As filed with the Securities and Exchange Commission on August 10, 1998.
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MIDLAND ENTERPRISES INC.
(Exact name of registrant as specified in its charter)
Delaware 04-2284434
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
300 Pike Street, Cincinnati, Ohio 45202 (513) 721-4000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Robert Faillo
Vice President, Finance and Treasurer
300 Pike Street
Cincinnati, OH 45202
(513) 721-4000 / (513) 721-4064 (fax)
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies of all communications to:
David B. Walek, Esq. Frank B. Porter, Esq.
Ropes & Gray Choate, Hall & Stewart
One International Place Exhange Plaza/53 State Street
Boston, MA 02110 Boston, MA 02109-2891
(617) 951-7000/ (617) 951-7050 (fax) (617) 248-5000/ (617) 248-4000 (fax)
--------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 (the "Securities Act") other than securities offered only in
connection with dividend or interest reinvestment plans, check the
following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Title of Each Class of Proposed Maximum Offering Proposed Maximum Aggregate Amount of
Securities to be Registered Amount to be Registered Price Per Unit (1) Offering Price (1) Registration Fee
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
% First Preferred Ship $75,000,000 100% $75,000,000 $22,125
Mortgage Bonds Due 2018
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(o).
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED AUGUST 10, 1998
PROSPECTUS
[[LOGO]]
$75,000,000
Midland Enterprises Inc.
% First Preferred Ship Mortgage Bonds Due 2018
The __% First Preferred Ship Mortgage Bonds due 2018 (the "Bonds") are
being offered (the "Offering") by Midland Enterprises Inc. (the "Company").
Interest on the Bonds will be payable semiannually on March 25 and September 25
of each year, commencing March 25, 1999. The Bonds will mature on September 25,
2018. The Bonds will be redeemable as a whole or in part, on a pro rata basis,
at the option of the Company, at any time at a redemption price equal to the
greater of (i) 100% of their principal amount or (ii) the sum of the present
values of the remaining scheduled payments of principal and interest thereon
discounted to the date of redemption on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Adjusted Treasury Rate (as
defined), plus accrued interest to the date of redemption. See "Description of
the Bonds -- Optional Redemption."
The Bonds will be secured by a first preferred ship mortgage on certain
vessels having an aggregate fair value of not less than 1331/3% of the principal
amount of the Bonds outstanding and by an assignment of monies payable to the
Company under a charter. The Bonds are subject to equal annual sinking fund
payments of $4,687,500 commencing on September 25, 2003 resulting in a weighted
average life of approximately 12.5 years. The Bonds will be direct, senior
secured obligations of the Company.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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Price to Public Underwriting Proceeds to the
(1) Discounts and Company (3)
Commissions (2)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Bond........................................................ % % %
Total........................................................... $ $ $
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from the date of issuance.
(2) The Company has agreed to indemnify the Underwriter (as defined) against
certain liabilities, including liabilities under the Securities Act (as
defined). See "Plan of Distribution."
(3) Before deduction of expenses payable by the Company, estimated at $ _______.
The Bonds are offered by Donaldson, Lufkin & Jenrette Securities Corporation
(the "Underwriter") subject to prior sale, when, as and if delivered to and
accepted by the Underwriter and subject to certain other prior conditions
including the right of the Underwriter to reject any order in whole or in part.
It is expected that delivery of the Bonds will be made in book-entry form
through the facilities of The Depository Trust Company ("DTC"), against payment
therefor in immediately available funds, on or about September __, 1998.
Donaldson, Lufkin & Jenrette
The date of this Prospectus is , 1998
<PAGE>
THE UNDERWRITER PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE BONDS. SPECIFICALLY,
THE UNDERWRITER MAY OVERALLOT IN CONNECTION WITH THE OFFERING AND MAY BID FOR
AND PURCHASE THE BONDS IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING".
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information can be
inspected at the public reference facilities of the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and the Commission's Regional
Offices at 75 Park Place, Room 1288, New York, New York 10017, and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and
copies may be obtained at prescribed rates from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Such reports
and other information may also be accessed electronically by means of the
Commission's site on the World Wide Web, at http://www.sec.gov.
The Company has filed with the Commission a registration statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Bonds to which this Prospectus
relates. This Prospectus does not contain all the information set forth in the
Registration Statement, certain portions of which have been omitted as permitted
by the rules and regulations of the Commission. For further information with
respect to the Company and the Bonds, reference is made to the Registration
Statement, including the exhibits thereto. The Registration Statement may be
inspected by anyone without charge at the principal office of the Commission in
Washington, D.C., and copies of all or part of it may be obtained from the
Commission upon payment of the prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1997, and Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998
and June 30, 1998, respectively, heretofore filed with the Commission pursuant
to the Exchange Act are hereby incorporated by reference in this Prospectus.
All other documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the Offering shall be deemed to be incorporated by reference
and to be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any subsequently filed incorporated document
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as modified or superseded, to constitute a part of
this Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, on the written or oral
request of any such person, a copy of any or all of the documents referred to
above which have been or may be incorporated by reference in this Prospectus,
other than exhibits to such documents (unless such exhibits have been
specifically incorporated by reference therein). Requests for such copies should
be directed to Secretary, Midland Enterprises Inc., 300 Pike Street, P.O. Box
1460, Cincinnati, Ohio 45201, telephone (513) 721-4000.
The Company does not prepare annual or quarterly reports to shareholders
and no such reports will be furnished to holders of the Bonds.
--------------------
As used herein, references to "Midland" or the "Company" are to Midland
Enterprises Inc., a Delaware corporation, and its consolidated subsidiaries.
-2-
<PAGE>
SUMMARY
The following summary information is qualified in its entirety by the
detailed information and financial statements appearing elsewhere in this
Prospectus and in the documents, financial statements and information
incorporated by reference in this Prospectus.
--------------------
This prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act concerning
projected future financial performance or concerning expected plans or future
operations. The Company cautions that actual results and developments may differ
materially from such projections or expectations. All statements other than
statements of historical facts included in this prospectus, including without
limitation, certain statements under "Summary," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business" and
located elsewhere herein regarding the Company's financial position and business
strategy, may constitute forward-looking statements. Although the Company
believes that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Investors should be aware of important factors that could cause
actual results to differ materially from the forward-looking projections or
expectations. These factors include, but are not limited to: the effects of
strategic initiatives on earnings and cash flow, changes in market conditions
for barge transportation, adverse weather and operating conditions on the inland
waterways, changes in economic conditions, including interest rates and the
value of the dollar versus other currencies, changes in fuel prices and
regulatory and court decisions. All of these factors are difficult to predict
and are generally beyond the control of the Company.
THE COMPANY
Midland owns and operates the second largest fleet of towboats and barges
for the transport of dry bulk commodities on the US inland river system. The
Company, through its barge line subsidiaries, is primarily engaged in the
operation of a fleet of approximately 2,400 barges and 87 tugboats and towboats,
principally on the Ohio and Mississippi Rivers and their tributaries, on the
Gulf Intracoastal Waterway and in the Gulf of Mexico. Midland transports a range
of dry bulk commodities, the major portion of which is coal for use by electric
utilities. Midland, through other subsidiaries, also performs repair work on
marine equipment and operates two coal dumping terminals, a phosphate rock and
phosphate fertilizer terminal and a marine fuel supply facility, which together
account for approximately 10% of its consolidated revenues.
Midland, incorporated in 1961, and its predecessors have been engaged in
barge transportation for over 70 years. The Company is a wholly-owned subsidiary
of Eastern Enterprises ("Eastern"), a Massachusetts unincorporated voluntary
association which is also engaged in the distribution of natural gas through a
wholly-owned subsidiary, Boston Gas Company ("Boston Gas"). Eastern's common
stock is listed on the New York, Pacific and Boston Stock Exchanges. Midland's
principal executive offices are located at 300 Pike Street, Cincinnati, Ohio
45202 and its telephone number is (513) 721-4000.
THE OFFERING
<TABLE>
<S> <C>
Issuer..................................................... Midland Enterprises Inc.
Securities Offered......................................... $75,000,000 _____% First Preferred Ship Mortgage Bonds due
2018.
Optional Redemption........................................ The Bonds will be redeemable as a whole or in part, on a pro rata
basis, at the option of the Company, at any time at a redemption
price equal to the greater of (i) 100% of their principal amount or
(ii) the sum of the present values of the remaining scheduled
payments of principal and interest thereon discounted to the date
of redemption on a semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Adjusted Treasury
Rate plus accrued interest to the date of redemption.
Use of Proceeds............................................ The net proceeds to the Company from the sale of the Bonds will
be used for the purchase of new and used river barges, renewal
and upgrade of the Company's towboats, and purchase of other
marine related property, machinery and equipment. Pending such
uses, the proceeds may be advanced to Eastern for short-term
-3-
<PAGE>
THE OFFERING (continued)
investment, in which event the Company will receive interest
payments from Eastern based on the applicable Federal rate as
defined in the Internal Revenue Code (currently, 5.75% per annum).
Security................................................... Mortgage on vessels having an aggregate fair value of at least
133-1/3% of the principal amount of Bonds outstanding and
assignment of charter hire from Orgulf Transport Co. ("Orgulf"),
a wholly-owned subsidiary of the Company.
