ratio of Funded Debt to Total Capitalization of not
more than 0.6 to 1 provided, that for purposes of compliance with this covenant
only, Funded Debt shall (i) exclude unsecured, subordinated debt, and (ii)
include the present value of the Borrower's (or any of the Borrower's
Subsidiaries') liability for all payments under synthetic leases other than the
Columbia Lease;
(n) Cash. maintain at all times on a consolidated basis readily
available cash and/or Cash Equivalents as follows:
(i) through December 31, 2000, not less than Ten Million
Dollars ($10,000,000);
(ii) thereafter, through June 30, 2001, not less than Fifteen
Million Dollars ($15,000,000);
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(iii) thereafter, not less than Twenty Million Dollars
($20,000,000);
(o) Consolidated Net Worth. maintain at all times a Consolidated Net
Worth of not less than One Hundred Sixty Million Dollars ($160,000,000) plus 50%
of the Borrower's positive net income (on a consolidated basis) earned after
December 31, 1999 plus 100% of the net proceeds received by the Borrower (or any
of the Borrower's Subsidiaries) from the issuance of equity securities after the
Drawdown Date;
(p) EBITDA to Interest Expense. maintain a ratio of EBITDA to
Interest Expense as follows:
(i) through December 31, 2000, not less than 1.1 to 1.0;
(ii) thereafter, through December 31, 2002, not less than
1.75 to 1.0;
(iii) thereafter, not less than 2.5 to 1.0;
measured not less than quarterly, in each instance based on the four
most recent fiscal quarters for which financial information is available;
(q) Use of Excess Cash. apply all cash and Cash Equivalents of the
Borrower (on a consolidated basis), proceeds from the issuance of securities by
the Borrower, any Guarantor or any Subordinated Guarantor, and (subject to
Section 5.3, Mandatory Prepayment; Sale or Loss of Vessel) proceeds from the
sale of any vessels by the Borrower, any Guarantor or any Subordinated Guarantor
(net of indebtedness secured by a mortgage on such vessel) as follows:
(A) to the extent the Borrower chooses to do so, to
retention by the Borrower as cash or Cash Equivalents up
to $20.0 million until Facility C has been repaid or
cancelled, and thereafter up to $30.0 million; and then
(B) to prepayment of Facility C until Facility C is fully
repaid; and then
(C) to prepayment of Facility B until Facility B is fully
repaid; and then
(D) to prepayment of the Facility A Loan until the ratio of
the balance of the Facility A Loan to the aggregate Fair
Market Value of the Third Vessels is no greater than
0.65; and then
(E) to the Borrower.
(r) Brokerage Commissions, etc. the Borrower agrees to indemnify and
hold the Arrangers, the Agents and the Lenders harmless from any claim for any
brokerage commission, fee, or compensation from any broker or third party
resulting from the transactions contemplated hereby;
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(s) Deposit Accounts; Assignment. maintain, and procure that each
other Security Party shall maintain its operating accounts with the Syndication
Agent and shall procure, and shall cause each other Security Party to procure,
that all earnings of any Vessels shall be paid into such operating accounts and
the Borrower, and by its execution of the Consent and Agreement hereto, each
other Security Party, hereby pledges, assigns and grants to the Syndication
Agent, for the benefit of the Lenders, a security interest in all funds from
time to time in such accounts (such security interest in accounts of the
Subordinated Guarantors being subject to the terms of the Intercreditor
Agreement);
(t) Future Guaranties. procure that all Subsidiaries of the Borrower
(other than Designated Subsidiaries, and only for so long as remaining a
Designated Subsidiary), shall execute a Guaranty (or, if and only if such
Subsidiary executes a Guaranty as defined in the Facility A Loan Agreement or
the Facility C Agreement, a Subordinated Guaranty) and other relevant Security
Documents in respect of any vessel owned thereby within thirty (30) days of
formation, acquisition or otherwise becoming a Subsidiary, or ceasing to be a
Designated Subsidiary, of the Borrower;
(u) Future Pledge Agreements. concurrent with the execution of any
Guaranty or Subordinated Guaranty pursuant to Section 9.1(t), execute and
deliver to the Security Agent a Pledge Agreement and the Pledged Shares in
respect of the relevant Guarantor or Subordinated Guarantor, unless the
Borrower's ownership interest therein is subject to a Facility A Pledge
Agreement; and
(v) Insurance. maintain, and cause each Subsidiary to maintain, with
financially sound and reputable insurance companies, insurance on all their
respective properties and against all such risks and in at least such amounts as
are usually insured against by companies of established reputation engaged in
the same or similar business from time to time
9.2 Negative Covenants. The Borrower hereby covenants and undertakes with the
Lenders that, from the date hereof and so long as any principal, interest or
other moneys are owing in respect of this Agreement, under the Note or under any
of the Security Documents, the Borrower will not, and will procure that no other
Subsidiary, to the extent applicable, will, without prior the written consent of
the Administrative Agent (or the Majority Lenders or all of the Lenders if
required by Section 15.8):
(a) Liens. create, assume or permit to exist, any mortgage, pledge,
lien, charge, encumbrance or any security interest whatsoever upon any
Collateral or other property except:
(i) liens disclosed in Schedule 6;
(ii) liens on the Designated Vessel securing the Designated
Vessel Indebtedness;
(iii) liens for taxes not yet payable for which adequate
reserves have been maintained;
(iv) the Mortgages, the Assignments, and other liens in favor
of the Security Agent;
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(v) liens, charges and encumbrances against their respective
Vessels permitted to exist under the terms of the
Mortgages;
(vi) pledges of certificates of deposit or other cash
collateral securing any Security Party's reimbursement
obligations in connection with letters of credit now or
hereafter issued for the account of such Security Party
in connection with the establishment of the financial
responsibility of the Security Parties under 33 C.F.R.
Part 130 or 46 C.F.R. Part 540, as the case may be, as
the same may be amended or replaced;
(vii) pledges or deposits to secure obligations under
workmen's compensation laws or similar legislation,
deposits to secure public or statutory obligations,
warehousemen's or other like liens, or deposits to
obtain the release of such liens and deposits to secure
surety, appeal or customs bonds on which the Borrower,
any of the Guarantors or any of the Subordinated
Guarantors is the principal, as to all of the foregoing,
only to the extent arising and continuing in the
ordinary course of business; and
(viii) other liens, charges and encumbrances incidental to the
conduct of the business of each such party, the
ownership of any such party's property and assets and
which do not in the aggregate materially detract from
the value of each such party's property or assets or
materially impair the use thereof in the operation of
its business;
(b) Change in Business. materially change the nature of its business
or commence any business materially different from its current business;
(c) Sale or Pledge of Shares. sell, assign, transfer, pledge or
otherwise convey or dispose of any of the shares (including by way of spin-off,
installment sale or otherwise) of the capital stock, or limited liability
company interests, as the case may be, of any Guarantor or Subordinated
Guarantor other than as may be allowed in accordance with the Pledge Agreement
or the Facility A Pledge Agreement;
(d) Sale of Assets. sell, or otherwise dispose of, any Vessel (other
than the Designated Vessel, sales of Third Vessels made in accordance with the
terms of the Facility A Loan Agreement and sales of First Vessels the proceeds
of which are applied in accordance with Section 5.3, Mandatory Prepayment; Sale
or Loss of Vessel) or any other asset (including by way of spin-off, installment
sale or otherwise) which is substantial in relation to its assets taken as a
whole including without limitation, any material foreign Subsidiary or foreign
assets or interest in an Affiliate, other than such sales by one Guarantor to
another or by one Subordinated Guarantor to another;
(e) Changes in Offices or Names. change the location of the chief
executive office of any Security Party, the office of the chief place of
business any such parties, the office of the Security Parties in which the
records relating to the earnings or insurances of the Vessels are kept unless
the Lenders shall have received sixty (60) days prior written notice of such
change;
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(f) Consolidation and Merger. consolidate with, or merge into, any
corporation or other entity, or merge any corporation or other entity into it
provided, however that any Guarantor shall be permitted to merge into or
consolidate with any other Guarantor, and any Subordinated Guarantor shall be
permitted to merge into or consolidate with any other Subordinated Guarantor, so
long as no Event of Default would result therefrom;
(g) Chartering-in. other than pursuant to charters disclosed in
Schedule 6, charter, as charterer, any one vessel for a charter period exceeding
twelve (12) months; or permit any vessel to be chartered into any vessel pool
(in which the Borrower or any Subsidiary is a member) for a term exceeding three
(3) months;
(h) Chartering-out. and will procure that each other Subsidiary will
not, other than pursuant to charters disclosed in Schedule 6, charter, as owner,
any vessel (other than the Designated Vessel) on demise or bareboat charter, or
on time charter for a period in excess of twelve (12) months;
(i) Vessel Pooling. and will procure that each Subsidiary will not,
enter any vessel into any vessel pooling arrangement other than as disclosed in
Schedule 6, or at any time amend any vessel pooling agreement;
(j) Distributions on Stock. in the case of the Borrower only,
directly or indirectly declare or pay any dividend or make any distribution on
its capital stock (a "Restricted Payment");
(k) Indebtedness. incur any Indebtedness, provided, however, that if
no Event of Default has occurred and is continuing, and that the other
Designated Vessel Conditions are met, the Designated Vessel Owner may incur the
Designated Vessel Indebtedness at the time of the Designated Vessel Acquisition;
(l) Investments. make any Investment provided, however, that if no
Event of Default has occurred and is continuing, the Borrower may make the
SOYANG Investment at the time the SOYANG is acquired;
(m) Capital Expenditures. make any Capital Expenditure (other than
as provided in (l) above);
(n) Deposit Accounts. other than as disclosed in Schedule 6,
maintain any deposit account other than with the Syndication Agent; provided,
that this covenant shall not apply to the Designated Vessel Owner; and
(o) Change Fiscal Year. change its fiscal year.
9.3 Subsidiary Negative Covenants. The Borrower hereby covenants and undertakes
with the Lenders that, from the date hereof and so long as any principal,
interest or other moneys are owing in respect of this Agreement, under the Note
or under any of the Security Documents, the Borrower will procure that no
Subsidiary will:
(a) Limitations on Ability to Make Distributions. create or
otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any
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Subsidiary (other than a Designated Subsidiary) to (i) pay dividends or make any
other distributions on its capital stock or limited liability company interests,
as the case may be, to the Borrower or any Subsidiary or pay any Indebtedness
owed to the Borrower, (ii) make any loans or advances to the Borrower, or (iii)
transfer any of its property or assets to the Borrower;
(b) Use of Corporate Funds. (except for the SOYANG Investment and
Permitted Drydocking Costs) pay out any funds to any company or person except
(a) in the ordinary course of business in connection with the management of the
business of the Borrower and its Subsidiaries, including the operation and/or
repair of the Vessels and other vessels owned or operated by such parties and
(b) the servicing of the Indebtedness permitted hereunder (but excluding, any
prepayments of any Indebtedness other than the Loan);
(c) Issuance of Shares. issue or dispose of any shares of its own
capital stock or limited liability company interests, as the case may be, to any
person other than the Borrower; or
9.4 First Vessel Valuations. For inclusion with each Compliance Certificate
delivered pursuant to Section 9.1(d)(i), and each Compliance Certificate in
respect of the second quarter of each fiscal year delivered pursuant to Section
9.1(d)(ii), and in any event upon the request of any Agent, the Borrower shall
obtain appraisals of the Fair Market Value of the First Vessels. The first three
such valuations in any year are to be at the Borrower's cost, provided, that
following and during the continuance of any Event of Default, all such
valuations are to be at the Borrower's cost. In the event the Borrower fails or
refuses to obtain the valuations requested pursuant to this Section 9.4 within
ten (10) days of an Agent's request therefor, any Agent will be authorized to
obtain such valuations, at the Borrower's cost, from three independent
shipbrokers selected by the Agents, which valuations shall be deemed the
equivalent of valuations duly obtained by the Borrower pursuant to this Section
9.4, but any Agent's actions in doing so shall not excuse any default of the
Borrower under this Section 9.4.
9.5 Asset Maintenance. If at any time after the Drawdown Date but prior to
December 15, 2000, the aggregate Fair Market Value of the First Vessels then
mortgaged to the Security Agent (based upon valuations obtained pursuant to
Section 9.4) (together with the value of any additional collateral theretofore
provided under this Section) is less than one hundred percent (100%) of the
Loan, or if at any time after December 15, 2000 such aggregate Fair Market Value
is less than one hundred ten percent (110%) of the Loan (in either such case,
such percentage herein called the "Required Percentage"), the Borrower shall,
within a period of thirty (30) days following receipt by the Borrower of written
notice from the Administrative Agent notifying the Borrower of such shortfall
and specifying the amount thereof (which amount shall, in the absence of
manifest error, be deemed to be conclusive and binding on the Borrower), either
(a) deliver to the Security Agent, upon the Administrative Agent's request, such
additional collateral as may be satisfactory to the Lenders in their sole
discretion of sufficient value to restore compliance with the Required
Percentage or (b) the Borrower shall prepay such amount of the Loan (together
with interest thereon and any other monies payable in respect of such prepayment
pursuant to Section 5.6) as shall result in the Fair Market Value of the Vessels
then mortgaged to the Security Agent being not less than the Required
Percentage.
9.6 Inspection and Survey Reports. If the Lenders shall so request, the
Borrowers shall provide the Lenders with copies of all internally generated
inspection or survey reports on the Vessels.
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10. ASSIGNMENT.
This Agreement shall be binding upon, and inure to the benefit of,
the Borrower and the Lenders, the Arrangers and the Agents and their respective
successors and assigns, except that the Borrower may not assign any of its
rights or obligations hereunder. Each Lender shall be entitled to assign its
rights and obligations under this Agreement or grant participation(s) in the
Loan to any subsidiary, holding company or other affiliate of such Lender, to
any subsidiary or other affiliate company of any thereof or, with the consent of
the Borrower and the Agents, not to be unreasonably withheld, to any other bank
or financial institution (in a minimum amount of not less than $5,000,000), and
such Lender shall forthwith give notice of any such assignment or participation
to the Borrower; and provided, however, that any such assignment must be made
pursuant to an Assignment and Assumption Agreement. The Borrower will take all
reasonable actions requested by any Agent or any Lender to effect such
assignment, including, without limitation, the execution of a written consent to
any Assignment and Assumption Agreement.
11. ILLEGALITY, INCREASED COST, NON-AVAILABILITY, ETC.
11.1 Illegality. In the event that by reason of any change in any applicable
law, regulation or regulatory requirement or in the interpretation thereof, a
Lender has a reasonable basis to conclude that it has become unlawful for any
Lender to maintain or give effect to its obligations as contemplated by this
Agreement, such Lender shall inform the Agent and the Borrower to that effect,
whereafter the liability of such Lender to make its Commitment available shall
forthwith cease and the Borrower shall be required either to repay to such
Lender that portion of the Loan advanced by such Lender immediately or, if such
Lender so agrees, to repay such portion of the Loan to the Lender on the last
day of any then current Interest Period in accordance with and subject to the
provisions of Section 11.5. In any such event, but without prejudice to the
aforesaid obligations of the Borrower to repay such portion of the Loan, the
Borrower and the relevant Lender shall negotiate in good faith with a view to
agreeing on terms for making such portion of the Loan available from another
jurisdiction or otherwise restructuring such portion of the Loan on a basis
which is not unlawful.
11.2 Increased Costs. If any change in applicable law, regulation or regulatory
requirement, or in the interpretation or application thereof by any governmental
or other authority, shall:
(i) subject any Lender to any Taxes with respect to its income
from the Loan, or any part thereof, or
(ii) change the basis of taxation to any Lender of payments of
principal or interest or any other payment due or to become
due pursuant to this Agreement (other than a change in the
basis effected by the jurisdiction of organization of such
Lender, the jurisdiction of the principal place of business of
such Lender, the United States of America, the State or City
of New York or any governmental subdivision or other taxing
authority having jurisdiction over such Lender (unless such
jurisdiction is asserted by reason of the activities of the
Borrower or any of the other Security Parties) or such other
jurisdiction where the Loan may be payable), or
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(iii) impose, 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, a Lender, or
(iv) impose on any Lender any other condition affecting the Loan or
any part thereof,
and the result of the foregoing is either to increase the cost to such Lender of
making available or maintaining its Commitment or any part thereof or to reduce
the amount of any payment received by such Lender, then and in any such case if
such increase or reduction in the opinion of such Lender materially affects the
interests of such Lender under or in connection with this Agreement:
(a) the Lender shall notify the Agent and the Borrower of the
happening of such event, and
(b) the Borrower agrees forthwith upon demand to pay to such Lender
such amount as such Lender certifies to be necessary to compensate such Lender
for such additional cost or such reduction; PROVIDED, however, that the
foregoing provisions shall not be applicable in the event that increased costs
to the Lender result from the exercise by the Lender of its right to assign its
rights or obligations under Section 10.
11.3 Nonavailability of Funds. If the Administrative Agent shall determine that,
by reason of circumstances affecting the London Interbank Market generally,
adequate and reasonable means do not or will not exist for ascertaining the
Applicable Rate for the Loan for any Interest Period, the Administrative Agent
shall give notice of such determination to the Borrower. The Borrower and the
Administrative Agent shall then negotiate in good faith in order to agree upon a
mutually satisfactory interest rate and/or Interest Period to be substituted for
those which would otherwise have applied under this Agreement. If the Borrower
and the Administrative Agent are unable to agree upon such a substituted
interest rate and/or Interest Period within thirty (30) days of the giving of
such determination notice, the Administrative Agent shall set an interest rate
and Interest Period to take effect from the expiration of the Interest Period in
effect at the date of determination, which rate shall be equal to the Margin
plus the cost to the Lenders (as certified by each Lender) of funding the Loan.
In the event the state of affairs referred to in this Section 11.3 shall extend
beyond the end of the Interest Period, the foregoing procedure shall continue to
apply until circumstances are such that the Applicable Rate may be determined
pursuant to Section 6.
11.4 Lender's Certificate Conclusive. A certificate or determination notice of
any Lender as to any of the matters referred to in this Section 11 shall, absent
manifest error, be conclusive and binding on the Borrower.
11.5 Compensation for Losses. Where the Loan or any portion thereof is to be
repaid by the Borrower pursuant to this Section 11, the Borrower agrees
simultaneously with such repayment to pay to the relevant Lender all accrued
interest to the date of actual payment on the amount repaid and all other sums
then payable by the Borrower to the relevant Lender pursuant to this Agreement,
together with such amounts as may be certified by the relevant Lender to be
necessary to compensate such Lender for any actual loss, premium or penalties
incurred or to be incurred thereby on account of funds borrowed to make, fund or
maintain its Commitment or such portion thereof for
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the remainder (if any) of the then current Interest Period or Periods, if any,
but otherwise without penalty or premium.
12. CURRENCY INDEMNITY
12.1 Currency Conversion. If for the purpose of obtaining or enforcing a
judgment in any court in any country it becomes necessary to convert into any
other currency (the "judgment currency") an amount due in Dollars under this
Agreement, the Note or any of the Security Documents then the conversion shall
be made, in the discretion of the Administrative Agent, at the rate of exchange
prevailing either on the date of default or on the day before the day on which
the judgment is given or the order for enforcement is made, as the case may be
(the "conversion date"), provided that the Administration Lenders shall not be
entitled to recover under this section any amount in the judgment currency which
exceeds at the conversion date the amount in Dollars due under this Agreement,
the Note and/or any of the Security Documents.
12.2 Change in Exchange Rate. If there is a change in the rate of exchange
prevailing between the conversion date and the date of actual payment of the
amount due, the Borrower shall pay such additional amounts (if any, but in any
event not a lesser amount) as may be necessary to ensure that the amount paid in
the judgment currency when converted at the rate of exchange prevailing on the
date of payment will produce the amount then due under this Agreement, the Note
and/or any of the Security Documents in Dollars; any excess over the amount due
received or collected by the Lenders shall be remitted to the Borrower.
12.3 Additional Debt Due. Any amount due from the Borrower under this Section 12
shall be due as a separate debt and shall not be affected by judgment being
obtained for any other sums due under or in respect of this Agreement, the Note
and/or any of the Security Documents.
12.4 Rate of Exchange. The term "rate of exchange" in this Section 12 means the
rate at which the Administrative Agent in accordance with its normal practices
is able on the relevant date to purchase Dollars with the judgment currency and
includes any premium and costs of exchange payable in connection with such
purchase.
13. FEES AND EXPENSES
13.1 Fees. The Borrower shall pay to the Arrangers and the Agents such fees as
the parties have agreed pursuant to the Fee Letter.13.2 Expenses. The Borrower
agrees, whether or not the transactions hereby contemplated are consummated, on
demand to pay, or reimburse the Agents and the Arrangers for their payment of,
the reasonable expenses of the Agents, the Arrangers and (after the occurrence
and during the continuance of an Event of Default) the Lenders incident to said
transactions (and in connection with any supplements, amendments, waivers or
consents relating thereto or incurred in connection with the enforcement or
defense of any of the Agents', the Arrangers' and the Lenders' rights or
remedies with respect thereto or in the preservation of the Agents', the
Arrangers' and the Lenders' priorities under the documentation executed and
delivered in connection therewith) including, without limitation, all reasonable
costs and expenses of preparation, negotiation, execution and administration of
this Agreement and the documents referred to herein, the reasonable fees and
disbursements of the Agents' counsel in connection therewith, as well as the
reasonable fees and expenses of any independent appraisers, surveyors, engineers
and other consultants retained by the Agents, or the Arrangers in connection
with this
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transaction, all reasonable costs and expenses, if any, in connection with the
enforcement of this Agreement, the Note and the Security Documents and stamp and
other similar taxes, if any, incident to the execution and delivery of the
documents (including, without limitation, the Note) herein contemplated and to
hold the Agents, the Arrangers and the Lenders free and harmless in connection
with any liability arising from the nonpayment of any such stamp or other
similar taxes. Such taxes and, if any, interest and penalties related thereto as
may become payable after the date hereof shall be paid immediately by the
Borrower to the Agents, the Arrangers or the Lenders, as the case may be, when
liability therefor is no longer contested by such party or parties or reimbursed
immediately by the Borrower to such party or parties after payment thereof (if
the Agents, the Arrangers or the Lenders, at their sole discretion, chooses to
make such payment).
14. APPLICABLE LAW, JURISDICTION AND WAIVER
14.1 Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
14.2 Jurisdiction. The Borrower hereby irrevocably submits to the jurisdiction
of the courts of the State of New York and of the United States District Court
for the Southern District of New York in any action or proceeding brought
against it by any of the Lenders, the Agents or the Arrangers under this
Agreement or under any document delivered hereunder and hereby irrevocably
agrees that valid service of summons or other legal process on it may be
effected by serving a copy of the summons and other legal process in any such
action or proceeding on the Borrower by mailing or delivering the same by hand
to the Borrower at the address indicated for notices in Section 16.1. The
service, as herein provided, of such summons or other legal process in any such
action or proceeding shall be deemed personal service and accepted by the
Borrower as such, and shall be legal and binding upon the Borrower for all the
purposes of any such action or proceeding. Final judgment (a certified or
exemplified copy of which shall be conclusive evidence of the fact and of the
amount of any indebtedness of the Borrower to the Lenders, the Agents or the
Arrangers) against the Borrower in any such legal action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment.
The Borrower will advise the Administrative Agent promptly of any change of
address for the purpose of service of process. Notwithstanding anything herein
to the contrary, the Lenders may bring any legal action or proceeding in any
other appropriate jurisdiction.
14.3 WAIVER OF JURY TRIAL. IT IS MUTUALLY AGREED BY AND AMONG THE BORROWER, THE
OTHER SECURITY PARTIES, THE ARRANGERS, THE AGENTS AND THE LENDERS THAT EACH OF
THEM HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
BROUGHT BY ANY PARTY HERETO AGAINST ANY OTHER PARTY HERETO ON ANY MATTER
WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT, THE NOTE,
THE GUARANTY OR THE SECURITY DOCUMENTS.
15. THE AGENTs
15.1 Appointment of Agents. Each of the Lenders irrevocably appoints and
authorizes the Agents severally each to take such action as agent on its behalf
and to exercise such powers under this Agreement, the Note and the Security
Documents as are delegated to such Agent by the terms hereof and thereof,
including execution of the Intercreditor Agreement. No Agent nor any of their
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respective directors, officers, employees or agents shall be liable for any
action taken or omitted to be taken by it or them under this Agreement, the Note
or the Security Documents or in connection therewith, except for its or their
own gross negligence or willful misconduct.
15.2 Security Agent as Trustee. Each of the Lenders irrevocably appoints the
Security Agent as trustee on its behalf with regard to (i) the security, powers,
rights, titles, benefits and interests (both present and future) constituted by
and conferred on the Lenders or any of them or for the benefit thereof under or
pursuant to this Agreement, the Note or any of the Security Documents
(including, without limitation, the benefit of all covenants, undertakings,
representations, warranties and obligations given, made or undertaken to any
Lender in the Agreement, the Note or any Security Document), (ii) all moneys,
property and other assets paid or transferred to or vested in any Lender or any
agent of any Lender or received or recovered by any Lender or any agent of any
Lender pursuant to, or in connection with, this Agreement, the Note or the
Security Documents whether from any Security Party or any other person and (iii)
all money, investments, property and other assets at any time representing or
deriving from any of the foregoing, including all interest, income and other
sums at any time received or receivable by any Lender or any agent of any Lender
in respect of the same (or any part thereof). The Security Agent hereby accepts
such appointment.
15.3 Distribution of Payments. Whenever any payment is received by any Agent
from the Borrower or any other Security Party for the account of the Lenders, or
any of them, whether of principal or interest on the Note, commissions, fees
under Section 13 or otherwise, it will thereafter cause to be distributed on the
same day if received before 11 a.m. New York time, or on the next day if
received thereafter, like funds relating to such payment ratably to the Lenders
according to their respective Commitments, in each case to be applied according
to the terms of this Agreement.
15.4 Holder of Interest in Note. The Agents may treat each Lender as the holder
of all of the interest of such Lender in the Note.
15.5 No Duty to Examine, Etc. The Agents shall not be under a duty to examine or
pass upon the validity, effectiveness or genuineness of any of this Agreement,
the Note, the Security Documents or any instrument, document or communication
furnished pursuant to this Agreement or in connection therewith or in connection
with the Note or any Security Document, and the Agents shall be entitled to
assume that the same are valid, effective and genuine, have been signed or sent
by the proper parties and are what they purport to be.
15.6 Agents as Lenders. With respect to that portion of the Loan made available
by it, each Agent shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not an Agent, and the term
"Lender" or "Lenders" shall include each Agent in its capacity as a Lender. Each
Agent and its affiliates may accept deposits from, lend money to and generally
engage in any kind of business with, the Borrower and the other Security Parties
as if it were not an Agent.
15.7 Acts of the Agents. Each Agent shall have duties and discretion, and shall
act as follows:
(a) Obligations of the Agents. The obligations of each Agent under this
Agreement, under the Note and under the Security Documents are only
those expressly set forth herein and therein.
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(b) No Duty to Investigate. No Agent shall at any time be under any duty
to investigate whether an Event of Default, or an event which with
the giving of notice or lapse of time, or both, would constitute an
Event of Default, has occurred or to investigate the performance of
this Agreement, the Note or any Security Document by any Security
Party.
(c) Discretion of the Agents. Each Agent shall be entitled to use its
discretion with respect to exercising or refraining from exercising
any rights which may be vested in it by, and with respect to taking
or refraining from taking any action or actions which it may be able
to take under or in respect of, this Agreement, the Note and the
Security Documents, unless the Agent shall have been instructed by
the Majority Lenders to exercise such rights or to take or refrain
from taking such action; provided, however, that no Agent shall be
required to take any action which exposes such Agent to personal
liability or which is contrary to this Agreement or applicable law.
(d) Instructions of Majority Lenders. Each Agent shall in all cases be
fully protected in acting or refraining from acting under this
Agreement, under the Note, or under any Security Document in
accordance with the instructions of the Majority Lenders, and any
action taken or failure to act pursuant to such instructions shall
be binding on all of the Lenders.
15.8 Certain Amendments. Neither this Agreement the Note nor any of the Security
Documents nor any terms hereof or thereof may be amended unless such amendment
is approved by the Borrower and the Majority Lenders, provided that no such
amendment shall, without the consent of each Lender affected thereby, (i) reduce
the interest rate or extend the time of payment of principal or interest or fees
on the Loan, or reduce the principal amount of the Loan or any fees hereunder,
(ii) increase or decrease the Commitment of any Lender or subject any Lender to
any additional obligation (it being understood that a waiver of any Event of
Default or any mandatory repayment of Loan shall not constitute a change in the
terms of any Commitment of any Lender), (iii) amend, modify or waive any
provision of this Section 15.8, (iv) amend the definition of Majority Lenders,
(v) consent to the assignment or transfer by the Borrower of any of its rights
and obligations under this Agreement, (vi) release any Security Party from any
of its obligations under any Security Document except as expressly provided
herein or in such Security Document or (vii) amend any provision relating to the
maintenance of collateral under Section 9.5. All amendments approved by the
Majority Lenders under this Section 15.8 must be in writing and signed by the
Borrower and each of the Lenders. In the event that any Lender is unable to or
refuses to sign an amendment approved by the Majority Lenders hereunder, such
Lender hereby appoints the Administrative Agent as its Attorney-In-Fact for the
purposes of signing such amendment. No provision of this Section 15 or any other
provisions relating to the Agents may be modified without the consent of each
Agent.
15.9 Assumption re Event of Default. Except as otherwise provided in Section
15.15, each Agent shall be entitled to assume that no Event of Default, or event
which with the giving of notice or lapse of time, or both, would constitute an
Event of Default, has occurred and is continuing, unless such Agent has been
notified by any Security Party of such fact, or has been notified by a Lender
that such Lender considers that an Event of Default or such an event (specifying
in detail the nature
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<PAGE>
thereof) has occurred and is continuing. In the event that an Agent shall have
been notified by any Security Party or any Lender in the manner set forth in the
preceding sentence of any Event of Default or of an event which with the giving
of notice or lapse of time, or both, would constitute an Event of Default, such
Agent shall notify the Lenders and shall take action and assert such rights
under this Agreement, under the Note and under Security Documents as the
Majority Lenders shall request in writing.
15.10 Limitations of Liability. Neither any Agent nor any of the Lenders shall
be under any liability or responsibility whatsoever:
(a) to any Security Party or any other person or entity as a consequence
of any failure or delay in performance by, or any breach by, any
other Lenders or any other person of any of its or their obligations
under this Agreement or under any Security Document;
(b) to any Lender or Lenders as a consequence of any failure or delay in
performance by, or any breach by, any Security Party of any of its
respective obligations under this Agreement, under the Note or under
the Security Documents; or
(c) to any Lender or Lenders for any statements, representations or
warranties contained in this Agreement, in any Security Document or
in any document or instrument delivered in connection with the
transaction hereby contemplated; or for the validity, effectiveness,
enforceability or sufficiency of this Agreement, the Note, any
Security Document or any document or instrument delivered in
connection with the transactions hereby contemplated.
15.11 Indemnification of the Agents. The Lenders agree to indemnify each Agent
(to the extent not reimbursed by the Security Parties or any thereof), pro rata
according to the respective amounts of their Commitments, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever (including legal fees and expenses incurred in investigating claims
and defending itself against such liabilities) which may be imposed on, incurred
by or asserted against, such Agent in any way relating to or arising out of this
Agreement, the Note or any Security Document, any action taken or omitted by
such Agent thereunder or the preparation, administration, amendment or
enforcement of, or waiver of any provision of, this Agreement, the Note or any
Security Document, except that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from such Agent's gross negligence or
willful misconduct.
15.12 Consultation with Counsel. Each Agent may consult with legal counsel
selected by such Agent and shall not be liable for any action taken, permitted
or omitted by it in good faith in accordance with the advice or opinion of such
counsel.
15.13 Resignation. Any Agent may resign at any time by giving sixty (60) days'
written notice thereof to the other Agents, the Lenders and the Borrower. Upon
any such resignation, the Lenders shall have the right to appoint a successor
Agent. If no successor Agent shall have been so
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<PAGE>
appointed by the Lenders and shall have accepted such appointment within sixty
(60) days after the retiring Agent's giving notice of resignation, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent which
shall be a bank or trust company of recognized standing. The appointment of any
successor Agent shall be subject to the prior written consent of the Borrower,
such consent not to be unreasonably withheld. After any retiring Agent's
resignation as Agent hereunder, the provisions of this Section 15 shall continue
in effect for its benefit with respect to any actions taken or omitted by it
while acting as Agent.
15.14 Representations of Lenders. Each Lender represents and warrants to each
other Lender and each Agent that:
(a) in making its decision to enter into this Agreement and to make its
Commitment available hereunder, it has independently taken whatever
steps it considers necessary to evaluate the financial condition and
affairs of the Security Parties, that it has made an independent
credit judgment and that it has not relied upon any statement,
representation or warranty by any other Lender or any Agent; and
(b) so long as any portion of its Commitment remains outstanding, it
will continue to make its own independent evaluation of the
financial condition and affairs of the Security Parties.
15.15 Notification of Event of Default. Each Agent hereby undertakes to promptly
notify the Lenders, and the Lenders hereby promptly undertake to notify each
Agent and the other Lenders, of the existence of any Event of Default which
shall have occurred and be continuing of which such Agent or Lender has actual
knowledge.
16. NOTICES AND DEMANDS
16.1 Notices. All notices, requests, demands and other communications to any
party hereunder shall be in writing (including prepaid overnight courier,
facsimile transmission or similar writing) and shall be given to the Borrower at
the address or telecopy number set forth below and to the Lenders and the Agents
at their address and telecopy numbers set forth in Schedule 1 or at such other
address or telecopy numbers as such party may hereafter specify for the purpose
by notice to each other party hereto. Each such notice, request or other
communication shall be effective (i) if given by telecopy, when such telecopy is
transmitted to the telecopy number specified in this Section and telephonic
confirmation of receipt thereof is obtained or (ii) if given by mail, prepaid
overnight courier or any other means, when received at the address specified in
this Section or when delivery at such address is refused.
If to the Borrower:
OMI Corporation
One Station Place
Stamford, Connecticut 06902
Telecopy No.: (203) 602-6701
Attention: Vincent de Sostoa
Senior Vice President - Treasurer
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17. MISCELLANEOUS
17.1 Time of Essence. Time is of the essence of this Agreement but no failure or
delay on the part of any Lender, the Agents or the Arrangers to exercise any
power or right under this Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise by any Lender, the Agents or the Arrangers of any
power or right hereunder preclude any other or further exercise thereof or the
exercise of any other power or right. The remedies provided herein are
cumulative and are not exclusive of any remedies provided by law.
17.2 Unenforceable, etc., Provisions - Effect. In case any one or more of the
provisions contained in this Agreement, the Note or in any Security Document
would, if given effect, be invalid, illegal or unenforceable in any respect
under any law applicable in any relevant jurisdiction, said provision shall not
be enforceable against the relevant Security Party, but the validity, legality
and enforceability of the remaining provisions herein or therein contained shall
not in any way be affected or impaired thereby.
17.3 References. References herein to Sections, Exhibits and Schedules are to be
construed as references to sections of, exhibits to, and schedules to, this
Agreement, unless the context otherwise requires.
17.4 Further Assurances. The Borrower agrees that if this Agreement, the Note or
any Security Document shall, in the reasonable opinion of the Lenders, at any
time be deemed by the Lenders for any reason insufficient in whole or in part to
carry out the true intent and spirit hereof or thereof, it will execute or cause
to be executed such other and further assurances and documents as in the opinion
of the Lenders may be required in order more effectively to accomplish the
purposes of this Agreement, the Note or any Security Document.
17.5 Prior Agreements, Merger. Any and all prior understandings and agreements
heretofore entered into between the Security Parties on the one part, and the
Agents, the Arrangers or the Lenders, on the other part, whether written or
oral, other than the Fee Letter are superseded by and merged into this Agreement
and the other agreements (the forms of which are exhibited hereto) to be
executed and delivered in connection herewith to which the Security Parties, the
Arrangers, the Agents and/or the Lenders are parties, which alone fully and
completely express the agreements between the Security Parties, the Arrangers,
the Agents and the Lenders.
17.6 Entire Agreement; Amendments. This Agreement constitutes the entire
agreement of the parties hereto including all parties added hereto pursuant to
an Assignment and Assumption Agreement. Subject to Section 15.8, any provision
of this Agreement, the Note or any Security Document may be amended or waived
if, but only if, such amendment or waiver is in writing and is signed by the
Borrower, the Administration Agent and the Majority Lenders (and, if the rights
or duties of the Security Agent or the Syndication Agent are affected thereby,
by such Agent, as applicable). This Agreement may be executed in any number of
counterparts, each of will shall be deemed an original, but all such
counterparts together shall constitute one and the same instrument.
17.7 Indemnification. The Borrower and, by its execution and delivery of the
Consent and Agreement set forth below, each of the other Security Parties
jointly and severally agree to indemnify each Lender, each Agent and each
Arranger, their respective successors and assigns, and
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<PAGE>
their respective officers, directors, employees, representatives and agents
(each an "Indemnitee") from, and hold each of them harmless against, any and all
losses, liabilities, claims, damages, expenses, obligations, penalties, actions,
judgments, suits, costs or disbursements of any kind or nature whatsoever
(including, without limitation, the fees and disbursements of counsel for such
Indemnitee in connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not such Indemnitee shall be
designated a party thereto) that may at any time (including, without limitation,
at any time following the payment of the obligations of the Borrower hereunder)
be imposed on, asserted against or incurred by, any Indemnitee as a result of,
or arising out of or in any way related to or by reason of, (a) any violation by
any Security Party (or any charterer or other operator of any Vessel) of any
applicable Environmental Law, (b) any Environmental Claim arising out of the
management, use, control, ownership or operation of property or assets by any
Security Party (or, after foreclosure, by any Lender, any Agent or any Arranger
or any of their respective successors or assigns), (c) the breach of any
representation, warranty or covenant set forth in Sections 2.1 (o) or 9.1(j),
(d) the Loan (including the use of the proceeds of the Loan and any claim made
for any brokerage commission, fee or compensation from any Person), of (e) the
execution, delivery, performance or non-performance of this Agreement, the Note,
any Security Document, or any of the documents referred to herein or
contemplated hereby (whether or not the Indemnitee is a party thereto). If and
to the extent that the obligations of the Security Parties under this Section
are unenforceable for any reason, the Borrower and, by its execution and
delivery of the Consent and Agreement set forth below, each of the other
Security Parties jointly and severally agree to make the maximum contribution to
the payment and satisfaction of such obligations which is permissible under
applicable law. The obligations of the Security Parties under this Section 17.7
shall survive the termination of this Agreement and the repayment to the Lenders
of all amounts owing thereto under or in connection herewith.
17.8 Release of Designated Vessel Owner Guaranty. Notwithstanding Section 17.6,
Entire Agreement, Amendments, upon the Designated Vessel Acquisition, the
Security Agent shall release the Designated Vessel Owner from its Guaranty.
17.9 Headings. In this Agreement, Section headings are inserted for convenience
of reference only and shall not be taken into account in the interpretation of
this Agreement.
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<PAGE>
IN WITNESS whereof the parties hereto have caused this Agreement to be
duly executed by their duly authorized representatives as of the day and year
first above written.
OMI CORPORATION
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
CHRISTIANIA BANK OG KREDITKASSE ASA,
as Arranger and Administrative Agent
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
DEN NORSKE BANK ASA,
as Arranger and Syndication Agent
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
MEESPIERSON CAPITAL CORP.,
as Arranger and Security Agent
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
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<PAGE>
CONSENT AND AGREEMENT
Each of the undersigned, referred to in the foregoing Loan Agreement
as the "Guarantors" and the "Subordinated Guarantors", hereby consents and
agrees to said Agreement and to the documents contemplated thereby and to the
provisions contained therein relating to conditions to be fulfilled and
obligations to be performed by the undersigned pursuant to or in connection with
said Agreement and agrees particularly to be bound by the representations,
warranties and covenants relating to the undersigned contained in Sections 2 and
9 of said Agreement to the same extent as if the undersigned were a party to
said Agreement, and expressly agrees to the grant of a security interest in
favor of the Syndication Agent in the undersigned's accounts pursuant to Section
9.1(s) of said Agreement.
Guarantors:
COLORADO SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
ELBE SHIPPING LLC
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
LOIRE SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
<PAGE>
NILE SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
PATRICIA SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
PAULINA SHIIPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
VOLGA SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
Subordinated Guarantors:
ALMA SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
<PAGE>
DANUBE SHIPPING LLC
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
ISERE SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
LIMAR SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
PAGODA SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
<PAGE>
PECOS SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
SABINE SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
SACRAMENTO SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
SEINE SHIPPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
SEVERN SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
<PAGE>
SHANNON SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
TIBER SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
TRENT SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
CAIRO SEA SHIPPING LLC
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
CZANTORIA SHIPPING LLC
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
<PAGE>
LAUREL SHIPPING LLC
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
MENDALA II TRANSPORT, INC.
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
SOKOLICA SHIPPING LLC
by OMI Corporation, Sole Member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
SOYANG SHIPPING LLC
by OMI Corporation, Sole Member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
TRINIDAD SEA SHIPPING LLC
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
<PAGE>
UBC CHARTERING LTD.