Restrictive Covenants...................................... The Bonds will be subject to various covenants, including
limitations on liens on any property of the Company and its Barge
Line Subsidiaries (as defined) and a restriction on the disposition
of securities of, and a debt limitation applicable to, Barge Line
Subsidiaries.
</TABLE>
SUMMARY FINANCIAL AND OPERATING INFORMATION
(Amounts, Except Ratios and Total Ton Miles, in Thousands)
<TABLE>
<CAPTION>
Unaudited
Six Months
Years Ended December 31, Ended June 30
------------------------ -------------------
1997 1996 1995 1998 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues................................................ $269,259 $301,880 $296,339 $127,821 $132,495
Operating Earnings...................................... $ 34,613 $ 58,415 $ 57,828 $ 13,808 $ 14,531
Net Earnings............................................ $ 16,623 $ 30,597 $ 27,559 $ 7,494 $ 6,401
Ratio of Earnings to Fixed Charges(1)................... 2.70x 3.96x 3.90x 2.62x 2.29x
Total Tonnage Transported............................... 57,000 65,500 66,200 29,500 27,400
Total Ton Miles (in millions)........................... 33,100 36,100 36,800 15,600 16,200
</TABLE>
<TABLE>
<CAPTION>
Unaudited
June 30, 1998
--------------------------
Actual As Adjusted(2)
------ --------------
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Obligations Under Capital Leases................................. $ 13,950 5.7% $ 13,950 4.3%
First Preferred Ship Mortgage Bonds.............................. 67,511 27.4 142,511 44.4
-------- ----- -------- -----
Total Long-Term Debt (less
current portion)............................................ $ 81,461 33.1% $156,461 48.7%
Stockholder's Equity........................................ 164,502 66.9 164,502 51.3
-------- -----
Total Capitalization........................................ $245,963 100.0% $320,963 100.0%
-------- -----
</TABLE>
- ----------------
(1) Earnings used to calculate the ratio of earnings to fixed charges equal the
sum of income before income taxes plus fixed charges. Fixed charges consist
of interest, amortization of debt expense and one-third of long-term
rentals.
(2) To reflect the sale of the Bonds offered hereby.
-4-
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Bonds will be used for
the purchase of new and used river barges, renewal and upgrade of the Company's
towboats, and purchase of other marine related property, machinery and
equipment. Pending such uses, the proceeds may be advanced to Eastern for
short-term investment, in which event the Company will receive interest payments
from Eastern based on the applicable Federal rate as defined in the Internal
Revenue Code of 1986, as amended (currently, 5.75% per annum).
CAPITALIZATION
The consolidated capitalization of the Company at June 30, 1998 and as
adjusted to give effect to the sale of the Bonds offered hereby is set forth
below. This table should be read in conjunction with the Company's Consolidated
Financial Statements and related Notes included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Unaudited
June 30, 1998
------------------------------
(Dollars in Thousands)
Outstanding Pro Forma As Adjusted
------------------------ -------------------------
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Long-Term Debt (less current
portion): (1)(2)
First Preferred Ship Mortgage Bonds
8.1%-9.85% Medium Term Notes,
Series A due 2002-2012..................... $ 67,511 27.4% $ 67,511 21.0%
___% First Preferred Ship Mortgage
Bonds due 2018............................. -- -- 75,000 23.4
Obligations Under Capital Leases................. 13,950 5.7 13,950 4.3
-------- ----- -------- -----
Total Long-Term Debt........................ $ 81,461 33.1% $156,461 48.7%
======== ===== ======== =====
Stockholder's Equity:
Common Stock, $100 par value
Authorized 1,000 shares
Issued 15-1/2shares........................... $ 1 0.0% $ 1 0.0%
Capital in excess of par value................... 52,519 21.4 52,519 16.4
Retained Earnings............................... 111,982 45.5 111,982 34.9
-------- ----- -------- -----
Total Stockholder's Equity....................... 164,502 66.9 164,502 51.3
-------- ----- -------- =====
Total Consolidated Capitalization................... $245,963 100.0% $320,963 100.0%
======== ===== ======== =====
</TABLE>
(1) See Note 3 of Notes to the Company's Unaudited Interim Financial Statements.
(2) As of June 30, 1998, current maturities of long-term debt were $4,545,000.
-5-
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial information for each of the three years in
the period ended December 31, 1997 and the six months ended June 30, 1998 and
1997 (with the exception of the ratios of earnings to fixed charges) has been
summarized from the Consolidated Financial Statements contained herein. This
information should be read in conjunction with the Consolidated Financial
Statements, related Notes and Management's Discussion and Analysis of Financial
Condition and Results of Operations included herein.
<TABLE>
<CAPTION>
Unaudited
Six Months
Ended
Years Ended December 31, June 30,
-------------------------------- ----------
1997 1996 1995 1998 1997
---- ---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Statement of Earnings Data (for period)
Revenues.............................................. $269,259 $301,880 $296,339 $127,821 $132,495
Operating Costs and Expenses:
Operating expenses................................ 183,929 189,357 183,462 87,315 92,849
Other expenses.................................... 50,717 54,108 55,049 26,698 25,115
Operating Earnings.................................... 34,613 58,415 57,828 13,808 14,531
Other Income (Expense):
Interest income................................... 4,315 4,461 5,156 1,047 2,065
Other............................................. (84) 2 332 184 (97)
Interest Expense...................................... 13,757 14,715 15,175 5,432 6,914
Earnings before Income Taxes.......................... 25,087 48,163 48,141 9,607 9,585
Provision for Income Taxes............................ 8,464 17,566 17,592 3,475 3,184
Net Earnings(1)....................................... 16,623 30,597 27,559 7,494 6,401
Ratio of Earnings to Fixed Charges (2)................ 2.70x 3.96x 3.90x 2.62x 2.29x
Balance Sheet Data (at end of period)
Total Current Assets.................................. 96,265 93,647 125,774 28,317 101,048
Total Assets.......................................... 423,295 417,791 426,012 369,267 415,215
Total Current Liabilities............................. 56,264 51,863 60,654 48,952 47,674
Current Portion of Long-Term Debt..................... 4,351 3,986 3,684 4,545 4,183
Long-Term Debt........................................ 132,142 137,313 144,903 81,461 135,084
Stockholder's Equity.................................. 160,508 156,287 148,906 164,502 157,887
Other Financial Data (for period)
Net Cash from Operations.............................. 43,849 54,675 68,605 12,460 17,770
Capital Expenditures.................................. 25,700 47,851 20,900 26,540 2,363
</TABLE>
- -----------
(1) Net earnings are after extraordinary items consisting in 1995 of a reserve
of $2,990,000 (after taxes) to provide for the Company's estimated
undiscounted obligations under the Coal Industry Retiree Health Benefit
Act of 1992 (the "Coal Act"), and in 1998 of a loss of $1,465,000 (after
taxes) on the early retirement of $50 million of 9.9% debt in March and a
credit of $2,827,000 (after taxes) to reverse the reserve as a result of
the Supreme Court decision in the Company's favor with respect to the Coal
Act in June. See "Business -- Legal Proceedings."
(2) Earnings used to calculate the ratio of earnings to fixed charges equal
the sum of income before income taxes plus fixed charges. Fixed charges
consist of interest, amortization of debt expense and one-third of total
long-term rentals.
-6-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and
results of operations of the Company should be read together with the
Consolidated Financial Statements and Notes thereto that are included elsewhere
in this Prospectus.
Overview
The Company, through its wholly-owned barge line subsidiaries, is primarily
engaged in the operation of a fleet of towboats, tugboats and barges,
principally on the Ohio and Mississippi Rivers and their tributaries, on the
Gulf Intracoastal Waterway and in the Gulf of Mexico. The Company, through other
subsidiaries, also performs repair work on marine equipment and operates two
coal dumping terminals, a phosphate rock and phosphate fertilizer terminal, and
a marine fuel supply facility.
The market for marine transportation is cyclical and weather conditions can
have a significant impact on customer demand as well as on operating conditions.
During 1997, and through the first six months of 1998, the industry experienced
a broad range of adverse weather and economic factors as discussed below in
"-- Results of Opererations", that affected the Company's operating results.
Although operating earnings in 1997 decreased 41% from the record earnings in
1996, Midland generated $57.3 million of earnings before interest, taxes,
depreciation and amortization, or over 6 times net interest expense, in 1997 and
$25.5 million for the first six months of 1998. The Company achieved these
earnings through continued cost reduction and productivity initiatives,
development of new business opportunities, renewal of certain expiring contracts
and continued barge fleet replacement, acquiring approximately 160 new barges
during this period.
Results of Operations
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
Weak demand for export coal and grain continued to place downward pressure
on spot and contract renewal rates compared to 1997. The strengthening of the
U.S. dollar and the economic problems in Southeast Asia have contributed to
export market weakness. Increased demand for domestic coal by electric utility
and industrial customers mostly offset such export market weakness. However,
fuel prices, which continued to decline, lowered rates in multi-year contracts
that contain fuel price adjustment clauses. As a result of these factors, year
to date revenues declined by 4% compared to 1997.