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
================================================================================
FACILITY AGREEMENT PROVIDING FOR A
US$36,000,000
CONVERTIBLE LETTER OF CREDIT FACILITY
TO BE MADE AVAILABLE TO
OMI CORPORATION
BY
CHRISTIANIA BANK OG KREDITKASSE ASA,
acting through its New York branch,
as Arranger, Administrative Agent and Issuer,
DEN NORSKE BANK ASA,
acting through its New York branch,
as Arranger and Syndication Agent,
MEESPIERSON CAPITAL CORP.,
as Arranger and Security Agent,
and the Banks and Financial Institutions
identified on Schedule 1, as Banks
================================================================================
as of February 4, 2000
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CONTENTS
PAGE
1. DEFINITIONS..............................................................1
1.1 Specific Definitions...................................................1
1.2 Computations of Time Periods; Other Definitional Provisions...........17
1.3 Accounting Terms......................................................17
1.4 Certain Matter Regarding Materiality..................................17
1.5 Forms of Documents....................................................17
2. REPRESENTATIONS AND WARRANTIES..........................................18
2.1 Representations and Warranties........................................18
3. THE LETTER OF CREDIT....................................................22
3.1 Issuance of the Letter of Credit......................................22
3.2 Several Obligations; Drawing..........................................22
3.3 Reimbursement Obligation..............................................23
3.4 Fees..................................................................23
4. conversion of facility..................................................23
5. CONDITIONS..............................................................24
5.1 Conditions Precedent to Issuance of Letter of Credit..................24
(a) Corporate Authority...............................................24
(b) The Vessels.......................................................25
(c) The Note..........................................................25
(d) Subordinated Guarantor Documents..................................25
(e) Mega I Assignment.................................................26
(f) Intercreditor Agreement...........................................26
(g) Facility A/Facility B.............................................26
(h) Subordinated Guarantor Solvency...................................26
(i) Environmental Claims..............................................26
(j) Fees..............................................................26
(k) Accounts..........................................................26
(l) Vessel Liens......................................................26
(m) Approved Business Plan............................................26
(n) Charters; Pooling Agreements......................................26
(o) Legal Opinions....................................................27
5.2 Further Conditions Precedent..........................................27
5.3 Breakfunding Costs....................................................27
5.4 Satisfaction after Issuance or Conversion.............................27
6. REPAYMENT AND PREPAYMENT OF LOAN........................................27
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6.1 Repayment.............................................................27
6.2 Voluntary Prepayment; no re-borrowing.................................28
6.3 Mandatory Prepayment; Sale or Loss of Vessel..........................28
6.4 Demand Conversion.....................................................28
6.5 Interest and Costs with Prepayments...................................28
7. INTEREST AND RATE.......................................................29
7.1 Applicable Rate.......................................................29
7.2 Default Rate..........................................................29
7.3 Interest Periods......................................................29
7.4 Interest Payments.....................................................29
8. PAYMENTS................................................................29
8.1 Place of Payments, No Set Off.........................................29
8.2 Tax Credits...........................................................30
8.3 Computations; Banking Days. (a)......................................30
9. EVENTS OF DEFAULT.......................................................30
9.1 Events of Default.....................................................30
9.2 Indemnification.......................................................33
9.3 Application of Moneys.................................................33
10. COVENANTS...............................................................33
10.1 Affirmative Covenants.................................................33
10.2 Negative Covenants....................................................37
(a) Liens.............................................................37
10.3 Subsidiary Negative Covenants.........................................40
10.4 Vessel Valuations.....................................................40
10.5 Asset Maintenance.....................................................40
(a) If at any time....................................................40
(b) 41
10.6 Inspection and Survey Reports.........................................41
11. ASSIGNMENT..............................................................41
12. ILLEGALITY, INCREASED COST, NON-AVAILABILITY, ETC.......................41
12.1 Illegality............................................................41
12.2 Increased Costs.......................................................42
12.3 Nonavailability of Funds..............................................43
12.4 Bank's Certificate Conclusive.........................................43
12.5 Compensation for Losses...............................................43
13. CURRENCY INDEMNITY......................................................43
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13.1 Currency Conversion...................................................43
13.2 Change in Exchange Rate...............................................43
13.3 Additional Debt Due...................................................44
13.4 Rate of Exchange......................................................44
14. FEES AND EXPENSES.......................................................44
14.1 Fees..................................................................44
14.2 Expenses..............................................................44
15. APPLICABLE LAW, JURISDICTION AND WAIVER.................................44
15.1 Applicable Law........................................................44
15.2 Jurisdiction..........................................................44
15.3 WAIVER OF JURY TRIAL..................................................45
16. THE AGENTS..............................................................45
16.1 Appointment of Agents.................................................45
16.2 Security Agent as Trustee.............................................45
16.3 Distribution of Payments..............................................45
16.4 Holder of Interest in Note............................................46
16.5 No Duty to Examine, Etc...............................................46
16.6 Agents as Banks.......................................................46
16.7 Acts of the Agents....................................................46
16.8 Certain Amendments....................................................47
16.9 Assumption re Event of Default........................................47
16.10 Limitations of Liability.............................................47
16.11 Indemnification of the Agents........................................48
16.12 Consultation with Counsel............................................48
16.13 Resignation..........................................................48
16.14 Representations of Banks.............................................48
16.15 Notification of Event of Default.....................................49
17. NOTICES AND DEMANDS.....................................................49
17.1 Notices...............................................................49
18. MISCELLANEOUS...........................................................49
18.1 Time of Essence.......................................................49
18.2 Unenforceable, etc., Provisions - Effect..............................49
18.3 References............................................................50
18.4 Further Assurances....................................................50
18.5 Prior Agreements, Merger..............................................50
18.6 Entire Agreement; Amendments..........................................50
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18.7 Indemnification.......................................................50
18.8 Release of Designated Vessel Owner Guaranty...........................51
18.9 Headings..............................................................51
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SCHEDULE
1 The Banks and the Commitments
2 OMI and Affiliates
3 The Facility A Vessels
4 The Facility B Vessels
5 Disclosure
EXHIBITS
A Form of Letter of Credit
B Form of Note
C Form of Guaranty
D Form of Mortgage
E Form of Earnings Assignment
F Form of Insurances Assignment
G Form of Assignment and Assumption Agreement
H Form of Compliance Certificate
I Form of Interest Notice
J Form of Mega I Assignment
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FACILITY AGREEMENT
THIS FACILITY AGREEMENT is made as of the 4th day of February, 2000,
by and among (1) OMI CORPORATION, a corporation incorporated under the laws of
the Republic of the Marshall Islands (the "Borrower"), (2) the banks and
financial institutions listed on Schedule 1 (together with any bank or financial
institution which becomes a party hereto pursuant to Article 10, the "Banks"),
(3) CHRISTIANIA BANK OG KREDITKASSE ASA, acting through its New York branch
("CBK"), as Administrative Agent for the Banks (in such capacity, the
"Administrative Agent"), and letter of credit issuer for the Banks (in such
capacity, the "Issuer") and as arranger, (4) DEN NORSKE BANK ASA, acting through
its New York branch ("DnB"), as syndication agent (in such capacity, the
"Syndication Agent") and as arranger, and (5) MEESPIERSON CAPITAL CORP.
("MeesPierson"), as arranger (in such capacity, together with CBK and DnB as
arrangers, the "Arrangers") and as security agent for the Banks (in such
capacity, the "Security Agent" and, together with the Administrative Agent and
the Syndication Agent, (the "Agents").
WITNESSETH THAT:
WHEREAS, at the request of the Borrower, the Arrangers have arranged
for the Agents to serve in their respective capacities under the terms of this
Agreement and for the Issuer, on behalf of the Banks, to issue a letter of
credit in the stated amount of US$36,000,000 to the Facility A Security Agent
(as defined below), as agent for the Facility A Lenders (as defined below);
NOW, THEREFORE, in consideration of the premises set forth above,
the covenants and agreements hereinafter set forth, and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as set forth below:
1. DEFINITIONS
1.1 Specific Definitions. In this Agreement the words and expressions specified
below shall, except where the context otherwise requires, have the meanings
attributed to them below:
"Acceptable Accounting Firm" means Deloitte & Touche LLP, or such other
recognized international accounting firm as
shall be approved by the Administrative Agent,
such approval not to be unreasonably withheld;
"Affiliate" means with respect to any Person, any other
Person directly or indirectly controlled by or
under common control with such Person. For the
purposes of this definition, "control"
(including, with correlative meanings, the
terms "controlled by" and "under common
control with") as applied to any Person means
the possession directly or indirectly of the
power to direct or cause the direction of the
management and policies of that Person whether
through ownership of voting securities or by
contract or otherwise; for purposes of Section
9.1(f), "Affiliate" shall also include each of
Alliance Chartering LLC, International Product
Carriers
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Limited, Geraldton Navigation Company
Incorporated, Amazon Transport, Inc. and Hayes
Navigation Co. Pte. Ltd. unless and until the
Borrower's direct or indirect interest in and
to such company has ceased;
"Agreement" means this Agreement, as the same shall be
amended, modified or supplemented from time to
time;
"Applicable Rate" means any rate of interest applicable to the
Loan from time to time pursuant to Section
7.1;
"Approved Business Plan" means a detailed business plan for reducing
leverage and increasing liquidity, in form and
in substance satisfactory to the Agents,
specifying, among other things, the Planned
Reduction Dates and Planned Reduction Amounts;
"Assigned Moneys" means sums assigned to or received by any
Agent pursuant to any Security Document;
"Assignment and Assumption means the Assignment and Assumption
Agreement(s)" Agreement(s) executed pursuant to Section 11
substantially in the form set out in Exhibit
G;
"Assignment Notices" means
(i) notices with respect to the
Earnings Assignments, substantially
in the form of Exhibit 1 thereto;
(ii) notices with respect to the
Insurances Assignments in the form
of Exhibit 3 thereto; and
(iii) notice with respect to the Mega I
Assignment in the form of Exhibit 1
thereto;
"Assignments" means the Earnings Assignments and the
Insurance Assignments;
"Availability Period" means the period commencing the date hereof
and ending February 29, 2000;
"Banking Day(s)" means day(s) on which banks are open for the
transaction of business in London, England,
Hong Kong, Frankfurt, Germany and New York,
New York;
"Capital Expenditures" means all capital expenditures except for (i)
normal maintenance of Vessels and other
properties and (ii) Permitted Drydocking
Costs;
"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 (provided that the
full faith and
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credit of the United States of America is
pledged in support thereof), and (ii) time
deposits, certificates of deposit or deposits
in the interbank market of any commercial bank
of recognized standing organized under the
laws of the United States of America, any
state thereof or any foreign jurisdiction
having capital and surplus in excess of
$500,000,000, and rated at least A or the
equivalent thereof by Standard & Poor's Rating
Services in respect of both (i) and (ii)
above, in each case having maturities of not
more than ninety (90) days from the date of
acquisition;
"Change of Control" means (a) any "person" (as such term is used
in Sections 13(d) and 14(d) of the Exchange
Act) becomes the beneficial owner (as defined
in Rules 13d-3 and 13d-5 under the Exchange
Act), directly or indirectly, of more than 35%
of the total voting power of the Borrower or
(b) the Board of Directors of the Borrower
ceases to consist of a majority of the
directors existing on the Date of Issuance or
directors nominated by at least two-thirds
(2/3) of the then existing directors;
"Classification Society" shall mean a member of the International
Association of Classification Societies with
whom the Vessels are entered and who conducted
periodic physical surveys and/or inspections
of the Vessels;
"Code" means the Internal Revenue Code of 1986, as
amended, and any successor statute and
regulation promulgated thereunder;
"Collateral" means, all property or other assets, real or
personal, tangible or intangible, whether now
owned or hereafter acquired in which any Agent
or Bank has been granted a security interest
pursuant to a Security Document;
"Columbia Lease" means that certain charter agreement dated as
of June 30, 1999 made by and between Sea Trade
Limited, as owner, and Columbia Shipping, as
charterer, in respect of the Marshall
Islands-registered suezmax tanker COLUMBIA,
official number 1272;
"Columbia Shipping" means Columbia Shipping LLC, a limited
liability company organized under the laws of
the Republic of the Marshall Islands;
"Commitment(s)" means in relation to a Bank, the portion of
the Stated Amount or the Loan, as the case may
be, set out opposite its name in Schedule 1
or, as the case may be, in any
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relevant Assignment and Assumption Agreement;
"Compliance Certificate" means a certificate certifying the compliance
by the Borrower with all of its covenants
contained herein and showing the calculations
thereof in reasonable detail, delivered by the
chief financial officer of the Borrower to the
Administrative Agent from time to time
pursuant to Section 10.1(d) in the form set
out in Exhibit H, or in such other form as the
Administrative Agent may agree;
"Consolidated Net Worth" means, at any time, shareholders equity
(excluding treasury stock) of the Borrower on
a consolidated basis determined in accordance
with GAAP;
"Construction Contract" means that certain contract dated November 10,
1997 between Mega Tankers Newbuilding AS and
the Shipyard as novated in favor of Loire
pursuant to an Assignment and Novation
Agreement dated November 24, 1999 and to be
novated further in favor of Laurel, providing
for the construction of the MEGA I;
"Conversion Date" means the date on which the Reimbursement
Obligations are converted into the Loan
pursuant to Section 4;
"Conversion" means the conversion of the Reimbursement
Obligations into the Loan pursuant to Section
4;
"Date of Issuance" means the date, being a Banking Day during the
Availability Period, on which the Letter of
Credit is issued pursuant to Section 3.1;
"Default Rate" shall have the meaning ascribed thereto in
Section 7.2;
"Designated Indebtedness" means Indebtedness that is
(i) incurred by the Designated Vessel
Owner to finance the Designated
Vessel Acquisition,
(ii) non-recourse to the Borrower and
the Borrower's Subsidiaries (other
than the Designated Vessel Owner),
and
(iii) in an amount not exceeding $30.0
million;
"Demand Notice" shall have the meaning ascribed thereto in
Section 3.2;
"Designated Subsidiary" means (i) during the term of the Columbia
Lease, Columbia Shipping, (ii) while the
Designated Indebtedness is
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outstanding, the Designated Vessel Owner, and
(iii) any Subsidiary of the Borrower (A) which
is not a Guarantor or a Guarantor, (B) which
has total assets of $1,000 or less, (C) which
is not engaged in any financing that is
recourse to the Borrower or any other
Subsidiary of the Borrower, (D) in respect of
which the Borrower has requested that the
Administrative Agent permit such Subsidiary's
designation as a Designated Subsidiary, and
(E) in respect of which the Administrative
Agent had consented in writing to such
designation;
"Designated Vessel" means the MEGA I or the SOYANG, whichever
thereof is designated by the Borrower by
written notice to the Administrative Agent as
the vessel to be financed on a non-recourse
basis in accordance with the terms and
conditions herein provided;
"Designated Vessel means the acquisition of the Designated Vessel
Acquisition" by the Designated Vessel Owner, occurring not
later than June 30, 2000, or such other date
as may be agreed by the Administrative Agent;
"Designated Vessel Conditions" means, upon or prior to the Designated Vessel
Acquisition,
(i) the Borrower having received not
less than $18.0 million net cash
proceeds from the issuance of
equity securities of the Borrower
after the Date of Issuance;
(ii) in the event the Designated Vessel
is the SOYANG, the Borrower (and
its Subsidiaries on a consolidated
basis) not having contributed more
than the amount of the SOYANG
Investment to the Designated Vessel
Acquisition;
(iii) the Borrower (and its Subsidiaries
on a consolidated basis) not having
incurred any Indebtedness other
than the Designated Vessel
Indebtedness to finance the
Designated Vessel Acquisition;
(iv) the Designated Vessel being
accepted for service under a time
charter of not less than twelve
(12) months duration at a rate of
hire sufficient to pay reasonably
anticipated operating expenses and
to amortize (on a level-debt
service basis), on a maximum
15-years profile, all Indebtedness
incurred to finance the Designated
Vessel Acquisition for the duration
of such time charter;
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(v) true and complete copies of all
contracts, agreements or other
documents entered into by the
Borrower or any Subsidiary in
connection with the Designated
Vessel Acquisition being delivered
to and approved by the
Administrative Agent;
(vi) not later than ten (10) Banking
Days prior to the date of the
Designated Vessel Acquisition, the
Borrower having delivered to the
Administration Agent a Compliance
Certificate as of such date and
after considering the effect of the
Designated Vessel Acquisition; and
(vii) immediately prior to the Designated
Vessel Acquisition, the Designated
Vessel owner has total assets of
less that $500,000 and has no
Subsidiaries;
"Designated Vessel Owner" means the Subsidiary which is the owner of the
Designated Vessel;
"DOC" means a document of compliance issued to an
Operator in accordance with rule 13 of the ISM
Code;
"Dollars" and the sign "$" means the legal currency, at any relevant time
hereunder, of the United States of America
and, in relation to all payments hereunder, in
same day funds settled through the New York
Clearing House Interbank Payments System (or
such other Dollar funds as may be determined
by the Administrative Agent to be customary
for the settlement in New York City of banking
transactions of the type herein involved);
"Earnings Assignments" means the second priority assignments in
respect of the earnings of each Vessel (other
than the SETTEBELLO) from any and all sources,
to be executed by the relevant Guarantor in
favor of the Security Agent pursuant to
Section 5.1(d), substantially in the form of
Exhibit E;
"EBITDA" means, with respect to any Person for any
period, operating income, plus depreciation,
amortization and other non-cash charges, but
excluding any gains or losses on vessel sales,
any writedown amounts, or any impairment
reserves;
"Environmental Affiliate" means any person or entity, the liability of
which for Environmental Claims any Security
Party or Subsidiary of any Security Party may
have assumed by contract or operation of law;
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"Environmental Approvals" shall have the meaning ascribed thereto in
Section 2.1(o);
"Environmental Claim(s)" shall have the meaning ascribed thereto in
Section 2.1(o);
"Environmental Laws" shall have the meaning ascribed thereto in
Section 2.1(o);
"ERISA Affiliate" means a trade or business (whether or not
incorporated) which is under common control
with the Borrower within the meaning of
Sections 414(b), (c), (m) or (o) of the Code;
"ERISA" means the Employment Retirement Income
Security Act of 1974, as amended;
"Event(s) of Default" means any of the events set out in Section
9.1;
"Exchange Act" means the Securities and Exchange Act of 1934,
as amended;
"Expiration Date" means the Banking Day which immediately
precedes the date which is the three month
anniversary of the Date of Issuance;
"Facility A" means the loan facility in the principal
amount of up to $218,000,000 to be made
available to the Borrower pursuant to the
Facility A Loan Agreement;
"Facility A Administrative means CBK, in its capacity as administrative
Agent" agent for the Facility A Lenders;
"Facility A Agents" means the Facility A Administrative Agent, the
Facility A Syndication Agent and the Facility
A Security Agent;
"Facility A Guaranty" means the guaranty made by each of the
guarantors of the obligations of the Borrower
under the Facility A Loan Agreement;
"Facility A Lenders" means the banks and financial institutions
identified in Schedule 1 to the Facility A
Loan Agreement, each in its capacity as a
Lender pursuant to the Facility A Loan
Agreement;
"Facility A Loan Agreement" means the loan agreement to be dated on or
about the date hereof made by and among, inter
alios, the Borrower, as borrower, and the
Facility A Lenders, as Lenders, pursuant to
which the Facility A Lenders will make
Facility A available to the Borrower for the
purpose of refinancing existing indebtedness
secured by the Facility A Vessels;
"Facility A Mortgages" means the first preferred Marshall Island or
Liberian ship
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mortgages on the Facility A Vessels, to
be executed by the relevant Guarantor in favor
of the Facility A Security Agent pursuant to
the Facility A Loan Agreement;
"Facility A Pledge Agreement" means any pledge agreement executed by the
Borrower in favor of the Facility A Security
Agent pursuant to the Facility A Loan
Agreement and pursuant to which the Borrower
pledges shares, limited liability company
interests or other equity interests in any
Guarantor;
"Facility A Security Agent" means MeesPierson, in its capacity as security
agent for the Facility A Lenders;
"Facility A Security means the Security Documents as defined in the
Documents" Facility A Loan Agreement;
"Facility A Syndication Agent" means DnB, in its capacity as syndication
agent for the Facility A Lenders;
"Facility A Vessels" means, as of the date of this Agreement, the
vessels identified on Schedule 3, and
thereafter shall also mean any vessel
mortgaged to the Facility A Security Agent
pursuant to the terms of the Facility A Loan
Agreement;
"Facility B Administrative means CBK, in its capacity as administrative
Agent" agent for the Facility B Lenders;
"Facility B Agents" means the Facility B Administrative Agent, the
Facility B Syndication Agent and the Facility
B Security Agent;
"Facility B Guaranty" means the guaranty made by each of the
guarantors of the obligations of the Borrower
under the Facility B Loan Agreement;
"Facility B Lenders" means the banks and financial institutions
identified in Schedule 1 to the Facility B
Loan Agreement, each in its capacity as a
Lender pursuant to the Facility B Loan
Agreement;
"Facility B Loan Agreement" means the loan agreement to be dated on or
about the date hereof made by and among, inter
alios, the Borrower, as borrower, and the
Facility B Lenders, as Banks, pursuant to
which the Facility B Lenders will make
Facility B available to the Borrower for the
purpose of refinancing existing indebtedness
secured by the Facility B Vessels;
"Facility B Mortgages" means the first preferred or Liberian ship
mortgages on the Facility B Vessels and the
third preferred Marshall Islands or Liberian
ship mortgages on the Facility A Vessels, to
be
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executed by the relevant Guarantor in favor of
the Facility B Security Agent pursuant to the
Facility B Loan Agreement;
"Facility B Pledge Agreement" means any pledge agreement executed by the
Borrower in favor of the Facility B Security
Agent pursuant to the Facility B Loan
Agreement and pursuant to which the Borrower
pledges shares, limited liability company
interests or other equity interests in any
Guarantor;
"Facility B Security Agent" means MeesPierson, in its capacity as security
agent for the Facility B Lenders;
"Facility B Security means the Security Documents as defined in the
Documents" Facility B Loan Agreement;
"Facility B Syndication Agent" means DnB, in its capacity as syndication
agent for the Facility B Lenders;
"Facility B Vessels" means, as of the date of this Agreement, the
vessels identified on Schedule 4, and
thereafter shall also mean any vessel
mortgaged on a first priority basis to the
Facility B Security Agent pursuant to the
terms of the Facility B Loan Agreement;
"Fair Market Value" means, in respect of any vessel, means the
average of three charter-free appraisals of
such vessel from independent ship brokers
approved by the Administrative Agent, no such
appraisal to be dated more than thirty (30)
days prior to the date on which such appraisal
is required pursuant to this Agreement unless
the Administrative Agent consents in writing
(on each occasion) to the use of an older
appraisal;
"Fee Letter" means the letter dated the date hereof and
entered into by the Borrower, the Arrangers
and the Agents in respect of the fees referred
to therein;
"Final Payment Date" means the date that is three years after the
Date of Issuance;
"Funded Debt" shall mean on a consolidated basis for the
Borrower (without duplication), the sum of (i)
all Indebtedness of the Borrower (on a
consolidated basis), (ii) all obligations to
pay a specific purchase price for goods or
services whether or not delivered or accepted,
i.e., take-or-pay and similar obligations
which in accordance with GAAP would be shown
on the liability side of the balance sheet,
(iii) all net obligations under Interest Rate
Agreements, and (iv) all guarantees of
non-consolidated entity obligations;
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provided, however, that balance sheet accruals
for future drydock expenses shall not be
classified as Funded Debt;
"GAAP" shall have the meaning ascribed thereto in
Section 1.3;
"Guarantor(s)" means, as of the date of this Agreement, each
of the companies listed in Schedule 2 as
Guarantors (including the SETTEBELLO
Guarantor) and thereafter shall also mean such
companies as may execute a Guaranty pursuant
to Section 9.1(t) or otherwise;
"Guaranty(ies)" means the guaranty to be executed by each
Guarantor in respect of the obligations of the
Borrower under and in connection with this
Agreement and the Note in favor of the
Security Agent pursuant to Section 4.l(d), and
any guaranty executed thereafter pursuant to
Section 9.1(t) or otherwise, each
substantially in the form of Exhibit B;
"Indebtedness" means, with respect to any Person at any date
of determination (without duplication), (i)
all indebtedness of such Person for borrowed
money, (ii) all obligations of such Person
evidenced by bonds, debentures, notes or other
similar instruments, (iii) all obligations of
such Person in respect of letters of credit or
other similar instruments (including
reimbursement obligations with respect
thereto), (iv) all obligations of such Person
to pay the deferred and unpaid purchase price
of property or services, which purchase price
is due more than six months after the date of
placing such property in service or taking
delivery thereof or the completion of such
services, except trade payables, (v) all
obligations on account of principal of such
Person as lessee under capitalized leases,
(vi) all indebtedness of other Persons secured
by a lien on any asset of such Person, whether
or not such indebtedness is assumed by such
Person; provided that the amount of such
indebtedness shall be the lesser of (a) the
fair market value of such asset at such date
of determination and (b) the amount of such
indebtedness, and (vii) all indebtedness of
other Persons guaranteed by such Person to the
extent guaranteed; the amount of Indebtedness
of any Person at any date shall be the
outstanding balance at such date of all
unconditional obligations as described above
and, with respect to contingent obligations,
the maximum liability upon the occurrence of
the contingency giving rise to the obligation,
provided that the amount outstanding at any
time of any indebtedness issued with original
issue discount is the face amount of such
indebtedness less the remaining unamortized
portion of the original issue discount of such
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indebtedness at such time as determined in
conformity with GAAP; and provided further
that Indebtedness shall not include any
liability for current or deferred federal,
state, local or other taxes, or any trade
payables;
"Initial Payment Date" means the date which is six months after the
Date of Issuance;
"Insurances Assignments" means the second priority assignments in
respect of the insurances over the Vessels
(other than the SETTEBELLO), to be executed by
the relevant Guarantor in favor of the
Security Agent pursuant to Section 5.1(d),
substantially in the form of Exhibit F;
"Intercreditor Agreement" means the intercreditor agreement dated on or
about the date hereof entered into by and
among the Agents, the Facility A Agents and
the Facility B Agents;
"Interest Expense" means for any period, all interest charges,
including the interest component of
capitalized leases;
"Interest Notice" means a notice from the Borrower to the
Administrative Agent specifying the duration
of any relevant Interest Period, each
substantially in the form of Exhibit I;
"Interest Period(s)" means period(s) of one, three or six months
selected by the Borrower or, in the Banks'
discretion, such other period(s) as may be
agreed;
"Interest Rate Agreements" means any interest rate protection agreement,
interest rate future agreement, interest rate
option agreement, interest rate swap
agreement, interest rate cap agreement,
interest rate collar agreement, interest rate
hedge agreement or other similar agreement or
arrangement designed to protect the Borrower
or any of its Subsidiaries against
fluctuations in interest rates to or under
which the Borrower or any of its Subsidiaries
is a party or a beneficiary on the date of
this Agreement or becomes a party or a
beneficiary hereafter;
"Investment" means any direct or indirect advance, loan or
other extension of credit (including by way of
guarantee or similar arrangement) or capital
contribution to (by means of any transfer of
cash or other property to others or any
payment for property or services for the
account or use of others), or any purchase or
acquisition of capital stock (or other equity
interest), Indebtedness or other similar
instruments;
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"ISM Code" means the International Safety Management Code
for the Safe Operating of Ships and for
Pollution Prevention constituted pursuant to
Resolution A.741(18) of the International
Maritime Organization and incorporated into
the Safety of Life at Sea Convention and
includes any amendments or extensions thereto
and any regulation issued pursuant thereto;
"Laurel" means Laurel Shipping LLC, a Marshall Islands
limited liability company;
"Letter of Credit" means the irrevocable letter of credit in the
stated amount of $36,000,000, to be issued by
the Issuer, on behalf of the Banks, to the
Facility A Security Agent pursuant to this
Agreement, substantially in the form of
Exhibit A;
"LIBOR" means the rate (rounded upward to the nearest
1/16th of one percent) for deposits of Dollars
for a period equivalent to the relevant
Interest Period at or about 11:00 a.m. (London
time) on the second London Banking Day before
the first day of such period as displayed on
Telerate page 3750 (British Bankers'
Association Interest Settlement Rates) (or
such other page as may replace such page 3750
on such system or on any other system of the
information vendor for the time being
designated by the British Bankers' Association
to calculate the BBA Interest Settlement Rate
(as defined in the British Bankers'
Association's Recommended Terms and Conditions
("BBAIRS" terms) dated August 1985)), provided
that if on such date no such rate is so
displayed for the relevant Interest Period,
LIBOR for such period shall be the arithmetic
mean (rounded upward if necessary to four
decimal places) of the rates respectively
quoted to the Administrative Agent by each of
the Reference Banks at the request of the
Administrative Agent as the offered rate for
deposits of Dollars in an amount approximately
equal to the amount in relation to which LIBOR
is to be determined for a period equivalent to
the relevant Interest Period to prime banks in
the London Interbank Market at or about 11:00
a.m. (London time) on the second Banking Day
before the first day of such period;
"Loan" means the amount of the Borrower's
Reimbursement Obligations hereunder as
pursuant to Section 4, or the balance thereof
from time to time outstanding;
"Loire" means Loire Shipping LLC, a Delaware limited
liability
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company;
"Majority Banks" at any time means Banks holding an aggregate
of more then 50% of the Reimbursement
Obligations or Loan, as the case may be, then
outstanding;
"Margin" means four percent (4%) per annum for the
first six (6) months following the Date of
Issuance, six percent (6%) per annum for the
following six (6) months and eight percent
(8%) thereafter; provided, however, that if
the Loan is prepaid by at least Eight Million
Dollars ($8,000,000) within six months of the
Date of Issuance each increase in the Margin
shall be deferred by six months; provided,
further, that if, and for so long as, the
amounts outstanding in respect of Facility A
and this Facility are equal to or less than
seventy percent (70%) of the Fair Market Value
of the Facility A Vessels, the Margin shall
remain at, or reduce to, as the case may be,
four percent (4%) (for the subsequent Interest
Period and each Interest Period thereafter
during which such ratio is maintained);
"Material Adverse Effect" means a material adverse effect on (i) the
ability of the Borrower to repay the Loan or
the Reimbursement Obligations, as the case may
be, or perform any of its obligations
hereunder or under the Note, (ii) the ability
of any Security Party to perform its
obligations under any Security Documents or
(iii) the business, property, assets,
liabilities, operations, condition (financial
or otherwise) or prospects of the Borrower and
the other Security Parties taken as a whole;
"Materials of Environmental shall have the meaning ascribed thereto in
Concern" Section 2.1(o);
"MEGA I" means Hyundai Hull No. 1173 under construction
by the Shipyard;
"Mega I Assignment" means the assignment by Loire and Laurel of
the Construction Contract to the Security
Agent pursuant to Section 5.1(e) to be
substantially in the form set out in Exhibit
J;
"Mortgages" means the second preferred ship mortgages on
each of the Vessels (other than the
SETTEBELLO), to be executed by the relevant
Guarantor in favor of the Security Agent (as
trustee for the Banks) substantially in the
form of
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Exhibit D;
"Multiemployer Plan" means, at any time, a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA to
which the Borrower or any ERISA Affiliate is
making or accruing an obligation to make
contributions or has within any of the three
preceding plan years made or accrued an
obligation to make contributions;
"Multiple Employer Plan" means, at any time, an employee benefit plan,
other than a Multiemployer Plan, subject to
Title IV or ERISA, to which the Borrower or
any ERISA Affiliate, and one or more employers
other than the Borrower or an ERISA Affiliate,
is making or accruing an obligation to make
contributions or, in the event that any such
plan has been terminated, to which the
Borrower or any ERISA Affiliate made or
accrued an obligation to make contributions
during any of the five plan years preceding
the date of termination of such plan;
"Note" means the promissory note to be executed by
the Borrower to the order of the Security
Agent and delivered thereto pursuant to
Section 5.1(c), to evidence the Loan if and
when made, substantially in the form of
Exhibit B;
"Operator" means, in respect of any Vessel, the Person
who is concerned with the operation of such
Vessel and falls within the definition of
"Company" set out in rule 1.1.2 of the ISM
Code;
"PBGC" means the Pension Benefit Guaranty
Corporation;
"Permitted Drydocking Costs" means (i) in respect of any one Vessel, $2.0
million in any calendar year, and (ii) in
respect of all Vessels on an aggregated basis,
$5.0 million in any calendar year, expended
for drydocking costs;
"Person" means any individual, sole proprietorship,
corporation, partnership (general or limited),
limited liability company, business trust,
bank, trust company, joint venture,
association, joint stock company, trust or
other unincorporated organization, whether or
not a legal entity, or any government or
agency or political subdivision thereof;
"Plan" means any employee benefit plan (other than a
Multiemployer Plan or a Multiple Employer
Plan) covered
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<PAGE>
by Title IV of ERISA;
"Prime Rate" means, from time to time, the rate of interest
publicly announced by the Administrative Agent
in New York City, New York, as its prime rate;
"Reference Banks" means Den norske Bank ASA, Christiania Bank og
Kreditkasse ASA and MeesPierson N.V.;
"Reimbursement Obligations" means the obligations of the Borrower then
outstanding and unpaid to reimburse the Banks
pursuant to Section 3.3 for the amounts paid
by the Issuer on behalf of the Banks in
respect of all drawings or other payments made
under or pursuant to the Letter of Credit;
"Required Percentage" shall have the meaning set forth for such term
in Section 10.5;
"Restricted Payments" shall have the meaning attributed thereto in
Section 10.2(j);
"Security Documents" means the Subordinated Guaranties, the
Mortgages, the Assignments and any other
documents that may be executed as security for
the Reimbursement Obligations or the Loan and
the Borrower's obligations in connection
therewith;
"Security Party(ies)" means the Borrower, and each of the
Guarantors;
"SETTEBELLO Guarantor" means Laurel Shipping LLC, a limited liability
company organized under the laws of the
Republic of the Marshall Islands;
"SETTEBELLO Owner" means Amazon Transport, Inc., a corporation
organized under the laws of the Republic of
Liberia;
"Shipyard" means Hyundai Heavy Industries Co. Ltd of
Ulsan, South Korea, and Hyundai Corporation of
Seoul, South Korea, collectively;
"SMC" means the safety management certificate issued
in respect of a Vessel in accordance with rule
13 of the ISM code;
"SOYANG Investment" means the contribution by the Borrower (and
its Subsidiaries on a consolidated basis) of
not more than $10.0 million of cash or Cash
Equivalents (in addition to contributions made
prior to the date of this Agreement) to the
acquisition of the SOYANG, made no earlier
than the date of acquisition thereof or three
(3) days prior thereto as
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<PAGE>
required by the construction contract for the
SOYANG;
"SOYANG Subsidiary" means Soyang Shipping LLC, a limited liability
company organized under the laws of the
Republic of the Marshall Islands;
"SOYANG" means Daewoo Hull No. 5152, currently under
construction by Daewoo Heavy Industries Ltd.,
South Korea;
"Stated Amount" means thirty-six million United States Dollars
($36,000,000);
"Subsidiaries" means, with respect to any Person, any
business entity of which more than 50% of the
outstanding voting stock is owned directly or
indirectly by such Person and one or more
other Subsidiaries of such Person;
"Taxes" means any present or future income or other
taxes, levies, duties, charges, fees,
deductions or withholdings of any nature now
or hereafter imposed, levied, collected,
withheld or assessed by any taxing authority
whatsoever, except for taxes on or measured by
the overall net income of each Bank imposed by
its jurisdiction of incorporation or
applicable lending office, the United States
of America, the State or City of New York or
any governmental subdivision or taxing
authority of any thereof or by any other
taxing authority having jurisdiction over such
Bank (unless such jurisdiction is asserted by
reason of the activities of the Borrower or
any of the Subsidiaries);
"Termination Event" means (i) a "reportable event," as defined in
Section 403 of ERISA (other than a "reportable
event" not subject to the provision for 30-day
notice to the PBGC), (ii) the withdrawal of
the Borrower or any ERISA Affiliate from a
Multiemployer Plan during a plan year in which
it was a "substantial employer," as defined in
Section 4001(a)(2) of ERISA, or the incurrence
of liability by the Borrower or any ERISA
Affiliate under Section 4064 of ERISA upon the
termination of a Multiple Employer Plan, (iii)
the filing of a notice of intent to terminate
a Plan under Section 4041of ERISA or the
treatment of a Multiemployer Plan amendment as
a termination under Section 4041A of ERISA,
(iv) the institution of proceedings to
terminate a Plan or a Multiemployer Plan, or
(v) any other event or condition which might
constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of
a trustee to administer, any Plan or
Multiemployer Plan;
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<PAGE>
"Total Capitalization" shall mean the sum of (i) Funded Debt, plus
(ii) Consolidated Net Worth;
"Total Loss" shall have the meaning ascribed thereto in the
Mortgages;
"Vessels" means the vessels listed in Schedules 3 and 4,
registered in the ownership of the relevant
Guarantor as set forth in Schedule 2;
"Withdrawal Liabilities" shall have the meaning given to such term
under Part 1 of Subtitle E of Title IV of
ERISA;
1.2 Computations of Time Periods; Other Definitional Provisions. In this
Agreement, the Note and the other Security Documents, in the computation of
periods of time from a specified date to a later specified date, the word "from"
means "from and including" and the words "to" and "until" each mean "to but
excluding"; words importing either gender include the other gender; references
to "writing" include printing, typing, lithography and other means of
reproducing words in a tangible visible form; the words "including," "includes"
and "include" shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections), exhibits,
annexes or schedules are to this Agreement, the Note or such Security Document,
as applicable; references to agreements and other contractual instruments
(including this Agreement, the Note and the Security Documents) shall be deemed
to include all subsequent amendments, amendments and restatements, supplements,
extensions, replacements and other modifications to such instruments (without,
however, limiting any prohibition on any such amendments, extensions and other
modifications by the terms of this Agreement, the Note or any Security
Document); references to any matter that is "approved" or requires "approval" of
a party shall mean approval given in the sole and absolute discretion of such
party unless otherwise specified.
1.3 Accounting Terms. Unless otherwise specified herein, all accounting terms
used in this Agreement, the Note and in the Security Documents shall be
interpreted, and all financial statements and certificates and reports as to
financial matters required to be delivered to the Administrative Agent or to the
Banks under this Agreement shall be prepared, in accordance with generally
accepted accounting principles for the United States ("GAAP").
1.4 Certain Matter Regarding Materiality. To the extent that any representation,
warranty, covenant or other undertaking of the Borrower in this Agreement is
qualified by reference to those which are not reasonably expected to result in a
"Material Adverse Effect" or language of similar import, no inference shall be
drawn therefrom that any Agent or Bank has knowledge or approves of any
noncompliance by the Borrower with any governmental rule.
1.5 Forms of Documents. Except as otherwise expressly provided in this
Agreement, references to documents or certificates "substantially in the form"
of Exhibits to another document shall mean that such documents or certificates
are duly completed in the form of the related Exhibits with substantive changes
subject to the provisions of Section 17.6 of this Agreement, as the case may be,
or the correlative provisions of the Security Documents.
17
<PAGE>
2. REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties. In order to induce the Arrangers, the Agents
and the Banks to enter into this Agreement and to induce the Issuer to issue the
Letter of Credit, the Borrower hereby represents and warrants to the Arrangers,
the Agents, the Issuer and the Banks (which representations and warranties shall
survive the execution and delivery of this Agreement that:
(a) Due Organization and Power. each Subsidiary is duly formed
and is validly existing in good standing under the laws of its jurisdiction of
incorporation or formation, has full power to carry on its business as now being
conducted and to enter into and perform its obligations under this Agreement,
the Note and the Security Documents to which it is a party, and has complied
with all statutory, regulatory and other requirements relative to such business
and such agreements;
(b) Authorization and Consents. all necessary corporate action
has been taken to authorize, and all necessary consents and authorities have
been obtained and remain in full force and effect to permit, each Security Party
to enter into and perform its obligations under this Agreement, the Note and the
Security Documents and, in the case of the Borrower, to borrow, service and
repay the Loan and, as of the date of this Agreement, no further consents or
authorities are necessary for the service and repayment of the Reimbursement
Obligations or the Loan or any part thereof;
(c) Binding Obligations. this Agreement, the Note and the
Security Documents constitute or will, when executed and delivered, constitute
the legal, valid and binding obligations of each Security Party as is a party
thereto enforceable against such Security Party in accordance with their
respective terms, except to the extent that such enforcement may be limited by
equitable principles, principles of public policy or applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting generally the
enforcement of creditors' rights;
(d) No Violation. the execution and delivery of, and the
performance of the provisions of, this Agreement, the Note, and those of the
Security Documents to which it is to be a party by each Security Party do not
contravene any applicable law or regulation existing at the date hereof or any
contractual restriction binding on such Security Party or the certificate of
incorporation or by-laws, certificate of formation and operating agreement (or
equivalent instruments) thereof;
(e) Litigation. no action, suit or proceeding is pending or
threatened against the Borrower or any Subsidiary before any court, board of
arbitration or administrative agency which could or might result in any Material
Adverse Effect;
(f) No Default. Neither the Borrower nor any Subsidiary is in
default under any material agreement by which it is bound, or is in default in
respect of any material financial commitment or obligation;
(g) Vessels. upon the Date of Issuance:
(i) each of the Facility A Vessels will be in the sole and
absolute ownership of the relevant Guarantor as set forth in
Schedule 3 and duly registered in such Guarantor's name under
Marshall Island or
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<PAGE>
Liberian flag, unencumbered, save and except for the Facility
A Mortgage, the Facility B Mortgage and the Mortgage recorded
against it and as permitted thereby;
(ii) each of the Facility B Vessels will be in the sole and
absolute ownership of the relevant Guarantor as set forth in
Schedule 4 and duly registered in such Guarantor's name under
Liberian flag, unencumbered, save and except for the Facility
B Mortgage and the Mortgage recorded against it and as
permitted thereby;
(iii) each Vessel will be classed in the highest classification and
rating for vessels of the same age and type with the
respective classification society as set forth in Schedule 3
or Schedule 4, as the case may be, without any material
outstanding recommendations;
(iv) each Vessel will be operationally seaworthy and in every way
fit for its intended service; and
(v) each Vessel will be insured in accordance with the provisions
of the Mortgage recorded against it and the requirements
thereof in respect of such insurances will have been complied
with;
(h) Insurance. the Borrower and each Subsidiary has insured
its properties and assets against such risks and in such amounts as are
customary for companies engaged in similar businesses;
(i) Financial Information. except as otherwise disclosed in
writing to the Agents on or prior to the date hereof, all financial statements,
information and other data furnished by the Borrower to the Agents are complete
and correct, such financial statements have been prepared in accordance with
GAAP and accurately and fairly present the financial condition of the parties
covered thereby as of the respective dates thereof and the results of the
operations thereof for the period or respective periods covered by such
financial statements, and since the date of the Borrower's financial statements
most recently delivered to the Administrative Agent, there has been no Material
Adverse Effect as to any of such parties and none thereof has any contingent
obligations, liabilities for taxes or other outstanding financial obligations
which are material in the aggregate except as disclosed in such statements,
information and data;
(j) Tax Returns. the Borrower and each Subsidiary has filed
all material tax returns required to be filed thereby and has paid all taxes
payable thereby which have become due, other than those not yet delinquent or
the nonpayment of which would not have a Material Adverse Effect on the Borrower
and or such Subsidiary and except for those taxes being contested in good faith
and by appropriate proceedings or other acts and for which adequate reserves
shall have been set aside on its books;
(k) ERISA. the execution and delivery of this Agreement and
the consummation of the transactions hereunder will not involve any prohibited
transaction within the meaning of ERISA or Section 4975 of the Code and no
condition exists or event or transaction has occurred in connection with any
Plan maintained or contributed to by any the Borrower or any
19
<PAGE>
Subsidiary or any ERISA Affiliate resulting from the failure of any thereof to
comply with ERISA insofar as ERISA applies thereto which is reasonably likely to
result in the Borrower or any such Subsidiary or any ERISA Affiliate incurring
any liability, fine or penalty which individually or in the aggregate would have
a Material Adverse Effect. Prior to the date hereof, the Borrower has delivered
to the Administrative Agent a list of all the employee benefit plans to which
the Borrower or any Subsidiary or any ERISA Affiliate is a "party in interest"
(within the meaning of Section 3(14) of ERISA) or a "disqualified person"
(within the meaning of Section 4975(e)(2) of the Code);
(l) Chief Executive Office. the Borrower's chief executive
office and chief place of business and the office in which the records relating
to the earnings and other receivables of each Security Party are kept is, and
will continue to be, located at One Station Place, Stamford, Fairfield County,
Connecticut;
(m) Foreign Trade. Control Regulations. to the best of the
Borrower's knowledge, none of the transactions contemplated herein will violate
any of the provisions of the Foreign Assets Control Regulations of the United
States of America (Title 31, Code of Federal Regulations, Chapter V, Part 500,
as amended), any of the provisions of the Cuban Assets Control Regulations of
the United States of America (Title 31, Code of Federal Regulations, Chapter V,
Part 515, as amended), any of the provisions of the Libyan Assets Control
Regulations of the United States of America (Title 31, Code of Federal
Regulations, Chapter V, Part 550, as amended), any of the provisions of the
Iranian Transaction Regulations of the United States of America (Title 31, Code
of Federal Regulations, Chapter V, Part 560, as amended), any of the provisions
of the Iraqi Sanctions Regulations (Title 31, Code of Federal Regulations,
Chapter V, Part 575, as amended), any of the provisions of the Federal Republic
of Yugoslavia (Serbia and Montenegro) Assets Control Regulations (Title 31, Code
of Federal Regulations, Chapter V, Part 585 as amended) or any of the provisions
of the Regulations of the United States of America Governing Transactions in
Foreign Shipping of Merchandise (Title 31, Code of Federal Regulations, Chapter
V, Part 505, as amended);
(n) Equity Ownership. each of the Guarantors is a wholly owned
direct subsidiary of the Borrower; the SETTEBELLO Guarantor owns 49.0% of the
issued and outstanding capital stock of the SETTEBELLO Owner; on the Date of
Issuance, the Borrower will not own any shares of capital stock, limited
liability company interest, partnership interest or any other direct or indirect
equity interest in any corporation, limited liability company, partnership or
other entity except the Security Parties and the other companies listed on
Schedule 2;
(o) Environmental Matters and Claims. (a) except as heretofore
disclosed in writing to the Agents (i) the Borrower, each of its Subsidiaries
and their Affiliates will, when required to operate their business as then being
conducted, be in compliance with all applicable United States federal and state,
local, foreign and international laws, regulations, conventions and agreements
relating to pollution prevention or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, navigable waters, waters of the contiguous zone, ocean waters and
international waters), including, without limitation, laws, regulations,
conventions and agreements relating to (1) emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous materials, oil, hazardous substances, petroleum and
petroleum products and by-products ("Materials of Environmental Concern"), or
(2) the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern
("Environmental Laws");
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<PAGE>
(ii) the Borrower, each of its Subsidiaries and their Affiliates will, when
required, have all permits, licenses, approvals, rulings, variances, exemptions,
clearances, consents or other authorizations required under applicable
Environmental Laws ("Environmental Approvals") and will, when required, be in
compliance with all Environmental Approvals required to operate their business
as then being conducted; (iii) none of the Borrower, any Subsidiary nor any
Affiliate thereof has received any notice of any claim, action, cause of action,
investigation or demand by any person, entity, enterprise or government, or any
political subdivision, intergovernmental body or agency, department or
instrumentality thereof, alleging potential liability for, or a requirement to
incur, material investigator costs, cleanup costs, response and/or remedial
costs (whether incurred by a governmental entity or otherwise), natural
resources damages, property damages, personal injuries, attorneys' fees and
expenses, or fines or penalties, in each case arising out of, based on or
resulting from (1) the presence, or release or threat of release into the
environment, of any Materials of Environmental Concern at any location, whether
or not owned by such person, or (2) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law or Environmental
Approval ("Environmental Claim") (other than Environmental Claims that have been
fully and finally adjudicated or otherwise determined and all fines, penalties
and other costs, if any, payable by the Security Parties in respect thereof have
been paid in full or which are fully covered by insurance (including permitted
deductibles)); and (iv) there are no circumstances that may prevent or interfere
with such full compliance in the future; and (b) except as heretofore disclosed
in writing to the Agent there is no Environmental Claim pending or threatened
against the Borrower, any Subsidiary or any Affiliate thereof and there are no
past or present actions, activities, circumstances, conditions, events or
incidents, including, without limitation, the release, emission, discharge or
disposal of any Materials of Environmental Concern, that could form the basis of
any Environmental Claim against such persons the adverse disposition of which
may result in a Material Adverse Effect;
(p) Compliance with ISM Code. each Vessel and each Operator
complies with the requirements of the ISM Code including (but not limited to)
the maintenance and renewal of valid certificates pursuant thereto;
(q) Threatened Withdrawal of DOC or SMC. there is no
threatened or actual withdrawal of any Operator's DOC or SMC in respect of any
Vessel;
(r) Approved Business Plan. the Approved Business Plan has
been duly approved by resolution of the Board of Directors of the Borrower,
which approval has not been amended or rescinded and remains in full force and
effect;
(s) Liens. other than as disclosed on Schedule 5, there are no
liens of any kind on any property owned by the Borrower or the Subsidiary;
(t) Indebtedness. other than as disclosed in Schedule 5, the
Borrower (and its Subsidiaries on a consolidated basis) has no long-term
Indebtedness; and
(u) Survival. all representations, covenants and warranties
made herein and in any certificate or other document delivered pursuant hereto
or in connection herewith shall survive the making of the Loan and the issuance
of the Note.