El Nino related storms in 1998, particularly in the Southeast and Gulf
regions, continued to cause high water conditions and intermittent traffic
delays. This resulted in increased vessel costs similar to the level caused by
the record flooding on the Ohio River in the comparable period in 1997. In
addition, fleet efficiency was negatively impacted by the lack of southbound
export tonnage to the Gulf, as replacement tonnage did not produce equivalent
pattern efficiency. Lower fuel costs partially offset the higher operating
costs. As a result of these operational factors and the lower revenues discussed
above, operating earnings declined 5% year to date compared to last year.
Tonnage increased 8%, while related ton miles declined 4% year to date
compared to 1997. The increased tonnage, with lower ton miles, reflects the
Company's efforts to replace reduced long-haul export tonnage with shorter haul
domestic movements. Coal tonnage increased 14% for the first half, with coal
tonnage under multi-year contracts to utility and industrial customers
increasing over 28% year to date. The reduced spot and export coal tonnage
partially offset those increases. Non-coal tonnage was 3% lower than 1997 year
to date, due to significantly lower grain shipments partially offset by
increased aggregate tonnage and towing for others.
-7-
<PAGE>
As a result of the lower operating earnings discussed above, partially
offset by lower net interest expense, earnings before extraordinary items
declined by $.3 million year to date compared to 1997.
In March 1998, the Company recognized an extraordinary loss of $2.3 million
pretax or $1.5 million net of tax, on the early retirement of $50 million of
First Preferred Ship Mortgage Bonds due 2008. In June of 1998, the U.S. Supreme
Court upheld Eastern Enterprises' challenge to the constitutionality of the Coal
Act as applied to Eastern. Consequently, as discussed in Note 2 of Notes to
Unaudited Interim Financial Statements, the Company reversed its Coal Act
reserve resulting in an extraordinary gain of $4.3 million pre-tax or $2.8
million net of tax in the second quarter of 1998.
As a result of the above items, net earnings improved by $1.1 million,
compared to 1997 year to date.
1997 Compared to 1996
Revenues in 1997 decreased 11% due to weak demand from export coal and
grain, lower contractual requirements for utility and industrial coal customers,
and fewer barges. Weak demand depressed spot rates on nearly all commodities and
traffic patterns were disrupted, reducing operational efficiency. Operating
conditions in 1997 were worse than those experienced in 1996, as navigation was
negatively impacted by record flooding on the Ohio River early in the year, and
later by long traffic delays related to repairs to various key locks throughout
the river system. These uncontrollable events resulted in higher operating costs
and lower fleet productivity than in 1996. Also, as a result of the weaker
markets, the Company slowed its fleet replacement program and did not renew
expiring charters of outside barges. These decisions, in addition to production
delays which postponed the delivery of new barges expected in the latter part of
1997, reduced the size of the Company's barge fleet.
Tonnage and ton miles decreased 13% and 8%, respectively, reflecting the
weak market and operational issues discussed previously, although a change in
business mix and customer sourcing resulted in 5% longer average hauls. Coal
tonnage and ton miles declined 17% and 14%, respectively, from the record levels
of 1996, while non-coal tonnage decreased 5% with related ton miles down 4% from
1996. Domestic coal volume, primarily for electric utilities, declined due to
the non-renewal of several multi-year contracts, unplanned plant outages and
milder temperatures. Export coal demand weakened as the strong U.S. dollar
effectively raised the prices of domestic supplies higher than those of foreign
competitors. Despite an ample grain harvest, the anticipated surge in
transportation volume and pricing for grain exports was short lived, as much of
the harvest was put in storage due to weak demand and the relative strength of
the U.S. dollar.
Ongoing improvement programs to lower vessel operating costs and
administrative expenses partially offset the higher operating costs discussed
above. Operating levels at the Company's terminals were also lower, reflecting
the reduced demand for coal transportation. As a result of the adverse market
and operational issues discussed above, operating earnings decreased by $23.8
million from 1996.
In 1997, net interest expense decreased by $0.8 million due mainly to lower
long-term debt balances and reduced debt premiums.
The combination of the items discussed above decreased net earnings by
$14.0 million as compared to 1996.
1996 Compared to 1995
Revenues and operating earnings increased $5.5 million and $0.6 million,
respectively, in 1996 over 1995, primarily reflecting continued strong demand
for coal and a favorable rate structure carried over from 1995, particularly on
non-coal commodities. Severe winter icing and flooding during the first quarter,
and numerous tropical storms in the Gulf of Mexico, led to higher operating
costs and lower fleet productivity than in 1995.
-8-
<PAGE>
Tonnage transported in 1996 declined 1%, with related ton miles down nearly
2%, reflecting shorter average hauls due to weak foreign demand for coal and a
late grain harvest. Coal tonnage and ton miles increased 1% and 3%,
respectively, over 1995, reflecting significantly increased shipments of
domestic spot coal, while coal under multi-year contracts for utilities declined
due to the non-renewal of several contracts. Non-coal tonnage and ton miles
declined 6% from 1995, mainly as a result of weaker barge demand on the
Mississippi River.
Ongoing programs to increase fleet productivity and control costs were
offset by adverse operating conditions and traffic pattern inefficiencies
resulting from reduced export tonnage. Fuel costs increased in 1996 due to
rising fuel prices that averaged 20% above 1995 levels.
Other income declined from 1995 due to lower average interest rates in 1996
and higher capital expenditures which decreased cash and interest bearing
advances with Parent. Interest expense included $0.4 million associated with the
early retirement of long-term debt in 1996.
Including the pretax items and operating results discussed above, earnings
before the extraordinary item for 1996 were nearly unchanged from 1995.
In 1995, the Company recorded a pretax charge of $4.6 million representing
the estimated undiscounted liability for health care and death benefit premiums
imposed by the Coal Act, as described in Note 11 of Notes to Consolidated
Financial Statements. This charge was reported as an extraordinary item of
approximately $3.0 million, net of tax. The charge was subsequently reversed as
a result of the Supreme Court decision in the Company's favor in June 1998. See
"Business -- Legal Proceedings."
Seasonality
The Company's results of operations are affected by seasonal factors. Due
to the freezing of some northern rivers and waterways during winter months,
increased coal consumption by electric utilities during the summer months, and
the fall harvest of grain, winter month revenues tend to be lower than revenues
for the remainder of the year.
Liquidity and Capital Resources
Capital expenditures for 1997 totaled approximately $26 million and are
budgeted at approximately $48 million for 1998, the majority of which pertains
to purchase commitments for new dry cargo barges for delivery during 1998.
Capital expenditures in 1997, debt payments, and dividends were funded from cash
provided from operating activities. The increase in accounts payable at December
31, 1997, reflected amounts established for the purchase of capital assets in
process at year end and timing of invoice flow from vendors. The Company plans
to fund the capital expenditures in 1998 with cash provided from operating
activities as well as from the proceeds of the Bonds.
In March of 1998, the Company utilized a receivable from Eastern to redeem
$50 million of its 9.90% First Preferred Ship Mortgage Bonds due 2008. In
connection with the extinguishment of this debt, the Company recognized an
extraordinary charge of $2.3 million before taxes ($1.5 million net of taxes).
In the second quarter of 1998, the Company entered into treasury rate lock
agreements in order to hedge the interest rate on the debt anticipated to be
issued in connection with the Offering. Upon issuance of the Bonds, any gain or
loss realized on the treasury rate lock agreements will be amortized to interest
expense over the term of the related debt.
As of June 30, 1998, the Company had $68 million in indebtedness
outstanding under its 8.1%-9.85% Medium Term Notes, Series A due 2002-2012 (the
"Series A Notes"), which are secured by approximately 531 of the Company's
barges and by assignment of rentals for that equipment payable to the Company by
its subsidiaries. In addition, the Bonds offered hereby will be secured by
approximately 433 of the Company's barges and 3 towboats, and by assignment of
rentals for that equipment payable to the Company by one of its subsidiaries.
The indenture relating to the Bonds and the indenture relating to the Series A
Notes contain various negative covenants as described below
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<PAGE>
in "Description of the Bonds -- Certain Restrictions." In addition, the
indenture relating to the Series A Notes contains restrictions on indebtedness
of, and dividends and advances by, the Company.
The Company also had approximately $18 million in obligations under capital
leases for barges at June 30, 1998. Principal payments due amount to $4.4
million in 1998, $4.8 million in 1999, $5.3 million in 2000, $4.2 million in
2001, $1.7 million in 2002 and $.3 million thereafter.
The Company may borrow up to $50 million under Eastern's $100 million
credit agreement with a syndicate of banks through December 31, 2001. The
Company currently has no borrowings outstanding under this agreement.
Computer Systems and Year 2000
Management has assessed the impact of the year 2000 issue with respect to
information systems and has initiated an enterprise wide action plan to modify
and test system programs which management believes will provide year 2000
compliance. Management is also surveying critical suppliers and customers to
determine the status of their year 2000 compliance programs. Management expects
the program modifications to be completed by December 31, 1998 and spending for
these modifications is being expensed as incurred. At this time, the Company has
not determined the total cost of modifying its software. However, management
does not believe that these costs will have a material impact on its operating
results or financial condition.
BUSINESS
General
Midland owns and operates the second largest fleet of towboats and barges
for the transport of dry bulk commodities on the US inland river system. The
Company, through its barge line subsidiaries, is primarily engaged in the
operation of a fleet of approximately 2,400 barges and 87 tugboats and towboats,
principally on the Ohio and Mississippi Rivers and their tributaries, on the
Gulf Intracoastal Waterway and in the Gulf of Mexico. Midland transports a range
of dry bulk commodities, the major portion of which is coal for use by electric
utilities. Midland, through other subsidiaries, also performs repair work on
marine equipment and operates two coal dumping terminals, a phosphate rock and
phosphate chemical fertilizer terminal and a marine fuel supply facility, which
together account for approximately 10% of its consolidated revenues.
Midland, incorporated in 1961, and its predecessors have been engaged in
barge transportation for over 70 years. Midland is a wholly-owned subsidiary of
Eastern, a Massachusetts unincorporated voluntary association which is also
engaged in the distribution of natural gas through its wholly-owned subsidiary
Boston Gas. Eastern's common stock is listed on the New York, Pacific and Boston
Stock Exchanges.
Principal Services and Markets
Barge Transportation. The Company's primary area of operations is barge
transportation conducted through its four wholly-owned barge-line subsidiaries,
The Ohio River Company ("ORCO"), Orgulf, Orsouth Transport Co. ("Orsouth") and
Red Circle Transport Co. ("Red Circle"). Inland marine transportation plays a
significant role in the delivery of raw materials and products for a variety of
different industries such as energy, agriculture and manufacturing. In addition,
the delivery of commodities such as coal, grain, aggregates, scrap and other
bulk cargoes using barge transportation can be accomplished at a significantly
lower cost than other modes of transportation.
Total tonnage amounted to 57.0 million in 1997, 65.5 million in 1996 and
66.2 million in 1995. Tonnage in 1997 declined 13% from 1996 primarily as a
result of the non-renewal of certain multi-year utility coal contracts,
unplanned plant outages for several customers, and lower demand from export coal
and grain markets. Tonnage in
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<PAGE>
1996 declined 1% from 1995 as a result of reduced non-coal tonnage due in part
to the late grain harvest and weak demand for barge towing on the lower
Mississippi River.
The following table summarizes the ton miles of cargo transported by the
Company for the years ended December 31, 1995, 1996 and 1997:
<TABLE>
<CAPTION>
Ton Miles Transported
Years Ended December 31,
1997 1996 1995
---- ---- ----
(in billions)
<S> <C> <C> <C>
Coal............................................. 13.6 15.7 15.2
Grain............................................ 4.5 4.8 5.2
Other (1)........................................ 15.0 15.6 16.4
---- ---- ----
Total Ton Miles............................. 33.1 36.1 36.8
</TABLE>
- -----------
(1) Includes sand, stone, gravel, iron, scrap, steel, coke, phosphate, towing
for others and other dry cargo.
Ton miles are the product of tons and distance transported. In 1997, total
ton miles declined 8% due to the lower tonnage, as discussed above, partially
offset by longer average hauls, particularly for coal. Ton miles in 1996
declined 2% from the record level set in 1995 due to a 1% decline in tonnage and
slightly shorter average trip lengths.
Midland's largest market segment and primary strategic focus is coal
transportation, principally on the Ohio River and primarily for electric
utilities in the eastern half of the United States. In 1997, coal represented
62% of its total tonnage but only 41% of total ton miles, due to the relatively
short-haul nature of most coal deliveries. Other coal transportation markets
served by Midland include coal used for industrial processes such as steel
making and coal exported to international markets.
Grain transportation, which primarily serves the export trade, is another
key market segment for Midland and plays an important role in the overall supply
and demand balance for the barge industry fleet generally. Grain movements are
equipment intensive due to the length of the trip down the Mississippi River to
the Gulf and back again. Midland's strategy for grain markets, which represented
14% of total ton miles in 1997, will continue to be balanced between providing
transportation for large, domestic grain customers, and, depending on demand and
availability of equipment, serving export trades as well.
Midland is also pursuing other commodity transportation markets such as the
growing number of river-served steel mini-mills. These high-efficiency,
steel-making facilities are being built on rivers in order to take advantage of
low-cost barge transportation for their large bulk shipments of raw materials in
and finished products out. The Company also transports other dry cargo such as
fertilizer and aggregates.
Orco and Orgulf are the largest of the Company's subsidiaries and accounted
for 57% and 33%, respectively, of the Company's total tonnage in 1997. Orco
operates principally on the Ohio River and certain of its tributaries
transporting principally coal, primarily for electric utilities and industrial
users. Orgulf operates principally on the Mississippi and Ohio Rivers and on the
Illinois Waterway, transporting coal, grain, aggregates, scrap, ores and steel
products. Orsouth operates principally on the Tennessee-Tombigbee and Gulf
Intracoastal Waterways, and on the Black Warrior and Mississippi Rivers,
transporting principally coal, ores and wood products. Red Circle is engaged
primarily in the offshore transportation of phosphate rock in the Gulf of Mexico
and grain from Louisiana to Puerto Rico.
Other Operations. In addition to its barge transport operations, the
Company also operates terminal facilities, a midstream fueling service and
shipyard repair facilities through Eastern Associated Terminals Company
("EATCO"),
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<PAGE>
Hartley Marine Corp. ("Hartley"), The Ohio River Terminals Company ("ORTCO") and
West Virginia Terminals, Inc. ("West Virginia Terminals"). EATCO operates a
terminal on leased land in Tampa, Florida. Hartley operates shipyard facilities
at Paducah, Kentucky, sells fuel at Point Pleasant, West Virginia, and provides
towing services principally on the Ohio River and its tributaries. ORTCO owns
and operates a coal dumping facility in Huntington, West Virginia, and West
Virginia Terminals operates a coal dumping facility in Kenova, West Virginia.
Customers
In 1997, one customer, The Cincinnati Gas and Electric Co., accounted for
approximately 10% of the Company's consolidated revenues under a multi-year coal
transportation agreement between ORCO and the customer. No other customer, or
group of customers under common control, accounted for more than 10% of revenues
in 1997, 1996, or 1995.
Multi-Year Contracts
The Company's multi-year contracts expire at various dates from February
1999 through December 2007. During 1997, approximately 44% of the Company's
consolidated revenues resulted from these contracts. A substantial portion of
the contracts provide for rate adjustments based on changes in various costs,
including diesel fuel costs, and, additionally, contain "force majeure" clauses
which excuse performance by the parties to the contracts when performance is
prevented by circumstances beyond their reasonable control. Some of these
contracts have provisions for termination for specified causes, such as material
breach of the contract, environmental restrictions on the burning of coal, or
loss by the customer of an underlying commodity supply contract. Penalties for
termination for such causes are not generally specified. However, some contracts
provide that in the event of an uncured material breach by the Company's
subsidiary that results in termination of the contract, the Company's subsidiary
would be responsible for reimbursing its customer for the differential between
the contract price and the cost of substituted performance.
Backlog. The backlog of transportation and terminalling business under
multi-year contracts is summarized in the following table:
<TABLE>
<CAPTION>
December 31,
1997 1996
---- ----
<S> <C> <C>
Tons (in millions).............................................................. 123.2 140.0
Revenues (in millions).......................................................... $412.1 $465.1
Portions of revenue backlog not expected to be filled
within the current fiscal year................................................ 66% 73%
</TABLE>
The 1997 revenue backlog (which is based on contracts that extend beyond
December 31, 1998) is shown at prices current as of December 31, 1997 which are
subject to escalation/de-escalation provisions. Since services under many of the
multi-year contracts are based on customer requirements, the Company has
estimated its backlog based on its forecast of the requirements of these
contract customers. The 12% decline in tonnage backlog from 1996 mainly reflects
the elapsing terms of current multi-year contracts as they draw closer to
maturity, including those excluded from the calculation as they enter their
final year. Partially offsetting these reductions are new multi-year agreements
entered into by the Company's subsidiaries. The decrease in the revenue backlog
is consistent with the reduction in backlog tonnage. Electric utilities, which
traditionally have entered into multi-year transportation and coal supply
agreements, have shortened the term of some agreements for a variety of reasons
including the Clean Air Act requirements and the trend towards deregulation of
the electric power industry.
-12-
<PAGE>
Raw Materials
The only significant raw material required by the Company is diesel fuel to
operate its towboats. Diesel fuel is purchased from a variety of sources, and
the Company regards the availability of diesel fuel as adequate for currently
planned operations.
Competition
The Company's inland marine transportation business competes on the basis
of price, service and equipment availability. The Company's primary competitors
include other barge lines and railroads. There are a number of companies
offering transportation services on the waterways served by the Company. A
shortage of grain supplies and sharply higher grain prices slowed demand in late
1996 and market rates softened. In 1997, a stronger U.S. dollar and increased
competition from non-U.S. suppliers to the world markets slowed U.S. exports of
grain and coal, which weakened demand for barges. Coupled with an increased
availability of new equipment, an imbalance of supply and demand was created,
which led to more intense competition and decreased spot rates.
Improvements in operating efficiencies have permitted barge operators to
maintain relatively low rate structures. Consequently, the barge industry has
generally been able to retain its competitive position with alternative methods
of transportation for bulk commodities when the origin and destination of such
movements are contiguous to navigable waterways.