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<PAGE>
3. THE LETTER OF CREDIT
3.1 Issuance of the Letter of Credit.
(a) Subject to the terms and conditions of this Agreement and in reliance
on the representations, warranties and covenants herein contained, the Banks
hereby agree, upon the request of the Borrower and the satisfaction of the
conditions precedent contained in Section 5.1 to procure that the Issuer, on
behalf of the Banks, issue the Letter of Credit in favor of the Facility A
Security Agent, as trustee for the Facility A Banks.
(b) The Issuer, on behalf of the Banks, shall issue the Letter of Credit
upon three (3) Banking Days' prior written notice from the Borrower to the
Issuer requesting the issuance of the Letter of Credit and setting forth the
Date of Issuance with respect thereto. Each Bank severally and not jointly
agrees, on the terms and conditions set forth herein, to cause the Issuer to
issue on behalf of the Banks on such date the Letter of Credit to the Facility A
Security Agent, as trustee for the Facility A Banks, in the amount of
$36,000,000, effective on the Date of Issuance and expiring on the Expiration
Date. The commitment of each Bank to cause the Issuer to issue on behalf of the
Banks the Letter of Credit and its obligations hereunder and under the Letter of
Credit shall be limited to its Commitment as in effect from time to time.
3.2 Several Obligations; Drawing.
(a) The obligations of the Banks hereunder and under or in respect of the
Letter of Credit are several and not joint, and no Bank shall be liable for the
failure of any other Bank to perform its obligations hereunder or thereunder.
The failure of any Bank to honor its obligations hereunder or in respect of the
Letter of Credit shall not excuse the several obligations of the other Banks
hereunder or thereunder.
(b) Upon receipt from the Facility A Security Agent of notice of a demand
for payment (the "Demand Notice") under the Letter of Credit made in accordance
with the terms thereof, the Issuer shall promptly notify the Borrower and each
Bank as to the amount to be paid by such Bank (which amount shall be equal to
the Commitment of such Bank) as a result of such demand and the date for such
payment (which shall be a Banking Day). Upon receipt of such notice from the
Issuer, each Bank shall promptly transfer the amount of its Commitment in
immediately available funds to the account specified in or pursuant to the
Demand Notice or such other account as the Issuer shall have specified in such
notice. Unless the Issuer shall have received notice from a Bank prior to the
date for such payment that such Bank will not make available to the Issuer an
amount equal to such Bank's Commitment, the Issuer may assume that such Bank has
made an amount equal to its Commitment available to the Issuer on the date for
such payment in accordance with this subsection (b) and the Issuer may, in
reliance upon such assumption, make available to the Facility A Security Agent
on such date a corresponding amount. If and to the extent that the Issuer in
reliance upon such assumption shall have made available to the Facility A
Security Agent, on behalf of any Bank, an amount equal to such Bank's Commitment
pursuant to this Section and such Bank shall not have made an amount equal to
its Commitment available to the Issuer and the Issuer shall not have been
reimbursed by the Borrower for such amount, such Bank agrees to pay to the
Issuer forthwith on demand such amount, together with interest thereon, for each
day from the date such amount is made available to the Facility A Security Agent
until the date such amount is repaid to the Issuer at a rate per annum equal to
the Prime Rate for each such day.
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<PAGE>
3.3 Reimbursement Obligation.
(a) Unless the Conversion has occurred pursuant to Section 4, the Borrower
agrees to pay to the Issuer, for the account of the Banks, immediately after
(and on the same Banking Day as) any amount is drawn under, or otherwise paid
pursuant to, the Letter of Credit, a sum equal to the amount so drawn or paid
and interest on such amount as provided in subsections (b) and (c) below;
provided that if the Issuer shall receive such payment from the Borrower later
than 3:00 P.M. (New York City time) on such Banking Day, such payment shall be
deemed to have been received by the Issuer on the next succeeding Banking Day
and interest shall accrue thereon pursuant to subsections (b) and (c) below from
the date such payment was due. The Borrower agrees that all payments required
hereunder shall be free and clear of all set-offs, withholdings, taxes, claims
or other deductions of any kind whatsoever.
(b) Any amount owing by the Borrower pursuant to subsection (a) and not
paid when due shall bear interest, payable upon demand, for each day from and
including the date payment thereof was due to but excluding the date of actual
payment thereof in full at the Default Rate.
(c) Until payment of any amount due hereunder is made, the Borrower's
obligations to the Issuer and the Banks under Section 3.3(a) shall be evidenced
by a loan account ledger maintained by the Issuer in the name of the Borrower.
The Issuer shall determine any amounts payable by the Borrower under this
Section 3.3 and any such determination shall be conclusive absent manifest
error.
3.4 Fees.
L/C Fee. The Borrower agrees to pay the Issuer, for distribution to the
Banks, a letter of credit fee (the "L/C Fee"), on the Stated Amount monthly in
arrears from the date hereof and on the earliest of (i) the Expiration Date,
(ii) the Conversion Date or (iii) termination of the Letter of Credit in
accordance with the terms hereof or thereof, at the rate of three percent (3%)
per annum (calculated on the basis of actual number of days elapsed over a year
of 360 days).
4. conversion of facility
(a) This facility shall automatically convert from a letter of credit
facility to a junior secured term loan facility and the outstanding
Reimbursement Obligations shall automatically convert to the Loan on
the date on which payment by the Issuer, on behalf of the Banks, is
made under the Letter of Credit pursuant to Section 3.2, provided,
that (i) prior to such date, the Borrower has used its best efforts
(to the satisfaction of the Agents) to obtain commitments which
would permit the Borrower to receive not less than $15,000,000 net
cash proceeds from the issuance of equity securities (excluding and
in addition to the approximately $15,000,000 in cash equity
previously committed to by First Reserve Corporation) prior to the
Initial Payment Date and (ii) the conditions set forth in Section
5.2 shall have been satisfied.
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(b) Upon the Conversion, (i) the Banks shall be deemed to have made the
Loan to the Borrower and the Borrower shall be obligated to repay
the Loan pursuant to the terms hereof, (ii) the Letter of Credit
shall terminate, (iii) the amount of Reimbursement Obligations
outstanding shall be reduced to zero, and (iv) the Administrative
Agent shall complete the grid attached to the Note.
5. CONDITIONS
5.1 Conditions Precedent to Issuance of Letter of Credit. The obligation of the
Issuer, on behalf of the Banks, to issue the Letter of Credit to the Facility A
Security Agent under this Agreement shall be expressly subject to the following
conditions precedent:
(a) Corporate Authority. The Administrative Agent shall have
received the following documents in form and substance satisfactory to the
Administrative Agent:
(i) copies, certified as true and complete by an officer of the
Borrower, of the resolutions of the board of directors of the
Borrower evidencing approval of this Agreement and the Note
and authorizing an appropriate officer or officers or
attorney-in-fact or attorneys-in-fact to execute the same on
its behalf, or other evidence of such approvals and
authorizations;
(ii) copies, certified as true and complete by an officer of each
Security Party (other than the Borrower), of the resolutions
of the board of directors and shareholder, or management
committee and member, as the case may be, thereof evidencing
approval of those Security Documents to which it is to be a
party and authorizing an appropriate officer or officers or
attorney-in-fact or attorneys-in-fact to execute the same on
its behalf, or other evidence of such approvals and
authorizations;
(iii) copies, certified as true and complete by an officer of the
Borrower, of all documents evidencing any other necessary
action (including actions by such parties thereto other than
the Borrower as may be required by the Administrative Agent),
approvals or consents with respect to this Agreement, the Note
and the Security Documents;
(iv) copies, certified as true and complete by an officer of the
respective Security Party of the certificate of incorporation
and by-laws, certificate of formation and operating agreement,
or equivalent instruments thereof;
(v) certificate of the Secretary of the Borrower certifying that
it legally and beneficially owns, directly or indirectly, all
of the issued and outstanding capital stock, or limited
liability company membership interests, as the case may be, of
each of the other Security Parties and that such capital stock
or membership interests are free and clear of
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any liens, claims, pledges or other encumbrances whatsoever
other than as disclosed to the Administrative Agent in writing
on or before the date hereof;
(vi) certificate of the Secretary of each Security Party (other
than the Borrower) certifying as to the record ownership of
all of its issued and outstanding capital stock, or limited
liability company membership interests, as the case may be;
and
(vii) certificates of the jurisdiction of incorporation or
formation, as the case may be, of each Security Party as to
the good standing thereof.
(b) The Vessels. the Administrative Agent shall have received
evidence satisfactory to it that:
(i) each of the Vessels is in the sole and absolute ownership of
the relevant Guarantor as set forth in Schedule 3 or Schedule
4, as the case may be, and duly registered in such Guarantor's
name under Marshall Islands or Liberian flag, unencumbered,
save and except for each of the Facility A Mortgage, in the
case of the Facility A Vessels, the Facility B Mortgage and
the Mortgage recorded against it and as permitted thereby;
(ii) each Vessel is classed in the highest classification and
rating for vessels of the same age and type with the
respective classification society as set forth in Schedule 3
or Schedule 4, as the case may be, without any material
outstanding recommendations;
(iii) each of the Vessels is operationally seaworthy and in every
way fit for its intended service; and
(iv) each of the Vessels is insured in accordance with the
provisions of the Mortgage recorded against it and the
requirements thereof in respect of such insurances have been
complied with;
(c) The Note. the Borrower shall have duly executed and
delivered this Agreement and the Note, to the Administrative Agent;
(d) Guarantor Documents. each Guarantor shall have duly
executed and delivered to the Administrative Agent:
(i) the Guaranty;
(ii) the Mortgage over its Vessel(s);
(iii) an Insurances Assignment with respect to its Vessel(s);
(iv) an Earnings Assignment with respect to its Vessel(s);
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(v) its Assignment Notices; and
(vi) Uniform Commercial Code Financing Statements for filing with
the State and County of New York, the State of Connecticut,
Fairfield County, Connecticut and in such other jurisdictions
as the Administrative Agent may reasonably require;
(e) Mega I Assignment. Loire shall have been executed and
delivered to the Security Agent the Mega I Assignment and its Assignment Notoce.
(f) Intercreditor Agreement. the Intercreditor Agreement shall
have been executed and delivered to the Administrative Agent;
(g) Facility A/Facility B. each of Facility A and Facility B
shall have been borrowed by the Borrower and/or all conditions to the borrowing
thereof shall have been complied with other than issuance of the Letter of
Credit.
(h) Guarantor Solvency. the Administrative Agent shall have
received a certificate of an officer of each Guarantor confirming the
representations and warranties with respect to solvency set forth in its
Guaranty and containing conclusions as to the solvency of such Guarantor;
(i) Environmental Claims. the Administrative Agent shall be
satisfied that neither the Borrower nor any of its Subsidiaries is subject to
any Environmental Claim which could have a Material Adverse Effect;
(j) Fees. the Administrative Agent shall have received payment
in full of all fees and expenses due to the Agents, the Arrangers and the Banks
under Section 14 and the Fee Letter;
(k) Accounts. each Security Party shall have established an
operating account with the Syndication Agent into which Assigned Moneys are to
be paid;
(l) Vessel Liens. the Administrative Agent shall have received
evidence satisfactory to it and to its legal advisor that, save for the liens
created by the Mortgages, the Assignments, the Facility A Mortgages, the other
Facility A Security Documents, the Facility B Mortgages and the other Facility B
Security Documents, there are no liens, charges or encumbrances of any kind
whatsoever on any of the Vessels or on their respective earnings except as
permitted hereby or by any of the Security Documents;
(m) Approved Business Plan. not later than fourteen (14) days
prior to the Date of Issuance, the Administrative Agent shall have received a
copy of the Approved Business Plan, certified by the Secretary of the Borrower
to be true and complete;
(n) Charters; Pooling Agreements. the Borrower shall have
delivered to the Administrative Agent true and complete copies of (i) all
charters having a term longer than twelve (12) months from the date of execution
and (ii) all vessel pooling agreements, in each case to which the Borrower or
any Subsidiary is a party; and
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(o) Legal Opinions. the Administrative Agent shall have
received legal opinions addressed to the Agents from (i) Fredric S. London,
Esq., in-house counsel for the Security Parties, and (ii) Seward & Kissel LLP,
special counsel to the Agents and Banks, in each case in such form as the
Administrative Agent may require, as well as such other legal opinions as the
Administrative Agent shall have required as to all or any matters under the laws
of the United States of America, the State of Delaware, the State of New York,
the Republic of Liberia and the Republic of the Marshall Islands covering the
representations and conditions which are the subjects of Sections 2 and 5.1.
5.2 Further Conditions Precedent. The Conversion of the Reimbursement
Obligations into the Loan under this Agreement shall be expressly and separately
subject to the following further conditions precedent on the Conversion Date:
(a) the representations stated in Section 2 (updated mutatis
mutandis to such date) being true and correct as if made on
and as of that date;
(b) no Event of Default having occurred and being continuing and
no event having occurred and being continuing which, with the
giving of notice or lapse of time, or both, would constitute
an Event of Default;
(c) the Administrative Agent being satisfied that no change in any
applicable laws, regulations, rules or in the interpretation
thereof shall have occurred which make it unlawful for any
Security Party to make any payment as required under the terms
of this Agreement, the Note, the Security Documents or any of
them; and
(d) there having been no Material Adverse Effect since the date
hereof.
5.3 Breakfunding Costs. In the event that, on the date specified in the Demand
Notice for the payment of the Stated Amount pursuant to the Letter of Credit,
the Banks shall not be obliged under the Letter of Credit to make such payment,
the Borrower shall indemnify and hold the Banks fully harmless against any
losses which the Banks (or any thereof) may sustain as a result of borrowing or
agreeing to borrow funds to meet the payment requirement of the Demand Notice
and the certificate of the relevant Bank or Banks shall, absent manifest error,
be conclusive and binding on the Borrower as to the extent of any such losses.
5.4 Satisfaction after Issuance or Conversion. Without prejudice to any of the
other terms and conditions of this Agreement, in the event the Banks, in their
sole discretion, cause the Issuer to issue the Letter of Credit or permit the
Conversion to occur prior to the satisfaction of all or any of the conditions
referred to in Sections 5.1 or 5.2, the Borrower hereby covenants and undertakes
to satisfy or procure the satisfaction of such condition or conditions within
fourteen (14) days after the Date of Issuance, in the case of issuance of the
Letter of Credit, or the Conversion Date, in the case of occurrence of the
Conversion (or such longer period as the Banks, in their sole discretion, may
agree).
6. REPAYMENT AND PREPAYMENT OF LOAN
6.1 Repayment. If the Reimbursement Obligations are converted into the Loan as
provided in Section 4, the Borrower shall repay the principal of the Loan in six
(6) semi-annual installments on
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six (6) consecutive Payment Dates, commencing with the Initial Payment Date. The
first four (4) such installments shall be in the amount of Four Million dollars
($4,000,000), the next such installment shall be in the amount of Ten Million
Dollars ($10,000,000) and the last such installment shall be in the amount of
Ten Million Dollars ($10,000,000) plus such other amounts as may be necessary to
repay the Loan in full together with accrued but unpaid interest and any other
amounts owing by the Borrower or any other Security Party to any Arranger, Agent
or Bank pursuant to this Agreement, the Note or any Security Document, such last
installment to be paid on the Final Payment Date.
6.2 Voluntary Prepayment; no re-borrowing. The Borrower may prepay, upon five
(5) Banking Days written notice, the Loan or any portion thereof. Each
prepayment shall be in a minimum amount of One Million Dollars ($1,000,000) plus
any One Million Dollar ($1,000,000) multiple thereof or the full amount of the
Loan. No part of the Loan will be available for re-borrowing.
6.3 Mandatory Prepayment; Sale or Loss of Vessel. On (i) any sale of a Vessel
(which in any event shall require the prior consent of the Agents) or (ii) the
earlier of (x) ninety (90) days after the Total Loss of a Vessel or (y) the date
on which the insurance proceeds in respect of such loss are received by the
Borrower (or a Guarantor) or the Security Agent as assignee thereof, such
proceeds shall be applied as follows:
(a) Facility A Vessel. in respect of a Facility A Vessel first
in accordance with Section 5.4 of the Facility A Loan Agreement, then in
repayment of amounts due hereunder in the inverse order of their due dates for
payment;
(b) Facility B Vessel. in respect of a Facility B Vessel first
in accordance with Section 5.3 of the Facility B Loan Agreement, then in
repayment of amounts due hereunder in the inverse order of their due dates for
payment
6.4 Demand Conversion. In the event that the Administrative Agent determines
that (a) a Material Adverse Effect has occurred, or (b) the Borrower has failed
to meet any objective specified in the Approved Business Plan by the target date
thereof specified in the Approved Business Plan to the satisfaction of the
Majority Banks, then the Administrative Agent may on such date or any time
thereafter convert the Loan to a demand loan by sending notice to the Borrower.
Upon the sending of such a notice, the Loan shall be converted to a demand loan,
and full repayment of the Loan and all other obligations of the Borrower or any
other Security Party under this Agreement, the Note or any Security Document
shall be due upon demand by the Administrative Agent.
6.5 Interest and Costs with Prepayments. Any repayment or prepayment of the Loan
made pursuant to this Agreement (including, without limitation, those made
pursuant to Sections 6 and 10) shall be subject to the condition that on the
date of prepayment all accrued interest to the date of such prepayment shall be
paid in full with respect to the Loan or portions thereof being prepaid,
together with any and all actual costs or expenses incurred by any Bank in
connection with any breaking of funding (as certified by such Bank, which
certification shall, absent any manifest error, be conclusive and binding on the
Borrower).
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7. INTEREST AND RATE
7.1 Applicable Rate. The Loan shall bear interest at the Applicable Rate which
shall be the rate per annum which is equal to the aggregate of (a) LIBOR for the
relevant Interest Period plus (b) the Margin. The Applicable Rate shall be
determined by the Administrative Agent two Banking Days prior to the first day
of the relevant Interest Period. The Administrative Agent shall promptly notify
the Borrower in writing of the Applicable Rate as and when determined. Each such
determination, absent manifest error, shall be conclusive and binding upon the
Borrower.
7.2 Default Rate. Any amounts due under this Agreement, not paid when due,
whether by acceleration or otherwise, shall bear interest thereafter from the
due date thereof until the date of payment at a rate per annum equal to (i) the
Prime Rate (as notified to the Borrower by the Administrative Agent), plus (ii)
the Margin, plus (iii) two percent (2%) (the "Default Rate"). Following the
occurrence of any Event of Default, the Administrative Agent, upon instruction
of the Majority Banks, may deliver a notice to the Borrower advising the
Borrower than an Event of Default has occurred. From the date of any such notice
until each such Event of Default is cured to the satisfaction of the Majority
Banks, the Loan shall bear interest at the Default Rate.
7.3 Interest Periods. The Borrower shall give the Administrative Agent an
Interest Notice specifying the Interest Period selected at least three (3)
Banking Days prior to the end of any then existing Interest Period. If at the
end of any then existing Interest Period the Borrower fails to give an Interest
Notice the relevant Interest Period shall be three (3) months. The Borrower's
right to select an Interest Period shall be subject to the restriction that no
selection of an Interest Period shall be effective unless each Bank is satisfied
that the necessary funds will be available to such Bank for such period and that
no Event of Default or event which, with the giving of notice or lapse of time,
or both, would constitute an Event of Default shall have occurred and be
continuing.
7.4 Interest Payments. Accrued interest on the Loan shall be payable in arrears
on the last day of each Interest Period, except that if the Borrower shall
select an Interest Period in excess of three (3) months, accrued interest shall
be payable during such Interest Period on each three (3) month anniversary of
the commencement of such Interest Period and upon the end of such Interest
Period.
8. PAYMENTS
8.1 Place of Payments, No Set Off. All payments to be made hereunder by the
Borrower shall be made to the Administrative Agent, not later than 11 a.m. New
York time (any payment received after 11 a.m. New York time shall be deemed to
have been paid on the next Banking Day) on the due date of such payment, at its
office located at 11 West 42nd Street, 7th Floor, New York, New York 10036 or to
such other office of the Administrative Agent as the Administrative Agent may
direct, without set-off or counterclaim and free from, clear of, and without
deduction for, any Taxes, provided, however, that if the Borrower shall at any
time be compelled by law to withhold or deduct any Taxes from any amounts
payable to the Banks hereunder, then the Borrower shall pay such additional
amounts in Dollars as may be necessary in order that the net amounts received
after withholding or deduction shall equal the amounts which would have been
received if such withholding or deduction were not required and, in the event
any withholding or deduction is made, whether for Taxes or otherwise, the
Borrower shall promptly send to the Administrative Agent such documentary
evidence with respect to such withholding or deduction as may be required from
time to time by the Banks.
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8.2 Tax Credits. If any Bank obtains the benefit of a credit against the
liability thereof for federal income taxes imposed by any taxing authority for
all or part of the Taxes as to which the Borrower has paid additional amounts as
aforesaid (and each Bank agrees to use its best efforts to obtain the benefit of
any such credit which may be available to it, provided it has knowledge that
such credit is in fact available to it), then such Bank shall reimburse the
Borrower for the amount of the credit so obtained. Each Bank agrees that in the
event that Taxes are imposed on account of the situs of its loans hereunder,
such Bank, upon acquiring knowledge of such event, shall, if commercially
reasonable, shift such loans on its books to another office of such Bank so as
to avoid the imposition of such Taxes.
8.3 Computations; Banking Days. (a) All computations of interest and fees shall
be made by the Agents or the Banks, as the case may be, on the basis of a
360-day year, in each case for the actual number of days (including the first
day but excluding the last day) occurring in the period for which interest or
fees are payable. Each determination by the Agents or the Banks of an interest
rate or fee hereunder shall be conclusive and binding for all purposes, absent
manifest error.
(b) Whenever any payment hereunder or under the Note shall be stated
to be due on a day other than a Banking Day, such payment shall be due and
payable on the next succeeding Banking Day unless the next succeeding Banking
Day falls in the following calendar month, in which case it shall be payable on
the immediately preceding Banking Day.
9. EVENTS OF DEFAULT
9.1 Events of Default. The occurrence of any of the following events shall be an
Event of Default:
(a) Non-Payment of Principal. any payment of principal is not
paid when due; or
(b) Non-Payment of Interest or Other Amounts. any interest or
any other amount becoming payable to the Agents, the Arrangers or any Bank under
this Agreement, under the Note, or under any of the Security Documents is not
paid on the due date or date of demand (as the case may be), and such default
continues unremedied for a period of five (5) Banking Days; or
(c) Representations. any representation, warranty or other
statement made by the Borrower in this Agreement or by any Security Party in any
of the Security Documents or in any other instrument, document or other
agreement delivered in connection herewith or therewith proves to have been
untrue or misleading in any material respect as at the date as of which made or
confirmed; or
(d) Mortgage. there is an event of default under any Mortgage;
or
(e) Covenants. any Security Party defaults in the due and
punctual observance or performance of any other term, covenant or agreement
contained in this Agreement, in the Note, in any of the Security Documents or in
any other instrument, document or other agreement delivered in connection
herewith or therewith, or it becomes impossible or unlawful for any Security
Party to fulfill any such term, covenant or agreement or there occurs any other
event which constitutes a default under this Agreement, under the Note or under
any of the Security Documents, in each case other than an Event of Default
referred to elsewhere in this Section 9.1,
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and such default, impossibility and/or unlawfulness, in the reasonable opinion
of the Majority Banks, could have a material adverse effect on the Banks' rights
hereunder, under the Note or under the Security Documents or on the Banks' right
to enforce this Agreement, the Note, and/or the Security Documents, and
continues unremedied or unchanged, as the case may be, for a period of thirty
(30) days; or
(f) Indebtedness. any Security Party, any Subsidiary or any
Affiliate shall default in the payment when due (subject to any applicable grace
period) of any Indebtedness or of any other indebtedness, in either case, in the
outstanding principal amount equal to or exceeding Five Hundred Thousand Dollars
($500,000) or such Indebtedness or indebtedness is, or by reason of such default
is subject to being, accelerated or any party becomes entitled to enforce the
security for any such Indebtedness or indebtedness and such party shall take
steps to enforce the same, unless such default or enforcement is being contested
in good faith and by appropriate proceedings or other acts and the Security
Party, Subsidiary or Affiliate, as the case may be, shall set aside on its books
adequate reserves with respect thereto; or
(g) Ownership of Guarantors. the Borrower shall cease to own
(except as otherwise expressly permitted by this Agreement), directly or
indirectly, one hundred percent (100%) of any of the Guarantors or the
SETTEBELLO Guarantor shall cease to own, directly or indirectly, 49.0% of the
SETTEBELLO Owner; or
(h) Bankruptcy. the Borrower or any Affiliate commences any
proceeding under any reorganization, arrangement or readjustment of debt,
dissolution, winding up, adjustment, composition, bankruptcy or liquidation law
or statute of any jurisdiction, whether now or hereafter in effect (a
"Proceeding"), or there is commenced against any thereof any Proceeding and such
Proceeding remains undismissed or unstayed for a period of thirty (30) days or
any receiver, trustee, liquidator or sequestrator of, or for, any thereof or any
substantial portion of the property of any thereof is appointed and is not
discharged within a period of thirty (30) days or any thereof by any act
indicates consent to or approval of or acquiescence in any Proceeding or the
appointment of any receiver, trustee, liquidator or sequestrator of, or for,
itself or of, or for, any substantial portion of its property; or
(i) Termination of Operations; Sale of Assets. except as
expressly permitted under this Agreement, any Security Party ceases its
operations or sells or otherwise disposes of all or substantially all of its
assets (other than such a sale by one Guarantor to another) or all or
substantially all of the assets of any Security Party are seized or otherwise
appropriated; or
(j) Judgments. any judgment or order is made the effect
whereof would be to render ineffective or invalid this Agreement, the Letter of
Credit, the Note or any of the Security Documents or any material provision
thereof, or the Borrower or any Security Party asserts that any such agreement
or provision thereof is invalid; or
(k) Inability to Pay Debts. any Security Party is unable to
pay or admits its inability to pay its debts as they fall due or a moratorium
shall be declared in respect of any material indebtedness of any Security Party;
or
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(l) Change in Financial Position. any change in the financial
position of any Security Party which, in the reasonable opinion of the Majority
Banks, shall have a Material Adverse Effect; or
(m) Change in Control. a Change of Control shall occur with
respect to the Borrower; or
(n) ERISA Debt. (i) the Borrower or any ERISA Affiliate fails
to pay when due an amount or amounts aggregating in excess of $1,000,000 which
it or they have become liable to pay under Title IV of ERISA or (ii) the
Borrower or any ERISA Affiliate, individually or collectively, incurs, or should
reasonably expect to incur, any Withdrawal Liability or liability upon the
happening of a Termination Event and the aggregate of all such Withdrawal
Liabilities and such other liabilities exceeds $10,000,000; or
(o) Approved Business Plan. at any time the Board of Directors
of the Borrower passes any resolution amending or rescinding any part of the
Approved Business Plan or the Borrower otherwise rejects or rescinds any part of
the Approved Business Plan; or
(p) Cross-Default. any Event of Default (as defined in either
the Facility A Loan Agreement or the Facility B Loan Agreement) or event which,
with the giving of notice or passage of time on both, would constitute such an
Event of Default, occurs or the Borrower or any Guarantor defaults under any
material contract or agreement to which it is a party or by which it is bound.
Upon and during the continuance of any Event of Default, the Banks' obligation
to make the Letter of Credit Available or convert the Reimbursement Obligations
into the Loan available shall cease and the Administrative Agent on the
instructions of the Majority Banks may, by notice to the Borrower, direct the
Borrower to pay to the Administrative Agent for the benefit of the Banks the
Stated Amount to be kept as collateral for the Borrower's Reimbursement
Obligations, or should the same have been converted into the Loan, declare the
entire unpaid balance of the then outstanding Loan, accrued interest and any
other sums payable by the Borrower hereunder or under the Note due and payable,
whereupon the same shall forthwith be due and payable without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived;
provided that upon the happening of an event specified in subsections (h) or (k)
of this Section 9.1 with respect to the Borrower, the Note (provided that the
Conversion had occurred) shall be immediately due and payable without
declaration or other notice to the Borrower. In such event, the Banks may
proceed to protect and enforce their rights by action at law, suit in equity or
in admiralty or other appropriate proceeding, whether for specific performance
of any covenant contained in this Agreement, in the Note (provided that the
Conversion had occurred) or in any Security Document, or in aid of the exercise
of any power granted herein or therein, or the Banks may proceed to enforce the
payment of the Note (provided that the Conversion had occurred) or the
Reimbursement Obligations or to enforce any other legal or equitable right of
the Banks, or proceed to take any action authorized or permitted under the terms
of any Security Document or by applicable law for the collection of all sums
due, or so declared due, on the Note (provided that the Conversion had occurred)
or with respect to the Reimbursement Obligations, including, without limitation,
the right to appropriate and hold or apply (directly, by way of set-off or
otherwise) to the payment of the obligations of the Borrower to the Banks
hereunder and/or under the Note (provided that the Conversion had occurred)
(whether or not then due) all moneys and other amounts of the Borrower then or
thereafter
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in possession of any Bank, the balance of any deposit account (demand or time,
mature or unmatured) of the Borrower then or thereafter with any Bank and every
other claim of the Borrower then or thereafter against any of the Banks.
9.2 Indemnification. The Borrower agrees to, and shall, indemnify and hold the
Agents, the Arrangers and the Banks harmless against any loss, as well as
against any reasonable costs or expenses (including reasonable legal fees and
expenses), which any of the Agents, the Arrangers or the Banks sustains or
incurs as a consequence of any default in payment of the principal amount of the
Loan, interest accrued thereon or any other amount payable hereunder, under the
Note or under any Security Documents including, but not limited to, all actual
losses incurred in liquidating or re-employing fixed deposits made by third
parties or funds acquired to effect or maintain the Loan or any portion thereof.
Any Banks' certification of such costs and expenses shall, absent any manifest
error, be conclusive and binding on the Borrower.
9.3 Application of Moneys. Except as otherwise provided in any Security
Document, all moneys received by the Agents, the Arrangers or the Banks under or
pursuant to this Agreement, the Note or any of the Security Documents after the
happening of any Event of Default (unless cured to the satisfaction of the
Majority Banks) shall be applied by the Agents in the following manner:
(a) first, in or towards the payment or reimbursement of any
expenses or liabilities incurred by the Agents, the Arrangers or the Banks in
connection with the ascertainment, protection or enforcement of its rights and
remedies hereunder, under the Note and under any of the Security Documents,
(b) secondly, in or towards payment of any interest owing in
respect of the Loan or the Reimbursement Obligations, as the case may be,
(c) thirdly, in or towards repayment of principal of the Loan
or the Reimbursement Obligations, as the case may be,
(d) fourthly, in or towards payment of all other sums which
may be owing to the Agents, the Arrangers or the Banks under this Agreement,
under the Note, under the Fee Letter or under any of the Security Documents, and
(e) fifthly, the surplus (if any) shall be paid to the
Borrower or to whosoever else may be entitled thereto.
10. COVENANTS
10.1 Affirmative Covenants. The Borrower hereby covenants and undertakes with
the Banks that, from the date hereof and so long as any principal, interest or
other moneys are owing in respect of this Agreement, under the Note or under any
of the Security Documents, the Borrower will:
(a) Performance of Agreements. duly perform and observe, and
procure the observance and performance by all other parties thereto (other than
the Banks) of, the terms of this Agreement, the Note and the Security Documents;
(b) Notice of Default, etc. promptly upon obtaining knowledge
thereof, inform the Administrative Agent of the occurrence of (a) any Event of
Default or of any event
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which, with the giving of notice or lapse of time, or both, would constitute an
Event of Default, (b) any litigation or governmental proceeding pending or
threatened against it or against any of its Subsidiaries which could reasonably
be expected to have a Material Adverse Effect, (c) the withdrawal of any
Vessel's rating by its Classification Society or the issuance by the
Classification Society of any material recommendation or notation affecting
class and (d) any other event or condition which is reasonably likely to have a
Material Adverse Effect;
(c) Obtain Consents. without prejudice to Section 2.1 and this
Section 10.1, obtain every consent and do all other acts and things which may
from time to time be necessary or advisable for the continued due performance of
all its and the other Security Parties' respective obligations under this
Agreement, under the Note and under the Security Documents;
(d) Financial Information. deliver to each Bank:
(i) as soon as available but not later than ninety (90) days after
the end of each fiscal year of the Borrower, complete copies
of the consolidated financial reports of the Borrower and its
Subsidiaries (together with a Compliance Certificate), all in
reasonable detail, which shall include at least the
consolidated balance sheet of the Borrower and its
Subsidiaries as of the end of such year and the related
consolidated statements of income and sources and uses of
funds for such year, which shall be audited reports prepared
by an Acceptable Accounting Firm;
(ii) as soon as available but not less than forty-five (45) days
after the end of each of the first three quarters of each
fiscal year of the Borrower, a quarterly interim consolidated
balance sheet of the Borrower and its Subsidiaries and the
related consolidated profit and loss statements and sources
and uses of funds (together with a Compliance Certificate),
all in reasonable detail, unaudited, but certified to be true
and complete by the chief financial officer of the Borrower;
(iii) within ten (10) days of the filing thereof, copies of all
registration statements and reports on Forms 10-K, 10-Q and
8-K (or their equivalents) and other material filings which
the Borrower shall have filed with the Securities and Exchange
Commission or any similar governmental authority;
(iv) promptly upon the mailing thereof to the shareholders of the
Borrower, copies of all financial statements, reports, proxy
statements and other communications provided to the Borrower's
shareholders;
(v) within ten (10) days of the Borrower's receipt thereof, copies
of all audit letters or other correspondence from any external
auditors including material financial information in respect
of the Borrower;
(vi) at any time upon the request of any Agent, a Compliance
Certificate; and
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(vii) such other statements (including, without limitation, monthly
consolidated statements of operating revenues and expenses),
lists of assets and accounts, budgets, forecasts, reports and
other financial information with respect to its business as
the Administrative Agent may from time to time reasonably
request, certified to be true and complete by the chief
financial officer of the Borrower;
(e) Corporate Existence. do or cause to be done, and procure
that each Subsidiary shall do or cause to be done, all things necessary to
preserve and keep in full force and effect its corporate existence, or limited
liability company existence, as the case may be, and all licenses, franchises,
permits and assets necessary to the conduct of its business;
(f) Books and Records. at all times keep, and cause each
Subsidiary to keep, proper books of record and account into which full and
correct entries shall be made in accordance with GAAP;
(g) Taxes and Assessments. pay and discharge, and cause each
Subsidiary to pay and discharge, all material taxes, assessments and
governmental charges or levies imposed upon it or upon its income or property
prior to the date upon which penalties attach thereto; provided, however, that
it shall not be required to pay and discharge, or cause to be paid and
discharged, any such tax, assessment, charge or levy so long as the legality
thereof shall be contested in good faith and by appropriate proceedings or other
acts and it shall set aside on its books adequate reserves with respect thereto;
(h) Inspection. allow, and cause each Subsidiary to allow, any
representative or representatives designated by any Agent, subject to applicable
laws and regulations, to visit and inspect any of its properties, and, on
request, to examine its books of account, records, reports and other papers and
to discuss its affairs, finances and accounts with its officers, all at such
reasonable times and as often as any Agent reasonably requests;
(i) Compliance with Statutes, Agreements, etc. do or cause to
be done, and cause each Subsidiary to do and cause to be done, all things
necessary to comply with all material contracts or agreements to which it or any
Subsidiary is a party, and all material laws, and the rules and regulations
thereunder, applicable to the Borrower or such Subsidiary, including, without
limitation, those laws, rules and regulations relating to employee benefit plans
and environmental matters;
(j) Environmental Matters. promptly upon the occurrence of any
of the following conditions, provide to the Administrative Agent a certificate
of a chief executive officer thereof, specifying in detail the nature of such
condition and its proposed response or the response of its Environmental
Affiliates: (a) its receipt or the receipt by any other Security Party or any
Environmental Affiliates of the Borrower or any other Security Party of any
written communication whatsoever that alleges that such person is not in
compliance with any applicable Environmental Law or Environmental Approval, if
such noncompliance could reasonably be expected to have a Material Adverse
Effect, (b) knowledge by it, or by any other Security Party or any Environmental
Affiliates of the Borrower or any other Security Party that there exists any
Environmental Claim pending or threatened against any such person, which could
reasonably be expected to have a Material Adverse Effect, or (c) any release,
emission, discharge or disposal of any material that
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could form the basis of any Environmental Claim against it, any other Security
Party or against any Environmental Affiliates of the Borrower or any other
Security Party, if such Environmental Claim could reasonably be expected to have
a Material Adverse Effect. Upon the written request by the Agent, it will submit
to the Agent at reasonable intervals, a report providing an update of the status
of any issue or claim identified in any notice or certificate required pursuant
to this subsection;
(k) ERISA. forthwith upon learning of the occurrence of any
material liability of the Borrower, any Subsidiary or any ERISA Affiliate
pursuant to ERISA in connection with the termination of any Plan or withdrawal
or partial withdrawal of any multi-employer plan (as defined in ERISA) or of a
failure to satisfy the minimum funding standards of Section 412 of the Code or
Part 3 of Title I of ERISA by any Plan for which the Borrower, any Subsidiary or
any ERISA Affiliate is plan administrator (as defined in ERISA), furnish or
cause to be furnished to the Banks written notice thereof;
(l) Vessel Management. cause each of the Vessels to be managed
both commercially and technically by the Borrower, a wholly-owned subsidiary
thereof or its existing manager;
(m) Funded Debt to Total Capitalization Ratio. maintain at all
times on a consolidated basis a ratio of Funded Debt to Total Capitalization of
not more than 0.6 to 1 provided, that for purposes of compliance with this
covenant only, Funded Debt shall (i) exclude unsecured, subordinated debt, and
(ii) include the present value of the Borrower's (or any of the Borrower's
Subsidiaries') liability for all payments under synthetic leases other than the
Columbia Lease;
(n) Cash. maintain at all times on a consolidated basis
readily available cash and/or Cash Equivalents as follows:
(i) through December 31, 2000, not less than Ten Million Dollars
($10,000,000);
(ii) thereafter, through June 30, 2001, not less than Fifteen
Million Dollars ($15,000,000);
(iii) thereafter, not less than Twenty Million Dollars
($20,000,000);
(o) Consolidated Net Worth. maintain at all times a
Consolidated Net Worth of not less than One Hundred Sixty Million Dollars
($160,000,000) plus 50% of the Borrower's positive net income (on a consolidated
basis) earned after December 31, 1999 plus 100% of the net proceeds received by
the Borrower (or any of the Borrower's Subsidiaries) from the issuance of equity
securities after the Date of Issuance;
(p) EBITDA to Interest Expense. maintain a ratio of EBITDA to
Interest Expense as follows:
(i) through December 31, 2000, not less than 1.1 to 1.0;
(ii) thereafter, through December 31, 2002, not less than 1.75 to
1.0;
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(iii) thereafter, not less than 2.5 to 1.0;
measured not less than quarterly, in each instance based on the four
most recent fiscal quarters for which financial information is available;
(q) Use of Excess Cash. apply all cash and Cash Equivalents of
the Borrower (on a consolidated basis), proceeds from the issuance of securities
by the Borrower, any Guarantor or any Guarantor, and proceeds from the sale of
any vessels by the Borrower, any Guarantor or any Guarantor (net of indebtedness
secured by a mortgage on such vessel) as follows:
(i) to the extent the Borrower chooses to do so, to retention by
the Borrower as cash or Cash Equivalents up to $20.0 million;
and then
(ii) to prepayment of the Loan until the Loan is fully repaid.