Many railroads operating in areas served by the inland waterways compete
for cargoes carried by river barges. In many cases, these railroads offer unit
train service (pursuant to which an entire train is committed to the customer)
and dedicated equipment service (pursuant to which equipment is set aside for
the exclusive use of a particular customer) for coal, grain and other bulk
commodities. In addition, rates charged by both railroads and river barge
operators are sometimes designed to reflect special circumstances and
requirements of the individual shippers. As a result, it is difficult to compare
rates charged for movements of the various commodities between specific points.
Towboats, such as those which comprise the Company's fleet, are capable of
moving in one tow (barge configuration) approximately 22,500 tons of cargo
(equivalent to 225 one hundred-ton capacity railroad cars) on the Ohio River and
on the upper Mississippi River and approximately 60,000 tons (equivalent to 600
one hundred-ton capacity railroad cars) on the lower Mississippi River, where
there are no locks to transit. Barge costs per ton mile are generally below
those of railroads.
Properties
As of June 30, 1998, the Company's floating equipment consisted of
approximately 2,400 dry cargo barges and 87 towboats and tugboats. Substantially
all of the barges, towboats and tugboats operated by the Company's barge line
subsidiaries are owned by and chartered from the Company. Approximately 42%
(including the equipment to be mortgaged as security under the Bonds) of the
Company's equipment is mortgaged or leased and the payments under related
charter agreements with its subsidiaries are pledged to secure long-term debt or
to meet capital lease payments.
The Company's subsidiaries also own and operate shore facilities in Tampa,
Florida, Paducah, Kentucky and Huntington, West Virginia.
Employees
As of June 30, 1998, the Company had approximately 1,300 employees, of whom
approximately 30% are represented by labor unions. These unions include the
United Steelworkers of America, the American Maritime Officers, the Seafarers
International Union and an independent labor union.
-13-
<PAGE>
The Company has not experienced any labor problems having a material
adverse effect on its financial position or results of operations.
Environmental Matters
The Company and certain of its subsidiaries are subject to the provisions
of the Federal Water Pollution Control Act, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, the Superfund Amendment and
Reauthorization Act, the Resource Conservation and Recovery Act of 1976, and the
Oil Pollution Act of 1990, which permit the Coast Guard and the Environmental
Protection Agency to assess penalties and clean-up costs for oil, hazardous
substance, and hazardous waste discharges. Some of these acts also allow third
parties to seek damages for losses caused by such discharges. Compliance with
these acts has had no material effect on the Company's capital expenditures,
earnings, or competitive position, and no such effect is anticipated.
Legal Proceedings
In 1993, Midland's parent, Eastern, received notice from the Social
Security Administration indicating that Eastern was responsible for health care
and death benefit premiums for a certain group of retired coal miners and their
beneficiaries under the Coal Act. In 1995, 1996 and 1997 Eastern received
further notices from the Social Security Administration for an additional group
of retired coal miners and their beneficiaries. In 1993 and 1995, Eastern
recorded extraordinary charges to provide for its estimated undiscounted
obligations under the Coal Act with respect to the retired coal miners and their
beneficiaries assigned to Eastern. A portion of the assignments to Eastern was
allegedly due to Eastern's relationship to a predecessor entity of Midland which
is no longer in business. Eastern asserted a claim against Peabody Holding
Company, Inc. ("Peabody"), to which Eastern sold its coal subsidiaries in 1987,
that any liabilities under the Coal Act should be borne by Peabody and such
subsidiaries. In 1995, Midland recorded a reserve of $4,600,000 ($2,990,000
after-tax) to provide for its estimated undiscounted obligations under the Coal
Act.
Eastern's constitutional challenge to the Coal Act failed in the First
Circuit Court of Appeals, which affirmed the federal district court's finding of
constitutionality. However, Eastern's petition for a writ of certiorari in the
Supreme Court was granted, and in June 1998 the Supreme Court reversed the
decision of the First Circuit Court of Appeals and held that the Coal Act was
unconstitutional as applied to Eastern. Accordingly, in June 1998, the Company
reversed $4,350,000 ($2,827,000 after tax) of the reserve established in 1995.
The Company is a party to various other legal actions ensuing in the
ordinary course of its business. The Company believes that the resolution of
these legal actions will not have a material adverse effect on its financial
position or results of operations.
EASTERN ENTERPRISES
All of the outstanding capital stock of the Company is owned by Eastern, an
unincorporated voluntary association formed under the laws of The Commonwealth
of Massachusetts in 1929. Eastern's principal subsidiaries are Midland and
Boston Gas, which is a regulated utility that distributes natural gas in and
around Boston, Massachusetts. Eastern provides management and other staff
services to Midland and Boston Gas. It is the policy of Eastern that each
operation should be financially independent, and, to that end, each of the
principal subsidiaries is financed primarily through its own funded debt which
is not guaranteed by Eastern.
Eastern's common stock is listed on the New York, Boston and Pacific Stock
Exchanges.
-14-
<PAGE>
DESCRIPTION OF THE BONDS
The Bonds have been authorized in an aggregate principal amount of
$75,000,000 and will be issued under an Indenture of First Preferred Ship
Mortgage dated as of _______, 1998 (the "Indenture") between the Company and The
Chase Manhattan Bank, as trustee (the "Trustee"), a copy of which is filed as an
Exhibit to the Registration Statement of which this Prospectus is a part. The
following brief summary of certain provisions of the Indenture uses terms
defined in the Indenture and is qualified in its entirety by the Indenture, to
which reference is hereby made. Unless otherwise defined herein, all such terms
shall have the meanings ascribed to them in the Indenture. Unless otherwise
indicated, references in italics are to Articles, Sections or clauses of the
Indenture. Wherever particular provisions of the Indenture are referred to, such
provisions are incorporated by reference as a part of the statements made and
the statements are qualified in their entirety by such reference.
The Bonds will be delivered only in fully registered form in a minimum
denomination of $1,000 and in integral multiples thereof. The Bonds in the
several denominations are interchangeable without service charge, subject to the
limitations provided in the Indenture. Interest will be payable semiannually on
March 25 and September 25 to the registered holders of the Bonds of record at
the close of business on the preceding March 10 or September 10, as the case may
be, commencing March 25, 1999. The Bonds mature on September 25, 2018. Principal
of and premium, if any, and interest on the Bonds will be payable, and the
transfer of the Bonds will be registrable, at the principal office of the
Trustee in New York City. In addition, payment of interest may, at the option of
the Company, be made by check mailed to the address of the holder entitled
thereto as it appears in the Bond Register. (Article Two and Article Three)
The Company does not plan to apply for listing of the Bonds on any national
securities exchange and trading in the Bonds after the initial public offering
may be relatively inactive.
The Indenture does not restrict or require the Company to redeem or permit
holders to cause a redemption of the Bonds in the event of (i) a consolidation,
merger, sale of assets or other similar transaction that may adversely affect
the creditworthiness of the Company or any successor or combined entity, (ii) a
change in control of the Company or (iii) except to the extent of restrictions
on liens on property of the Company and its Barge Line Subsidiaries, a highly
leveraged transaction involving the Company whether or not involving a change in
control.
Sinking Fund
The Bonds will be subject to equal annual sinking fund payments of
$4,687,500 commencing on September 25, 2003, such that the weighted average life
of the Bonds will be approximately 12.5 years. In lieu of deposits in cash to
satisfy the sinking fund, the Company may receive credit for the Bonds delivered
or for the Bonds acquired with certain moneys deposited with the Trustee or for
the Bonds previously redeemed and not used as the basis for credit under the
Indenture. All sinking fund cash is to be applied to the redemption of the Bonds
on September 25 in each year plus accrued and unpaid interest to the date of
redemption. (Article Fifteen)
Optional Redemption
The Bonds will be redeemable as a whole or in part, on a pro rata basis, at
the option of the Company, at any time upon not less than 30 nor more than 60
days, notice to each Holder of the Bonds, at a redemption price equal to the
greater of (i) 100% of the principal amount of such Bonds or (ii) as determined
by an Independent Investment Banker, the sum of the present values of the
remaining scheduled payments of principal and interest thereon discounted to the
date of redemption on a semiannual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate, plus accrued and unpaid
interest thereon to the date of redemption. Unless the Company defaults in
payment of the redemption price, on and after the Redemption Date, interest will
cease to accrue on the Bonds or portions thereof called for redemption. (Section
203 and Article Fourteen)
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<PAGE>
Security and Release Provisions
The Indenture will create as security for the Bonds a first preferred ship
mortgage on Vessels having an aggregate fair value of not less than 1331/3% of
the principal amount of Bonds outstanding. It is expected that these Vessels
will include approximately 433 barges and 3 towboats. The Company currently
uses, and intends to continue to use, these Vessels on the inland waterways of
the United States. The lien of the Indenture will constitute a first "preferred
mortgage" lien on each of the Vessels under Chapter 313 of Title 46 of the
United States Code ("Chapter 313"), as amended, having the effect and with the
priority provided by Chapter 313. The Indenture does not prohibit any use of the
Vessels in foreign waters; however, the equipment is designed primarily for use
in the United States waters referred to above.