(r) Brokerage Commissions, etc. the Borrower agrees to
indemnify and hold the Arrangers, the Agents and the Banks harmless from any
claim for any brokerage commission, fee, or compensation from any broker or
third party resulting from the transactions contemplated hereby;
(s) Deposit Accounts; Assignment. maintain, and procure that
each other Security Party shall maintain its operating accounts with the
Syndication Agent and shall procure, and shall cause each other Security Party
to procure, that all earnings of any Vessels shall be paid into such operating
accounts and the Borrower, and by its execution of the Consent and Agreement
hereto, each other Security Party, hereby pledges, assigns and grants to the
Syndication Agent, for the benefit of the Banks, a security interest in all
funds from time to time in such accounts (such security interest in accounts of
the Guarantors being subject to the terms of the Intercreditor Agreement);
(t) Future Guaranties. procure that all Subsidiaries of the
Borrower (other than Designated Subsidiaries, and only for so long as remaining
a Designated Subsidiary), shall execute a Guaranty and other relevant Security
Documents in respect of any vessel owned thereby within thirty (30) days of
formation, acquisition or otherwise becoming a Subsidiary, or ceasing to be a
Designated Subsidiary, of the Borrower; and
(u) Insurance. maintain, and cause each Subsidiary to
maintain, with financially sound and reputable insurance companies, insurance on
all their respective properties and against all such risks and in at least such
amounts as are usually insured against by companies of established reputation
engaged in the same or similar business from time to time
10.2 Negative Covenants. The Borrower hereby covenants and undertakes with the
Banks that, from the date hereof and so long as any principal, interest or other
moneys are owing in respect of this Agreement, under the Note or under any of
the Security Documents, the Borrower will not, and will procure that no other
Subsidiary, to the extent applicable, will, without prior the written consent of
the Administrative Agent (or the Majority Banks or all of the Banks if required
by Section 16.8):
(a) Liens. create, assume or permit to exist, any mortgage, pledge,
lien, charge, encumbrance or any security interest whatsoever upon any
Collateral or other property except:
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(i) liens disclosed in Schedule 5;
(ii) liens on the Designated Vessel securing the Designated Vessel
Indebtedness;
(iii) liens for taxes not yet payable for which adequate reserves
have been maintained;
(iv) the Mortgages, the Assignments, and other liens in favor of
the Security Agent;
(v) liens, charges and encumbrances against their respective
Vessels permitted to exist under the terms of the Mortgages;
(vi) pledges of certificates of deposit or other cash collateral
securing any Security Party's reimbursement obligations in
connection with letters of credit now or hereafter issued for
the account of such Security Party in connection with the
establishment of the financial responsibility of the Security
Parties under 33 C.F.R. Part 130 or 46 C.F.R. Part 540, as the
case may be, as the same may be amended or replaced;
(vii) pledges or deposits to secure obligations under workmen's
compensation laws or similar legislation, deposits to secure
public or statutory obligations, warehousemen's or other like
liens, or deposits to obtain the release of such liens and
deposits to secure surety, appeal or customs bonds on which
the Borrower or any of the Guarantors is the principal, as to
all of the foregoing, only to the extent arising and
continuing in the ordinary course of business; and
(viii) other liens, charges and encumbrances incidental to the
conduct of the business of each such party, the ownership of
any such party's property and assets and which do not in the
aggregate materially detract from the value of each such
party's property or assets or materially impair the use
thereof in the operation of its business;
(b) Change in Business. materially change the nature of its
business or commence any business materially different from its current
business;
(c) Sale or Pledge of Shares. sell, assign, transfer, pledge
or otherwise convey or dispose of any of the shares (including by way of
spin-off, installment sale or otherwise) of the capital stock, or limited
liability company interests, as the case may be, of any Guarantor other than as
may be allowed in accordance with the Facility A Pledge Agreement or the
Facility B Pledge Agreement;
(d) Sale of Assets. sell, or otherwise dispose of, any Vessel
(other than the Designated Vessel, sales of Facility A Vessels made in
accordance with the terms of the Facility A Loan Agreement and sales of Facility
B Vessels made in accordance with the terms of the Facility B Loan Agreement the
proceeds of which are applied in accordance with Section 6.3
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hereof) or any other asset (including by way of spin-off, installment sale or
otherwise) which is substantial in relation to its assets taken as a whole
including without limitation, any material foreign Subsidiary or foreign assets
or interest in an Affiliate, other than such sales by one Guarantor to another;
(e) Changes in Offices or Names. change the location of the
chief executive office of any Security Party, the office of the chief place of
business any such parties, the office of the Security Parties in which the
records relating to the earnings or insurances of the Vessels are kept unless
the Banks shall have received sixty (60) days prior written notice of such
change;
(f) Consolidation and Merger. consolidate with, or merge into,
any corporation or other entity, or merge any corporation or other entity into
it provided, however that any Guarantor shall be permitted to merge into or
consolidate with any other Guarantor, so long as no Event of Default would
result therefrom;
(g) Chartering-in. other than pursuant to charters disclosed
in Schedule 5, charter, as charterer, any one vessel for a charter period
exceeding twelve (12) months; or permit any vessel to be chartered into any
vessel pool (in which the Borrower or any Subsidiary is a member) for a term
exceeding three (3) months;
(h) Chartering-out. and will procure that each other
Subsidiary will not, other than pursuant to charters disclosed in Schedule 5,
charter, as owner, any vessel (other than the Designated Vessel) on demise or
bareboat charter, or on time charter for a period in excess of twelve (12)
months;
(i) Vessel Pooling. and will procure that each Subsidiary will
not, enter any vessel into any vessel pooling arrangement other than as
disclosed in Schedule 5, or at any time amend any vessel pooling agreement;
(j) Distributions on Stock. in the case of the Borrower only,
directly or indirectly declare or pay any dividend or make any distribution on
its capital stock (a "Restricted Payment");
(k) Indebtedness. incur any Indebtedness, provided, however,
that if no Event of Default has occurred and is continuing, and that the other
Designated Vessel Conditions are met, the Designated Vessel Owner may incur the
Designated Vessel Indebtedness at the time of the Designated Vessel Acquisition;
(l) Investments. make any Investment provided, however, that
if no Event of Default has occurred and is continuing, the Borrower may make the
SOYANG Investment at the time the SOYANG is acquired;
(m) Capital Expenditures. make any Capital Expenditure (other
than as provided in (l) above);
(n) Deposit Accounts. other than as disclosed in Schedule 5,
maintain any deposit account other than with the Syndication Agent; provided,
that this covenant shall not apply to the Designated Vessel Owner; and
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(o) Change Fiscal Year. change its fiscal year.
10.3 Subsidiary Negative Covenants. The Borrower hereby covenants and undertakes
with the Banks that, from the date hereof and so long as any principal, interest
or other moneys are owing in respect of this Agreement, under the Note or under
any of the Security Documents, the Borrower will procure that no Subsidiary
will:
(a) Limitations on Ability to Make Distributions. create or
otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Subsidiary (other than a
Designated Subsidiary) to (i) pay dividends or make any other distributions on
its capital stock or limited liability company interests, as the case may be, to
the Borrower or any Subsidiary or pay any Indebtedness owed to the Borrower,
(ii) make any loans or advances to the Borrower, or (iii) transfer any of its
property or assets to the Borrower;
(b) Use of Corporate Funds. (except for the SOYANG Investment
and Permitted Drydocking Costs) pay out any funds to any company or person
except (a) in the ordinary course of business in connection with the management
of the business of the Borrower and its Subsidiaries, including the operation
and/or repair of the Vessels and other vessels owned or operated by such parties
and (b) the servicing of the Indebtedness permitted hereunder (but excluding,
any prepayments of any Indebtedness other than the Loan);
(c) Issuance of Shares. issue or dispose of any shares of its
own capital stock or limited liability company interests, as the case may be, to
any person other than the Borrower; or
10.4 Vessel Valuations. For inclusion with each Compliance Certificate delivered
pursuant to Section 10.1(d)(i), and each Compliance Certificate in respect of
the second quarter of each fiscal year delivered pursuant to Section
10.1(d)(ii), and in any event upon the request of any Agent, the Borrower shall
obtain appraisals of the Fair Market Value of the Vessels. The first three such
valuations in any year are to be at the Borrower's cost, provided, that
following and during the continuance of any Event of Default, all such
valuations are to be at the Borrower's cost. In the event the Borrower fails or
refuses to obtain the valuations requested pursuant to this Section 10.4 within
ten (10) days of an Agent's request therefor, any Agent will be authorized to
obtain such valuations, at the Borrower's cost, from three independent
shipbrokers selected by the Agents, which valuations shall be deemed the
equivalent of valuations duly obtained by the Borrower pursuant to this Section
10.4, but any Agent's actions in doing so shall not excuse any default of the
Borrower under this Section 10.4.
10.5 Asset Maintenance.
(a) If at any time after the Issuance Date but prior to December 31,
2001, the aggregate Fair Market Value of the Facility A Vessels then mortgaged
to the Security Agent (based upon the valuations obtained pursuant to Section
10.4) (together with the value of any additional collateral theretofore provided
under this Section) is less than one hundred fifteen percent (115%) of the
aggregate of the Facility A Loan and the Loan, or
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(b) if at any time after December 31, 2001 but prior to December 31,
2002 such aggregate Fair Market Value is less than one hundred twenty percent
(120%) of the aggregate of the Facility A Loan and the Loan, or
(c) if at any time thereafter the aggregate Fair Market Value of the
Facility Vessels is less than one hundred thirty percent (130%) of the aggregate
of the Facility A Loan and the Loan,
(in each case as applicable, such percentage being the "Required
Percentage") the Borrower shall, within a period of thirty (30) days following
receipt by the Borrower of written notice from the Administrative Agent
notifying the Borrower of such shortfall and specifying the amount thereof
(which amount shall, in the absence of manifest error, be deemed to be
conclusive and binding on the Borrower), either (i) deliver to the Security
Agent, upon the Administrative Agent's request, such additional collateral as
may be satisfactory to the Lenders in their sole discretion of sufficient value
to restore compliance with the Required Percentage or (ii) the Borrower shall
prepay such amount of the Loan (together with interest thereon and any other
monies payable in respect of such prepayment pursuant to Section 5.4) as shall
result in the Fair Market Value of the Facility A Vessels then mortgaged to the
Security Agent being not less than the Required Percentage. The Borrower shall
provide the Agents with its calculation as to its compliance with these
provisions with each Interest Notice and each Compliance Certificate.
10.6 Inspection and Survey Reports. If the Banks shall so request, the Borrowers
shall provide the Banks with copies of all internally generated inspection or
survey reports on the Vessels.
11. ASSIGNMENT.
This Agreement shall be binding upon, and inure to the benefit of,
the Borrower and the Banks, the Arrangers and the Agents and their respective
successors and assigns, except that the Borrower may not assign any of its
rights or obligations hereunder. Each Bank shall be entitled to assign its
rights and obligations under this Agreement or grant participation(s) in the
Loan to any subsidiary, holding company or other affiliate of such Bank, to any
subsidiary or other affiliate company of any thereof or, with the consent of the
Borrower and the Agents, not to be unreasonably withheld, to any other bank or
financial institution (in a minimum amount of not less than $5,000,000), and
such Bank shall forthwith give notice of any such assignment or participation to
the Borrower; and provided, however, that any such assignment must be made
pursuant to an Assignment and Assumption Agreement. The Borrower will take all
reasonable actions requested by any Agent or any Bank to effect such assignment,
including, without limitation, the execution of a written consent to any
Assignment and Assumption Agreement.
12. ILLEGALITY, INCREASED COST, NON-AVAILABILITY, ETC.
12.1 Illegality. In the event that by reason of any change in any applicable
law, regulation or regulatory requirement or in the interpretation thereof, a
Bank has a reasonable basis to conclude that it has become unlawful for any Bank
to maintain or give effect to its obligations as contemplated by this Agreement
or the Letter of Credit, such Bank shall inform the Agent and the Borrower to
that effect, whereafter the liability of such Bank to make its Commitment
available shall forthwith cease and the Borrower shall be required either to
repay to such Bank that portion of the Loan advanced by such Bank immediately
or, if such Bank so agrees, to repay such portion of
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the Loan to the Bank on the last day of any then current Interest Period in
accordance with and subject to the provisions of Section 12.5. In any such
event, but without prejudice to the aforesaid obligations of the Borrower to
repay such portion of the Loan, the Borrower and the relevant Bank shall
negotiate in good faith with a view to agreeing on terms for making such portion
of the Loan available from another jurisdiction or otherwise restructuring such
portion of the Loan on a basis which is not unlawful.
12.2 Increased Costs. If any change in applicable law, regulation or regulatory
requirement, or in the interpretation or application thereof by any governmental
or other authority, shall:
(i) subject any Bank to any Taxes with respect to its income from
the Loan or the Reimbursement Obligations, or any part
thereof, or
(ii) change the basis of taxation to any Bank of payments of
principal or interest or any other payment due or to become
due pursuant to this Agreement (other than a change in the
basis effected by the jurisdiction of organization of such
Bank, the jurisdiction of the principal place of business of
such Bank, the United States of America, the State or City of
New York or any governmental subdivision or other taxing
authority having jurisdiction over such Bank (unless such
jurisdiction is asserted by reason of the activities of the
Borrower or any of the other Security Parties) or such other
jurisdiction where the Loan or the Reimbursement Obligations
may be payable), or
(iii) impose, 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, a Bank, or
(iv) impose on any Bank any other condition affecting the Loan or
the Reimbursement Obligations or any part thereof,
and the result of the foregoing is either to increase the cost to such Bank of
making available or maintaining its Commitment or any part thereof or to reduce
the amount of any payment received by such Bank, then and in any such case if
such increase or reduction in the opinion of such Bank materially affects the
interests of such Bank under or in connection with this Agreement:
(a) the Bank shall notify the Agent and the Borrower of the
happening of such event, and
(c) the Borrower agrees forthwith upon demand to pay to such Bank
such amount as such Bank certifies to be necessary to
compensate such Bank for such additional cost or such
reduction; PROVIDED, however, that the foregoing provisions
shall not be applicable in the event that increased costs to
the Bank result from the exercise by the Bank of its right to
assign its rights or obligations under Section 11.
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12.3 Nonavailability of Funds. If the Administrative Agent shall determine that,
by reason of circumstances affecting the London Interbank Market generally,
adequate and reasonable means do not or will not exist for ascertaining the
Applicable Rate for the Loan for any Interest Period, the Administrative Agent
shall give notice of such determination to the Borrower. The Borrower and the
Administrative Agent shall then negotiate in good faith in order to agree upon a
mutually satisfactory interest rate and/or Interest Period to be substituted for
those which would otherwise have applied under this Agreement. If the Borrower
and the Administrative Agent are unable to agree upon such a substituted
interest rate and/or Interest Period within thirty (30) days of the giving of
such determination notice, the Administrative Agent shall set an interest rate
and Interest Period to take effect from the expiration of the Interest Period in
effect at the date of determination, which rate shall be equal to the Margin
plus the cost to the Banks (as certified by each Bank) of funding the Loan. In
the event the state of affairs referred to in this Section 12.3 shall extend
beyond the end of the Interest Period, the foregoing procedure shall continue to
apply until circumstances are such that the Applicable Rate may be determined
pursuant to Section 7.
12.4 Bank's Certificate Conclusive. A certificate or determination notice of any
Bank as to any of the matters referred to in this Section 12 shall, absent
manifest error, be conclusive and binding on the Borrower.
12.5 Compensation for Losses. Where the Loan or any portion thereof is to be
repaid by the Borrower pursuant to this Section 12, the Borrower agrees
simultaneously with such repayment to pay to the relevant Bank all accrued
interest to the date of actual payment on the amount repaid and all other sums
then payable by the Borrower to the relevant Bank pursuant to this Agreement,
together with such amounts as may be certified by the relevant Bank to be
necessary to compensate such Bank for any actual loss, premium or penalties
incurred or to be incurred thereby on account of funds borrowed to make, fund or
maintain its Commitment or such portion thereof for the remainder (if any) of
the then current Interest Period or Periods, if any, but otherwise without
penalty or premium.
13. CURRENCY INDEMNITY
13.1 Currency Conversion. If for the purpose of obtaining or enforcing a
judgment in any court in any country it becomes necessary to convert into any
other currency (the "judgment currency") an amount due in Dollars under this
Agreement, the Note or any of the Security Documents then the conversion shall
be made, in the discretion of the Administrative Agent, at the rate of exchange
prevailing either on the date of default or on the day before the day on which
the judgment is given or the order for enforcement is made, as the case may be
(the "conversion date"), provided that the Administration Banks shall not be
entitled to recover under this section any amount in the judgment currency which
exceeds at the conversion date the amount in Dollars due under this Agreement,
the Note and/or any of the Security Documents.
13.2 Change in Exchange Rate. If there is a change in the rate of exchange
prevailing between the conversion date and the date of actual payment of the
amount due, the Borrower shall pay such additional amounts (if any, but in any
event not a lesser amount) as may be necessary to ensure that the amount paid in
the judgment currency when converted at the rate of exchange prevailing on the
date of payment will produce the amount then due under this Agreement, the Note
and/or any of the Security Documents in Dollars; any excess over the amount due
received or collected by the Banks shall be remitted to the Borrower.
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13.3 Additional Debt Due. Any amount due from the Borrower under this Section 13
shall be due as a separate debt and shall not be affected by judgment being
obtained for any other sums due under or in respect of this Agreement, the Note
and/or any of the Security Documents.
13.4 Rate of Exchange. The term "rate of exchange" in this Section 13 means the
rate at which the Administrative Agent in accordance with its normal practices
is able on the relevant date to purchase Dollars with the judgment currency and
includes any premium and costs of exchange payable in connection with such
purchase.
14. FEES AND EXPENSES
14.1 Fees. The Borrower shall pay to the Arrangers and the Agents such fees set
forth in Section 3.4 hereof as the parties have agreed pursuant to the Fee
Letter.
14.2 Expenses. The Borrower agrees, whether or not the transactions hereby
contemplated are consummated, on demand to pay, or reimburse the Agents and the
Arrangers for their payment of, the reasonable expenses of the Agents, the
Arrangers and (after the occurrence and during the continuance of an Event of
Default) the Banks incident to said transactions (and in connection with any
supplements, amendments, waivers or consents relating thereto or incurred in
connection with the enforcement or defense of any of the Agents', the Arrangers'
and the Banks' rights or remedies with respect thereto or in the preservation of
the Agents', the Arrangers' and the Banks' priorities under the documentation
executed and delivered in connection therewith) including, without limitation,
all reasonable costs and expenses of preparation, negotiation, execution and
administration of this Agreement and the documents referred to herein, the
reasonable fees and disbursements of the Agents' counsel in connection
therewith, as well as the reasonable fees and expenses of any independent
appraisers, surveyors, engineers and other consultants retained by the Agents,
or the Arrangers in connection with this transaction, all reasonable costs and
expenses, if any, in connection with the enforcement of this Agreement, the Note
and the Security Documents and stamp and other similar taxes, if any, incident
to the execution and delivery of the documents (including, without limitation,
the Note) herein contemplated and to hold the Agents, the Arrangers and the
Banks free and harmless in connection with any liability arising from the
nonpayment of any such stamp or other similar taxes. Such taxes and, if any,
interest and penalties related thereto as may become payable after the date
hereof shall be paid immediately by the Borrower to the Agents, the Arrangers or
the Banks, as the case may be, when liability therefor is no longer contested by
such party or parties or reimbursed immediately by the Borrower to such party or
parties after payment thereof (if the Agents, the Arrangers or the Banks, at
their sole discretion, chooses to make such payment).
15. APPLICABLE LAW, JURISDICTION AND WAIVER
15.1 Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
15.2 Jurisdiction. The Borrower hereby irrevocably submits to the jurisdiction
of the courts of the State of New York and of the United States District Court
for the Southern District of New York in any action or proceeding brought
against it by any of the Banks, the Agents or the Arrangers under this Agreement
or under any document delivered hereunder and hereby irrevocably agrees that
valid service of summons or other legal process on it may be effected by serving
a copy of the
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summons and other legal process in any such action or proceeding on the Borrower
by mailing or delivering the same by hand to the Borrower at the address
indicated for notices in Section 17.1. The service, as herein provided, of such
summons or other legal process in any such action or proceeding shall be deemed
personal service and accepted by the Borrower as such, and shall be legal and
binding upon the Borrower for all the purposes of any such action or proceeding.
Final judgment (a certified or exemplified copy of which shall be conclusive
evidence of the fact and of the amount of any indebtedness of the Borrower to
the Banks, the Agents or the Arrangers) against the Borrower in any such legal
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment. The Borrower will advise the
Administrative Agent promptly of any change of address for the purpose of
service of process. Notwithstanding anything herein to the contrary, the Banks
may bring any legal action or proceeding in any other appropriate jurisdiction.
15.3 WAIVER OF JURY TRIAL. IT IS MUTUALLY AGREED BY AND AMONG THE BORROWER, THE
OTHER SECURITY PARTIES, THE ARRANGERS, THE AGENTS AND THE BANKS THAT EACH OF
THEM HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
BROUGHT BY ANY PARTY HERETO AGAINST ANY OTHER PARTY HERETO ON ANY MATTER
WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT, THE NOTE,
THE GUARANTY OR THE SECURITY DOCUMENTS.
16. THE AGENTS
16.1 Appointment of Agents. Each of the Banks irrevocably appoints and
authorizes the Agents severally each to take such action as agent on its behalf
and to exercise such powers under this Agreement, the Note and the Security
Documents as are delegated to such Agent by the terms hereof and thereof,
including execution of the Intercreditor Agreement. No Agent nor any of their
respective directors, officers, employees or agents shall be liable for any
action taken or omitted to be taken by it or them under this Agreement, the Note
or the Security Documents or in connection therewith, except for its or their
own gross negligence or willful misconduct.
16.2 Security Agent as Trustee. Each of the Banks irrevocably appoints the
Security Agent as trustee on its behalf with regard to (i) the security, powers,
rights, titles, benefits and interests (both present and future) constituted by
and conferred on the Banks or any of them or for the benefit thereof under or
pursuant to this Agreement, the Note or any of the Security Documents
(including, without limitation, the benefit of all covenants, undertakings,
representations, warranties and obligations given, made or undertaken to any
Bank in the Agreement, the Note or any Security Document), (ii) all moneys,
property and other assets paid or transferred to or vested in any Bank or any
agent of any Bank or received or recovered by any Bank or any agent of any Bank
pursuant to, or in connection with, this Agreement, the Note or the Security
Documents whether from any Security Party or any other person and (iii) all
money, investments, property and other assets at any time representing or
deriving from any of the foregoing, including all interest, income and other
sums at any time received or receivable by any Bank or any agent of any Bank in
respect of the same (or any part thereof). The Security Agent hereby accepts
such appointment.
16.3 Distribution of Payments. Whenever any payment is received by any Agent
from the Borrower or any other Security Party for the account of the Banks, or
any of them, whether of principal or interest on the Reimbursement Obligations
or the Note, commissions, fees under
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Section 14 or otherwise, it will thereafter cause to be distributed on the same
day if received before 11 a.m. New York time, or on the next day if received
thereafter, like funds relating to such payment ratably to the Banks according
to their respective Commitments, in each case to be applied according to the
terms of this Agreement.
16.4 Holder of Interest in Note. The Agents may treat each Bank as the holder of
all of the interest of such Bank in the Note.
16.5 No Duty to Examine, Etc. The Agents shall not be under a duty to examine or
pass upon the validity, effectiveness or genuineness of any of this Agreement,
the Note, the Security Documents or any instrument, document or communication
furnished pursuant to this Agreement or in connection therewith or in connection
with the Letter of Credit, the Note or any Security Document, and the Agents
shall be entitled to assume that the same are valid, effective and genuine, have
been signed or sent by the proper parties and are what they purport to be.
16.6 Agents as Banks. With respect to that portion of the Stated Amount or the
Loan made available by it, each Agent shall have the same rights and powers
hereunder as any other Bank and may exercise the same as though it were not an
Agent, and the term "Bank" or "Banks" shall include each Agent in its capacity
as a Bank. Each Agent and its affiliates may accept deposits from, lend money to
and generally engage in any kind of business with, the Borrower and the other
Security Parties as if it were not an Agent.
16.7 Acts of the Agents. Each Agent shall have duties and discretion, and shall
act as follows:
(a) Obligations of the Agents. The obligations of each Agent under this
Agreement, under the Letter of Credit, under the Note and under the
Security Documents are only those expressly set forth herein and
therein.
(b) No Duty to Investigate. No Agent shall at any time be under any duty
to investigate whether an Event of Default, or an event which with
the giving of notice or lapse of time, or both, would constitute an
Event of Default, has occurred or to investigate the performance of
this Agreement, the Note or any Security Document by any Security
Party.
(c) Discretion of the Agents. Each Agent shall be entitled to use its
discretion with respect to exercising or refraining from exercising
any rights which may be vested in it by, and with respect to taking
or refraining from taking any action or actions which it may be able
to take under or in respect of, this Agreement, the Letter of
Credit, the Note and the Security Documents, unless the Agent shall
have been instructed by the Majority Banks to exercise such rights
or to take or refrain from taking such action; provided, however,
that no Agent shall be required to take any action which exposes
such Agent to personal liability or which is contrary to this
Agreement or applicable law.
(d) Instructions of Majority Banks. Each Agent shall in all cases be
fully protected in acting or refraining from acting under this
Agreement, under the Letter of Credit, under the Note, or under any
Security Document in accordance with the instructions of the
Majority Banks, and any action taken
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or failure to act pursuant to such instructions shall be binding on
all of the Banks.
16.8 Certain Amendments. Neither this Agreement, the Note nor any of the
Security Documents nor any terms hereof or thereof may be amended unless such
amendment is approved by the Borrower and the Majority Banks, provided that no
such amendment shall, without the consent of each Bank affected thereby, (i)
reduce the interest rate or extend the time of payment of principal or interest
or fees on the Reimbursement Obligations or the Loan, as the case may be, or
reduce the principal amount of the Reimbursement Obligations or the Loan, as the
case may be, or any fees hereunder, (ii) increase or decrease the Commitment of
any Bank or subject any Bank to any additional obligation (it being understood
that a waiver of any Event of Default or any mandatory repayment of the
Reimbursement Obligations or Loan, as the case may be, shall not constitute a
change in the terms of any Commitment of any Bank), (iii) amend, modify or waive
any provision of this Section 16.8, (iv) amend the definition of Majority Banks,
(v) consent to the assignment or transfer by the Borrower of any of its rights
and obligations under this Agreement, (vi) release any Security Party from any
of its obligations under any Security Document except as expressly provided
herein or in such Security Document or (vii) amend any provision relating to the
maintenance of collateral under Section 10.5. All amendments approved by the
Majority Banks under this Section 16.8 must be in writing and signed by the
Borrower and each of the Banks. In the event that any Bank is unable to or
refuses to sign an amendment approved by the Majority Banks hereunder, such Bank
hereby appoints the Administrative Agent as its Attorney-In-Fact for the
purposes of signing such amendment. No provision of this Section 16 or any other
provisions relating to the Agents may be modified without the consent of each
Agent.
16.9 Assumption re Event of Default. Except as otherwise provided in Section
16.15, each Agent shall be entitled to assume that no Event of Default, or event
which with the giving of notice or lapse of time, or both, would constitute an
Event of Default, has occurred and is continuing, unless such Agent has been
notified by any Security Party of such fact, or has been notified by a Bank that
such Bank considers that an Event of Default or such an event (specifying in
detail the nature thereof) has occurred and is continuing. In the event that an
Agent shall have been notified by any Security Party or any Bank in the manner
set forth in the preceding sentence of any Event of Default or of an event which
with the giving of notice or lapse of time, or both, would constitute an Event
of Default, such Agent shall notify the Banks and shall take action and assert
such rights under this Agreement, under the Letter of Credit, under the Note and
under Security Documents as the Majority Banks shall request in writing.
16.10 Limitations of Liability. Neither any Agent nor any of the Banks shall be
under any liability or responsibility whatsoever:
(a) to any Security Party or any other person or entity as a consequence
of any failure or delay in performance by, or any breach by, any
other Banks or any other person of any of its or their obligations
under this Agreement, under the Letter of Credit or under any
Security Document;
(b) to any Bank or Banks as a consequence of any failure or delay in
performance by, or any breach by, any Security Party of any of its
respective obligations under this Agreement, under the Note or under
the Security Documents; or
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(c) to any Bank or Banks for any statements, representations or
warranties contained in this Agreement, in any Security
Document or in any document or instrument delivered in
connection with the transaction hereby contemplated; or for
the validity, effectiveness, enforceability or sufficiency of
this Agreement, the Letter of Credit, the Note, any Security
Document or any document or instrument delivered in connection
with the transactions hereby contemplated.
16.11 Indemnification of the Agents. The Banks agree to indemnify each Agent (to
the extent not reimbursed by the Security Parties or any thereof), pro rata
according to the respective amounts of their Commitments, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever (including legal fees and expenses incurred in investigating claims
and defending itself against such liabilities) which may be imposed on, incurred
by or asserted against, such Agent in any way relating to or arising out of this
Agreement, the Letter of Credit, the Note or any Security Document, any action
taken or omitted by such Agent thereunder or the preparation, administration,
amendment or enforcement of, or waiver of any provision of, this Agreement, the
Letter of Credit, the Note or any Security Document, except that no Bank shall
be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from such Agent's gross negligence or willful misconduct.
16.12 Consultation with Counsel. Each Agent may consult with legal counsel
selected by such Agent and shall not be liable for any action taken, permitted
or omitted by it in good faith in accordance with the advice or opinion of such
counsel.
16.13 Resignation. Any Agent may resign at any time by giving sixty (60) days'
written notice thereof to the other Agents, the Banks and the Borrower. Upon any
such resignation, the Banks shall have the right to appoint a successor Agent.
If no successor Agent shall have been so appointed by the Banks and shall have
accepted such appointment within sixty (60) days after the retiring Agent's
giving notice of resignation, then the retiring Agent may, on behalf of the
Banks, appoint a successor Agent which shall be a bank or trust company of
recognized standing. The appointment of any successor Agent shall be subject to
the prior written consent of the Borrower, such consent not to be unreasonably
withheld. After any retiring Agent's resignation as Agent hereunder, the
provisions of this Section 16 shall continue in effect for its benefit with
respect to any actions taken or omitted by it while acting as Agent.
16.14 Representations of Banks. Each Bank represents and warrants to each other
Bank and each Agent that:
(a) in making its decision to enter into this Agreement and to make its
Commitment available hereunder, it has independently taken whatever
steps it considers necessary to evaluate the financial condition and
affairs of the Security Parties, that it has made an independent
credit judgment and that it has not relied upon any statement,
representation or warranty by any other Bank or any Agent; and
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(b) so long as any portion of its Commitment remains outstanding, it
will continue to make its own independent evaluation of the
financial condition and affairs of the Security Parties.
16.15 Notification of Event of Default. Each Agent hereby undertakes to promptly
notify the Banks, and the Banks hereby promptly undertake to notify each Agent
and the other Banks, of the existence of any Event of Default which shall have
occurred and be continuing of which such Agent or Bank has actual knowledge.
17. NOTICES AND DEMANDS
17.1 Notices. All notices, requests, demands and other communications to any
party hereunder shall be in writing (including prepaid overnight courier,
facsimile transmission or similar writing) and shall be given to the Borrower at
the address or telecopy number set forth below and to the Banks and the Agents
at their address and telecopy numbers set forth in Schedule 1 or at such other
address or telecopy numbers as such party may hereafter specify for the purpose
by notice to each other party hereto. Each such notice, request or other
communication shall be effective (i) if given by telecopy, when such telecopy is
transmitted to the telecopy number specified in this Section and telephonic
confirmation of receipt thereof is obtained or (ii) if given by mail, prepaid
overnight courier or any other means, when received at the address specified in
this Section or when delivery at such address is refused.
If to the Borrower:
OMI Corporation
One Station Place
Stamford, Connecticut 06902
Telecopy No.: (203) 602-6701
Attention: Vincent de Sostoa
Senior Vice President - Treasurer
18. MISCELLANEOUS
18.1 Time of Essence. Time is of the essence of this Agreement but no failure or
delay on the part of any Bank, the Agents or the Arrangers to exercise any power
or right under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise by any Bank, the Agents or the Arrangers of any power
or right hereunder preclude any other or further exercise thereof or the
exercise of any other power or right. The remedies provided herein are
cumulative and are not exclusive of any remedies provided by law.
18.2 Unenforceable, etc., Provisions - Effect. In case any one or more of the
provisions contained in this Agreement, the Letter of Credit, the Note or in any
Security Document would, if given effect, be invalid, illegal or unenforceable
in any respect under any law applicable in any relevant jurisdiction, said
provision shall not be enforceable against the relevant Security Party, but the
validity, legality and enforceability of the remaining provisions herein or
therein contained shall not in any way be affected or impaired thereby.
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18.3 References. References herein to Sections, Exhibits and Schedules are to be
construed as references to sections of, exhibits to, and schedules to, this
Agreement, unless the context otherwise requires.
18.4 Further Assurances. The Borrower agrees that if this Agreement, the Letter
of Credit, the Note or any Security Document shall, in the reasonable opinion of
the Banks, at any time be deemed by the Banks for any reason insufficient in
whole or in part to carry out the true intent and spirit hereof or thereof, it
will execute or cause to be executed such other and further assurances and
documents as in the opinion of the Banks may be required in order more
effectively to accomplish the purposes of this Agreement, the Letter of Credit,
the Note or any Security Document.
18.5 Prior Agreements, Merger. Any and all prior understandings and agreements
heretofore entered into between the Security Parties on the one part, and the
Agents, the Arrangers or the Banks, on the other part, whether written or oral,
other than the Fee Letter are superseded by and merged into this Agreement and
the other agreements (the forms of which are exhibited hereto) to be executed
and delivered in connection herewith to which the Security Parties, the
Arrangers, the Agents and/or the Banks are parties, which alone fully and
completely express the agreements between the Security Parties, the Arrangers,
the Agents and the Banks.
18.6 Entire Agreement; Amendments. This Agreement constitutes the entire
agreement of the parties hereto including all parties added hereto pursuant to
an Assignment and Assumption Agreement. Subject to Section 16.8, any provision
of this Agreement, the Note or any Security Document may be amended or waived
if, but only if, such amendment or waiver is in writing and is signed by the
Borrower, the Administration Agent and the Majority Banks (and, if the rights or
duties of the Security Agent or the Syndication Agent are affected thereby, by
such Agent, as applicable). This Agreement may be executed in any number of
counterparts, each of will shall be deemed an original, but all such
counterparts together shall constitute one and the same instrument.
18.7 Indemnification. The Borrower and, by its execution and delivery of the
Consent and Agreement set forth below, each of the other Security Parties
jointly and severally agree to indemnify each Bank, each Agent and each
Arranger, their respective successors and assigns, and their respective
officers, directors, employees, representatives and agents (each an
"Indemnitee") from, and hold each of them harmless against, any and all losses,
liabilities, claims, damages, expenses, obligations, penalties, actions,
judgments, suits, costs or disbursements of any kind or nature whatsoever
(including, without limitation, the fees and disbursements of counsel for such
Indemnitee in connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not such Indemnitee shall be
designated a party thereto) that may at any time (including, without limitation,
at any time following the payment of the obligations of the Borrower hereunder)
be imposed on, asserted against or incurred by, any Indemnitee as a result of,
or arising out of or in any way related to or by reason of, (a) any violation by
any Security Party (or any charterer or other operator of any Vessel) of any
applicable Environmental Law, (b) any Environmental Claim arising out of the
management, use, control, ownership or operation of property or assets by any
Security Party (or, after foreclosure, by any Bank, any Agent or any Arranger or
any of their respective successors or assigns), (c) the breach of any
representation, warranty or covenant set forth in Sections 2.1 (o) or 10.1(j),
(d) the Loan (including the use of the proceeds of the Loan and any claim made
for any brokerage commission, fee or compensation from any Person), of (e) the
execution, delivery, performance or non-performance of this Agreement, the Note,
any Security Document, or any of the documents referred to herein or
contemplated hereby
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(whether or not the Indemnitee is a party thereto). If and to the extent that
the obligations of the Security Parties under this Section are unenforceable for
any reason, the Borrower and, by its execution and delivery of the Consent and
Agreement set forth below, each of the other Security Parties jointly and
severally agree to make the maximum contribution to the payment and satisfaction
of such obligations which is permissible under applicable law. The obligations
of the Security Parties under this Section 18.7 shall survive the termination of
this Agreement and the repayment to the Banks of all amounts owing thereto under
or in connection herewith.
18.8 Release of Designated Vessel Owner Guaranty. Notwithstanding Section 18.6,
Entire Agreement, Amendments, upon the Designated Vessel Acquisition, the
Security Agent shall release the Designated Vessel Owner from its Guaranty.
18.9 Headings. In this Agreement, Section headings are inserted for convenience
of reference only and shall not be taken into account in the interpretation of
this Agreement.
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IN WITNESS whereof the parties hereto have caused this Agreement to
be duly executed by their duly authorized representatives as of the day and year
first above written.
OMI CORPORATION
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
CHRISTIANIA BANK OG KREDITKASSE ASA,
as Arranger, Administrative Agent and Issuer
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
DEN NORSKE BANK ASA,
as Arranger and Syndication Agent
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
MEESPIERSON CAPITAL CORP.,
as Arranger and Security Agent
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
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The Lenders:
CHRISTIANIA BANK OG KREDITKASSE ASA
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
DEN NORSKE BANK ASA
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
MEESPIERSON CAPITAL CORP.
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
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CONSENT AND AGREEMENT
Each of the undersigned, referred to in the foregoing Loan Agreement
as the "Guarantors", hereby consents and agrees to said Agreement and to the
documents contemplated thereby and to the provisions contained therein relating
to conditions to be fulfilled and obligations to be performed by the undersigned
pursuant to or in connection with said Agreement and agrees particularly to be
bound by the representations, warranties and covenants relating to the
undersigned contained in Sections 2 and 10 of said Agreement to the same extent
as if the undersigned were a party to said Agreement, and expressly agrees to
the grant of a security interest in favor of the Syndication Agent in the
undersigned's accounts pursuant to Section 10.1(s) of said Agreement.
COLORADO SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
ELBE SHIPPING LLC
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
LOIRE SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
NILE SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
<PAGE>
PATRICIA SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
PAULINA SHIIPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
VOLGA SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
ALMA SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
DANUBE SHIPPING LLC
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
2
<PAGE>
ISERE SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
LIMAR SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
PAGODA SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
PECOS SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
3
<PAGE>
SABINE SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
SACRAMENTO SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
SEINE SHIPPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
SEVERN SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
SHANNON SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
4
<PAGE>
TIBER SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
TRENT SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
CAIRO SEA SHIPPING LLC
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
CZANTORIA SHIPPING LLC
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
LAUREL SHIPPING LLC
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
5
<PAGE>
MENDALA II TRANSPORT, INC.
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Treasurer
SOKOLICA SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
SOYANG SHIPPING LLC,
by OMI Corporation, sole member
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
TRINIDAD SEA SHIPPING LLC
By:_____________________________________
Vincent de Sostoa
Senior Vice President-Treasurer
UBC CHARTERING LTD.
By:_____________________________________
Vincent de Sostoa
Treasurer
EXHIBIT 21
OMI CORPORATION SUBSIDIARIES
AS OF DECEMBER 31, 1999
(ALL SUBSIDIARIES ARE 100% OWNED DIRECTLY OR INDIRECTLY EXCEPT AS INDICATED)
COMPANY JURISDICTION
- ------- ------------
Alliance Chartering LLC (50%) Marshall Islands
Alma Shipping LLC Marshall Islands
Amazon Transport, Inc. (49%) Liberia
Cairo Sea Shipping LLC Marshall Islands
Colorado Shipping LLC Marshall Islands
Columbia Shipping LLC Marshall Islands
Czantoria Shipping LLC Marshall Islands
Danube Shipping LLC Marshall Islands
Elbe Shipping LLC (inactive) Marshall Islands
Elbe Shipping LLC Delaware
Geraldton Navigation Company Incorporated (49.9%) Panama
Hayes Navigation Company Pte. Ltd. (49.9%) Singapore
International Product Carriers Limited (50%) Bermuda
International Product Carriers LLC (50%) Delaware
International Product Carriers Ltd. Pte. (50%) Singapore
Isere Shipping LLC Marshall Islands
Laurel Shipping LLC Marshall Islands
Limar Shipping LLC Marshall Islands
Loire Shipping LLC` Marshall Islands
Mendala II Transport, Inc. Liberia
Nile Shipping LLC Marshall Islands
OMI Marine Services LLC Delaware
OMI Promise Transport, Inc. Liberia
OMI State, Inc. Washington
Pagoda Shipping LLC Marshall Islands
Patricia Shipping LLC Marshall Islands
Paulina Shipping LLC Marshall Islands
Pecos Shipping LLC Marshall Islands
<PAGE>
EXHIBIT 21
OMI CORPORATION SUBSIDIARIES
AS OF DECEMBER 31, 1999
(ALL SUBSIDIARIES ARE 100% OWNED DIRECTLY OR INDIRECTLY EXCEPT AS INDICATED)
COMPANY JURISDICTION
- ------- ------------
Sabine Shipping LLC Marshall Islands
Sacramento Shipping LLC Marshall Islands
Seine Shipping LLC Marshall Islands
Severn Shipping LLC Marshall Islands
Shannon Shipping LLC (inactive) Marshall Islands
Shannon Shipping LLC. Delaware
Sokolica Shipping LLC Marshall Islands
Soyang Shipping LLC Marshall Islands
Tiber Shipping LLC Marshall Islands
Trent Shipping LLC Marshall Islands
Trinidad Sea Shipping LLC Marshall Islands
UBC Chartering Ltd. Liberia
Volga Shipping LLC Marshall Islands
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27 contains summary information extracted from OMI Corporation and
subsidiaries Consolidated financial statements and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 7,381
<SECURITIES> 0
<RECEIVABLES> 18,381
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 121,195
<PP&E> 359,682
<DEPRECIATION> 42,926
<TOTAL-ASSETS> 472,415
<CURRENT-LIABILITIES> 77,239
<BONDS> 212,913
0
0
<COMMON> 24,697
<OTHER-SE> 147,069
<TOTAL-LIABILITY-AND-EQUITY> 472,415
<SALES> 0
<TOTAL-REVENUES> 115,992
<CGS> 0
<TOTAL-COSTS> 82,076
<OTHER-EXPENSES> 40,550
<LOSS-PROVISION> 56,463
<INTEREST-EXPENSE> 17,945
<INCOME-PRETAX> (81,306)
<INCOME-TAX> 475
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (1,253)
<CHANGES> 2,729
<NET-INCOME> (80,305)
<EPS-BASIC> (1.90)
<EPS-DILUTED> (1.90)
</TABLE>