On or before the time each Vessel is subjected to the lien of the
Indenture, it will be chartered by the Company under a charter (the "Charter")
with Orgulf. As additional security for the Bonds, the Company will assign to
the Trustee by an assignment to be dated the date of the Closing (as defined)
certain moneys payable to it under the Charter. The Charter will have a term of
20 years and will provide for aggregate, annual payments sufficient to enable
the Company to meet when due its obligations under the Bonds.
Each Vessel will be assigned an Original Release Price which will be a
specified amount set forth in the Indenture equal to 75% of its appraised fair
value to the Company as of the Issue Date. Each Vessel also will be assigned a
Release Percentage which shall be equal to the ratio of its Original Release
Price divided by the amount of the Bonds initially issued. The Release Prices
will change over time in proportion to the reduction in principal amount of the
Bonds. (Sections 902 and 1109). The Company may release any Vessel from the
first preferred ship mortgage lien and Charter upon (i) (a) substitution of cash
alone deposited with the Trustee, (b) cash plus other Vessel(s) whose then fair
value, when taken with such cash, equals or exceeds the Release Price of the
Vessel to be released, or (c) Vessel(s) alone whose then fair value equals or
exceeds the Release Price of the Vessel to be released. (Section 1101)
Insurance proceeds received with respect to a Vessel which has become an
actual, constructive or agreed total loss are treated under the Indenture as if
the particular Vessel were being released so that proceeds, if any, in excess of
the Release Price of such Vessel are payable to the Company and the balance
(equal to the Release Price) is retained by the Trustee, subject to gradual
repayment to the Company as the Bonds are paid down and the Release Prices
reduced. However, if the Trustee holds any such funds as of September 24, 2003,
such funds are payable to the Company up to an amount not exceeding 5% of the
principal amount of the Bonds then outstanding; and insurance proceeds received
on or after September 25, 2003 are to be paid directly to the Company and not to
the Trustee to the extent that the Release Prices of Vessels with respect to
which such insurance proceeds are payable do not in the aggregate exceed 5% of
the Bonds at the time outstanding on a cumulative basis less the amount of
insurance proceeds, if any, paid to the Company on September 24, 2003. (Sections
1101 and 1105)
The Trustee shall invest Deposited Moneys in such Investment Securities as
the Company may request, which shall be United States government obligations,
prime commercial paper, certificates of deposit, time deposits in banks or trust
companies or securities of any investment fund, trust, mutual fund or other
investment entity, the assets of which are primarily invested in such
securities. (Section 1106) Deposited Moneys shall be paid to the Company if the
Company shall subject to the lien of the Indenture one or more additional
Vessels and may also be used at the direction of the Company to buy the Bonds in
the market. The amount which may be paid to the Company shall be the greater of
75% of the fair value of such a Vessel or its Original Release Price. (Sections
1105 and 1106)
Certain Restrictions
Prohibitions Against Liens. The Company and its Barge Line Subsidiaries
will be restricted from assuming or permitting to exist any mortgage, pledge,
lien or encumbrance upon any of their property, other than, among other things,
(i) Existing Leases and the Existing Mortgage and charters referred to therein,
(ii) the lien of the Indenture and the Charter, and (iii) liens on vessels
provided that the principal amount of such indebtedness secured by such liens
-16-
<PAGE>
when incurred does not exceed 80% of the Fair Value of the vessels plus cash, if
any, deposited as additional security for such indebtedness and (iv) liens upon
stock of any Subsidiary or upon property (other than vessels) owned by the
Company or any Subsidiary created or assumed upon or in connection with the
acquisition of such property or to secure indebtedness of the Company or any
Subsidiary for money borrowed. (Section 1312)
Disposition of Securities of and Debt Limitation on Barge Line
Subsidiaries. The Company will be restricted from (a) selling, transferring or
disposing of any stock or indebtedness of any Barge Line Subsidiary, (b)
permitting any Barge Line Subsidiary to issue stock to any person other than the
Company or (c) permitting any Barge Line Subsidiary to consolidate or merge into
or sell all of its assets to anyone other than the Company or another Barge Line
Subsidiary, except that the stock or properties of any Barge Line Subsidiary may
be disposed of as an entirety for a consideration deemed to be fair to the
Company by its Board of Directors. Barge Line Subsidiaries will be restricted
from incurring funded indebtedness, in excess of $1,000,000 other than (i) to
the Company or a Subsidiary and (ii) secured debt referred to above in clause
(iii) under "Prohibitions Against Liens." (Section 1319)
Consolidation, Merger or Sale. The Company will not consolidate or merge
with any other corporation or sell or transfer all or substantially all of its
assets to another corporation, unless the successor corporation assumes all of
the Company's obligations under the Indenture and the Bonds and after giving
effect to such transaction, no Event of Default or event which after notice or
lapse of time or both would become an Event of Default, shall have occurred and
be continuing. (Section 801)
Modification of the Indenture; Waivers
The Indenture will contain provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
principal amount of the Bonds at the time outstanding, to modify the Indenture
or any supplemental indenture or the rights of the holders of the Bonds;
provided that such modification shall not (i) change the Stated Maturity of any
principal or interest on any Bonds, or reduce the principal amount thereof or
premium thereon, or reduce the rate or extend the time of payment of interest
thereon, without the consent of the holders of each Bond so affected or (ii)
reduce the aforesaid percentage of the Bonds, the consent of the holders of
which is required for any such modification, without the consent of the holders
of all Bonds then outstanding. (Article Twelve)
Events of Default
An Event of Default will be defined in the Indenture as being: (i) default
for 30 days in payment of any interest; (ii) default in payment of principal (or
premium, if any) when due; (iii) default for 30 days in making any sinking fund
payments; (iv) default in performance of any other covenant in the Indenture for
90 days after written notice thereof; (v) certain unstayed or unsatisfied
judgment defaults; and (vi) certain events in bankruptcy, insolvency or
reorganization of the Company. (Section 501)
The holders of 25% in principal amount of the Bonds at the time outstanding
may waive any past default under the Indenture, except a default in the payment
of interest or principal or premium. (Section 522) The holders of a majority in
principal amount of the Bonds at the time outstanding may annul a declaration
that all Bonds are due and payable immediately but only if all defaults have
been remedied and all payments due (other than by acceleration) have been made.
(Section 501) The Indenture will provide that the Trustee may withhold notice to
the holders of any default (except in the payment of principal of, or interest
or premium on, or sinking fund payments in respect of, the Bonds) if the Trustee
considers it in the interest of the holders to do so. (Section 602) If an Event
of Default shall have happened and be continuing, either the Trustee or the
holders of 25% in principal amount of the Bonds at the time outstanding may
declare the principal of all the Bonds to be due and payable. (Section 501)
Other than the right to payment of the principal and premium (if any) and
interest on any Bond, the holder thereof may not enforce any right under the
Indenture unless he has given written notice of default and the continuance
thereof to the Trustee and unless the holders of at least 25% principal amount
of the Bonds at the time outstanding have
-17-
<PAGE>
requested enforcement thereof by the Trustee and offered reasonable indemnity
therefor and the Trustee has failed to proceed with such enforcement for a
period of 60 days after receipt of such request. (Section 520) Subject to such
indemnification, the holders of a majority in principal amount of the Bonds at
the time outstanding shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, provided that the
Trustee shall have the right to decline to follow any such direction if the
Trustee is advised by counsel that the action so directed may not lawfully be
taken or if the Trustee determines that such action would involve the Trustee in
personal liability. (Section 519)
The Company will be required to file with the Trustee annually a
certificate as to the absence of defaults under the terms of the Indenture.
(Section 1304)
Concerning the Trustee
The Chase Manhattan Bank is the Trustee under the Indenture and has been
appointed by the Company as Registrar and Paying Agent with regard to the Bonds.
Certain Definitions
"Adjusted Treasury Rate" means, with respect to any date of redemption, the
rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such date of redemption, plus ___%.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the Remaining Average Life of the Bonds to be redeemed that would be utilized,
at the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
Remaining Average Life of such Bonds.
"Comparable Treasury Price" means, with respect to any date of redemption,
(i) the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such date of redemption, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities," or (ii) if such release (or any successor release) is
not published or does not contain such prices on such business day, (A) the
average of the Reference Treasury Dealer Quotations, or (B) if the Trustee
obtains fewer than three such Reference Treasury Dealer Quotations, the average
of all such Reference Treasury Dealer Quotations.
"Independent Investment Banker" means an independent investment banking
institution of national standing appointed by the Trustee after consultation
with the Company.
"Issue Date" means the date on which the Bonds are originally issued.
"Reference Treasury Dealer" means, for the Bonds, Donaldson, Lufkin &
Jenrette Securities Corporation, and its successors; provided, however, that if
the foregoing shall not be a primary U.S. Government securities dealer in New
York City (a "Primary Treasury Dealer"), the Company shall substitute therefor
another Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to the Reference
Treasury Dealer and any date of redemption, the average, as determined by the
Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by the Reference Treasury Dealer at 5:00 p.m. on the
third business day preceding such date of redemption.
-18-
<PAGE>
"Remaining Average Life" means, with respect to any Bond, the principal of
which is to be redeemed (the "Called Principal"), the number of years
(calculated to the nearest one-twelfth year) obtained by dividing (i) such
Called Principal into (ii) the sum of the products obtained by multiplying (a)
the principal component of each Remaining Scheduled Payment (as defined below)
with respect to such Called Principal by (b) the number of years (calculated to
the nearest one-twelfth year) that will elapse between the date on which such
Called Principal is to be redeemed (the "Settlement Date") and the scheduled due
date of such Remaining Scheduled Payment. For purposes of this definition, the
term "Remaining Scheduled Payments" means, with respect to the Called Principal
of any Bond, all payments of such Called Principal and interest thereon that
would be due after the Settlement Date with respect to such Called Principal if
no payment of such Called Principal were made prior to its scheduled due date.
Book-entry, Delivery and Form
Except as set forth below, the Bonds will be issued in registered, global
form in minimum denominations of $1,000 and in integral multiples thereof. The
Bonds will be issued at the closing of the Offering (the "Closing") only against
payment in immediately available funds.
The Bonds initially will be represented by one or more Bonds in registered
global form without interest coupons (the "Global Bonds"). The Global Bonds will
be deposited upon issuance with the Trustee as custodian for DTC, in New York,
New York, and registered in the name of DTC or its nominee, in each case for
credit to an account of a direct or indirect participant in DTC as described
below.
Except as set forth below, the Global Bonds may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Bonds may not be exchanged for Bonds
in certificated form except in the limited circumstances described below. See
"--Exchange of Book-Entry Bonds for Certificated Bonds." Except in the limited
circumstances described below, owners of beneficial interests in the Global
Bonds will not be entitled to receive physical delivery of Certificated Bonds
(as defined).
Transfers of beneficial interests in the Global Bonds will be subject to
the applicable rules and procedures of DTC and its direct or indirect
participants, which may change from time to time.
Initially, the Trustee will act as Paying Agent and Bond Registrar. The
Bonds may be presented for registration of transfer and exchange at the offices
of the Bond Registrar.
Depositary Procedures
The following description of the operations and procedures of DTC is
provided solely as a matter of convenience. These operations and procedures are
solely within the control of the respective settlement systems and are subject
to changes by them from time to time. The Company takes no responsibility for
these operations and procedures and urges investors to contact the system or
their participants directly to discuss these matters.
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchaser), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interests in, and transfers of ownership interests
in, each security held by or on behalf of DTC are recorded on the records of the
Participants and Indirect Participants.
-19-
<PAGE>
DTC has also advised the Company that, pursuant to procedures established
by it, (i) upon deposit of the Global Bonds, DTC will credit the accounts of
Participants designated by the Initial Purchaser with portions of the principal
amount of the Global Bonds and (ii) ownership of interests in the Global Bonds
will be shown on, and the transfer of ownership thereof will be effected only
through, records maintained by DTC (with respect to the Participants) or by the
Participants and the Indirect Participants (with respect to other owners of
beneficial interest in the Global Bonds).
Investors in the Global Bonds may hold their interests therein directly
through DTC, if they are Participants in such system, or indirectly through
organizations which are Participants in such system.
All interests in a Global Bond may be subject to the procedures and
requirements of DTC. The laws of some states require that certain persons take
physical delivery in definitive form of securities that they own. Consequently,
the ability to transfer beneficial interests in a Global Bond to such persons
will be limited to that extent. Because DTC can act only on behalf of
Participants, which in turn act on behalf of Indirect Participants and certain
banks, the ability of a person having beneficial interests in a Global Bond to
pledge such interests to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be affected
by the lack of a physical certificate evidencing such interests.
Except as described below, owners of interests in the Global Bonds will not
have the Bonds registered in their names, will not receive physical delivery of
the Bonds in certificated form and will not be considered the registered owners
or "Holders" thereof under the Indenture for any purpose.
Payments in respect of the principal of, and premium, if any, and interest
on a Global Bond registered in the name of DTC or its nominee will be payable to
DTC in its capacity as the registered Holder under the Indenture. Under the
terms of the Indenture, the Company and the Trustee will treat the persons in
whose names the Bonds, including the Global Bonds, are registered as the owners
thereof for the purpose of receiving such payments and for any and all other
purposes whatsoever. Consequently, neither the Company, the Trustee nor any
agent of the Company or the Trustee has or will have any responsibility or
liability for (i) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interest in the Global Bonds, or for maintaining, supervising or
reviewing any of DTC's records or any Participant's or Indirect Participant's
records relating to the beneficial ownership interests in the Global Bonds or
(ii) any other matter relating to the actions and practices of DTC or any of its
Participants or Indirect Participants. DTC has advised the Company that its
current practice, upon receipt of any payment in respect of securities such as
the Bonds (including principal and interest), is to credit the accounts of the
relevant Participants with the payment on the payment date, in amounts
proportionate to their respective holdings in the principal amount of beneficial
interest in the relevant security as shown on the records of DTC unless DTC has
reason to believe it will not receive payment on such payment date. Payments by
the Participants and the Indirect Participants to the beneficial owners of the
Bonds will be governed by standing instructions and customary practices and will
be the responsibility of the Participants or the Indirect Participants and will
not be the responsibility of DTC, the Trustee or the Company. Neither the
Company nor the Trustee will be liable for any delay by DTC or any of its
Participants in identifying the beneficial owners of the Bonds, and the Company
and the Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Interests in the Global Bonds are expected to be eligible to trade in DTC's
Same-Day Funds Settlement System, and secondary market trading activity in such
interests will, therefore, settle in immediately available funds, subject in all
cases to the rules and procedures of DTC and its Participants. See "--Same Day
Settlement and Payment." Transfers between Participants in DTC will be effected
in accordance with DTC's procedures, and will be settled in same day funds.
DTC has advised the Company that it will take any action permitted to be
taken by a Holder of the Bonds only at the direction of one or more Participants
to whose account DTC has credited the interests in the Global Bonds and
-20-
<PAGE>
only in respect of such portion of the aggregate principal amount of the Bonds
as to which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the Bonds, DTC reserves the right
to exchange the Global Bonds for legended Bonds in certificated form, and to
distribute such Bonds to its Participants.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Bonds among Participants in DTC, it is under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company nor the Trustee
nor any of their respective agents will have any responsibility for the
performance by DTC or its Participants or Indirect Participants of its
obligations under the rules and procedures governing their operations.
Exchange of Book-Entry Bonds for Certificated Bonds
A Global Bond is exchangeable for definitive Bonds in registered
certificated form ("Certificated Bonds") if (i) DTC (x) notifies the Company
that it is unwilling or unable to continue as depositary for the Global Bonds
and the Company thereupon fails to appoint a successor depositary or (y) has
ceased to be a clearing agency registered under the Exchange Act, (ii) the
Company, at its option, notifies the Trustee in writing that it elects to cause
the issuance of the Certificated Bonds or (iii) there shall have occurred and be
continuing a Default or Event of Default with respect to the Bonds. In addition,
beneficial interests in a Global Bond may be exchanged for Certificated Bonds
upon request but only upon prior written notice given to the Trustee by or on
behalf of DTC in accordance with the Indenture. In all cases, Certificated Bonds
delivered in exchange for any Global Bond or beneficial interests therein will
be registered in the names, and issued in any approved denominations, requested
by or on behalf of the depositary (in accordance with its customary procedures).
Exchange of Certificated Bonds for Book-Entry Bonds
Bonds issued in certificated form may not be exchanged for beneficial
interests in any Global Bond unless the transferor first delivers to the Trustee
a written certificate (in the form provided in the Indenture).
Same Day Settlement and Payment
The Indenture will require that payments in respect of the Bonds
represented by the Global Bonds (including principal, premium, if any, and
interest) be made by wire transfer of immediately available funds to the
accounts specified by the Global Bond Holder. With respect to Bonds in
certificated form, the Company will make all payments of principal, premium, if
any, and interest by wire transfer of immediately available funds to the
accounts specified by the Holders thereof or, if no such account is specified,
by mailing a check to each such Holder's registered address. The Bonds
represented by the Global Bonds are expected to trade in the DTC's Same-Day
Funds Settlement System, and any permitted secondary market trading activity in
such Bonds will, therefore, be required by the DTC to be settled in immediately
available funds. The Company expects that secondary trading in any certificated
Bonds will also be settled in immediately available funds.
UNDERWRITING
Subject to the terms and conditions of an underwriting agreement between
the Company and the Underwriter (the "Underwriting Agreement"), the Underwriter
has agreed to purchase from the Company, and the Company has agreed to sell to
the Underwriter, all of the Bonds offered hereby.
The Underwriting Agreement provides that the obligations of the Underwriter
to purchase and accept delivery of the Bonds offered hereby are subject to
approval by its counsel of certain legal matters and to certain other
-21-
<PAGE>
conditions. The Underwriter is obligated to purchase and accept delivery of all
of the Bonds offered hereby if any are purchased.
The Underwriter initially proposes to offer the Bonds in part directly to
the public at the initial public offering price set forth on the cover page of
this Prospectus and in part to certain dealers at such price less a concession
not in excess of ____% of the principal amount of the Bonds. The Underwriter may
allow, and such dealers may re-allow, to certain other dealers a concession not
in excess of ____% of the principal amount of the Bonds. After the initial
offering of the Bonds, the public offering price and other selling terms may be
changed by the Underwriter at any time without notice.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriter may be required to make in respect thereof.
The Bonds are a new issue of securities with no established trading market.
The Company does not intend to apply for listing of the Bonds on any securities
exchange or the Nasdaq National Market. The Company has been advised by the
Underwriter that the Underwriter intends to make a market in the Bonds; however,
it is not obligated to do so, and it may discontinue any such market making at
any time without notice. Therefore, no assurance can be given as to the
liquidity of the Bonds.
In connection with the Offering, the Underwriter may engage in transactions
that stabilize, maintain or otherwise affect the price of the Bonds.
Specifically, the Underwriter may over-allot the Offering, creating a syndicate
short position. The Underwriter may bid for and purchase the Bonds in the open
market to cover such syndicate short positions or to stabilize the price of the
Bonds. These activities may stabilize or maintain the market price of the Bonds
above independent market levels. The Underwriter is not required to engage in
these activities, and may end these activities at any time.
VALIDITY OF THE BONDS
The validity of the Bonds offered hereby is being passed upon for the
Company by Ropes & Gray, Boston, Massachusetts, and for the Underwriter by
Choate, Hall & Stewart (a partnership including professional corporations),
Boston, Massachusetts. Ropes & Gray and Choate, Hall & Stewart are not passing
upon the security afforded by the Indenture and will rely on the opinion of
Thompson Coburn, St. Louis, Missouri, for such matter and all matters relating
to admiralty law.
EXPERTS
The financial statements and schedules included or incorporated by
reference in this Prospectus have been examined by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.
-22-
<PAGE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2
FINANCIAL STATEMENTS:
Consolidated Statements of Earnings for the years
ended December 31, 1997, 1996 and 1995 F-3
Consolidated Balance Sheets -- December 31, 1997 and 1996 F-4
Consolidated Statements of Stockholder's Equity for
the years ended December 31, 1997, 1996 and 1995 F-6
Consolidated Statements of Cash Flows for the years
ended December 31, 1997, 1996 and 1995 F-7
Notes to Consolidated Financial Statements F-8
Unaudited Interim Financial Statements F-18
Notes to Unaudited Interim Financial Statements F-22
SCHEDULE:
II - Valuation and Qualifying Accounts and Reserves F-23
</TABLE>
Schedules other than that listed above have been omitted as the information has
been included in the consolidated financial statements and related notes, or is
not applicable or not required.
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Midland Enterprises Inc.:
We have audited the accompanying consolidated balance sheets of MIDLAND
ENTERPRISES INC. (a Delaware corporation and a wholly-owned subsidiary of
Eastern Enterprises) and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of earnings, stockholder's equity and cash flows
for each of the three years in the period ended December 31, 1997. These
consolidated financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Midland Enterprises Inc. and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the Index to
Consolidated Financial Statements is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not a required part of the
basic financial statements. This schedule has been subjected to the auditing
procedures applied in our audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
Cincinnati, Ohio,
January 20, 1998
F-2
<PAGE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(000 OMITTED)
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Revenues (Note 1) $269,259 $301,880 $296,339
-------- -------- --------
Operating costs and expenses:
Operating expenses............................... $183,929 $189,357 $183,462
Depreciation and amortization (Note 6) 22,675 22,554 22,897
Selling, general and administrative
expenses......................................... 11,337 12,329 11,983
Overhead allocation from Parent
(Note 1)....................................... 2,900 2,549 2,830
Taxes, other than income......................... 13,805 16,676 17,339
-------- -------- --------
$234,646 $243,465 $238,511
-------- -------- --------
Operating earnings..................................... $ 34,613 $ 58,415 $ 57,828
-------- -------- --------
Other income (expense):
Interest income from Parent (Note 1) $ 4,242 $ 3,483 $ 4,404
Interest income other............................ 73 978 752
Gain (loss) on sale of assets and other,
net.............................................. (84) 2 332
-------- -------- --------
$ 4,231 $ 4,463 $ 5,488
-------- -------- --------
Interest expense:
Long-term debt................................... $ 13,530 $ 14,043 $ 14,624
Other, including amortization of debt
expense.......................................... 227 672 551
-------- -------- --------
$ 13,757 $ 14,715 $ 15,175
-------- -------- --------
Earnings before income taxes........................... $ 25,087 $ 48,163 $ 48,141
Provision for income taxes (Note 5).................... 8,464 17,566 17,592
-------- -------- --------
Earnings before extraordinary item..................... $ 16,623 $ 30,597 $ 30,549
Extraordinary item net of tax (Note 11)................ - - (2,990)
-------- -------- ---------
Net earnings........................................... $ 16,623 $ 30,597 $ 27,559
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(000 OMITTED)
<TABLE>
<CAPTION>
ASSETS
------
Current assets: 1997 1996
-------- --------
<S> <C> <C>
Cash and cash equivalents (Note 1)....................... $ 88 $ 91
Receivables -
Trade, less allowance of $665,000
in 1997 and $685,000 in 1996........................ 18,207 18,226
Parent (Notes 1 and 4).............................. 66,945 63,863
Other............................................... 565 1,263
Materials, supplies and fuel (Note 1).................... 8,738 8,176
Prepaid expenses......................................... 1,722 2,028
-------- --------
Total current assets................................ $ 6,265 $ 93,647
-------- --------
Property and equipment, at cost (Notes 4 and 6):
Towboats and barges...................................... $590,100 $580,546
Terminals and other facilities........................... 46,139 44,402
Land..................................................... 4,727 4,612
-------- --------
Total property and equipment, at cost............... $640,966 $629,560
Less - accumulated depreciation......................... 333,489 323,120
-------- --------
Net property and equipment.......................... $307,477 $306,440
-------- --------
Other assets:
Deferred pension charges (Note 2)........................ $ 14,520 $ 13,587
Unamortized debt expense, deferred
maintenance and other (Notes 1 and 6)................... 5,033 4,117
-------- --------
Total other assets.................................. $ 19,553 $ 17,704
-------- --------
Total assets........................................ $423,295 $417,791
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
LIABILITIES AND STOCKHOLDER'S EQUITY
(000 OMITTED)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Current liabilities:
Current portion of long-term debt (Note 4).................... $ 4,351 $ 3,986
Accounts payable.............................................. 18,199 11,224
Reserve for insurance claims (Note 1)......................... 11,980 11,881
Accrued expenses.............................................. 4,495 5,616
Interest payable.............................................. 3,944 4,063
Other taxes payable........................................... 3,221 4,119
Income taxes payable (Note 5)................................. 955 1,123
Other current liabilities..................................... 9,119 9,851
-------- --------
Total current liabilities................................ $ 56,264 $ 51,863
-------- --------
Long-term debt (Note 4)............................................ $132,142 $137,313
-------- --------
Reserves and deferred credits:
Deferred income taxes (Note 5)................................ $ 57,940 $ 54,594
Unamortized investment tax credits (Note 5)................... 2,515 2,999
Post-retirement health care (Note 3).......................... 8,569 8,798
Coal miners retiree health care (Note 11)..................... 3,300 3,500
Other reserves................................................ 2,057 2,437
-------- --------
Total reserves and deferred credits...................... $ 74,381 $ 72,328
-------- --------
Commitments and contingencies (Notes 7 and 11)
Stockholder's equity (Note 4):
Common stock, $100 par value -
Authorized shares - 1,000
Issued shares - 15 1/2................................... $ 1 $ 1
Capital in excess of par value................................ 52,519 52,519
Retained earnings............................................. 107,988 103,767
-------- --------
Total stockholder's equity............................... $160,508 $156,287
-------- --------
Total liabilities and stockholder's equity......................... $423,295 $417,791
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(000 OMITTED EXCEPT SHARES OUTSTANDING)
<TABLE>
<CAPTION>
Capital in
Common Stock Excess of Retained
Outstanding Par Value Earnings Total
----------- --------- -------- -----
Shares Amount
------ ------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1994: 15.5 $ 1 $52,519 $ 96,386 $148,906
Net earnings.............................. 0.0 0 0 27,559 27,559
Dividends to Parent....................... 0.0 0 0 (27,559) (27,559)
---- ------- ------- -------- --------
Balance December 31, 1995: 15.5 $ 1 $52,519 $ 96,386 $148,906
Net earnings.............................. 0.0 0 0 30,597 30,597
Dividends to Parent....................... 0.0 0 0 (22,948) (22,948)
Pension liability adjustment, net......... 0.0 0 0 (268) (268)
---- ------- ------- -------- --------
Balance December 31, 1996: 15.5 $ 1 $52,519 $103,767 $156,287
Net earnings.............................. 0.0 0 0 16,623 16,623
Dividends to Parent....................... 0.0 0 0 (12,467) (12,467)
Pension liability adjustment, net......... 0.0 0 0 65 65
---- ------- ------- -------- --------
Balance December 31, 1997: 15.5 $ 1 $52,519 $107,988 $160,508
==== ======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(000 OMITTED)
<TABLE>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings................................................ $ 16,623 $ 30,597 $ 27,559
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Extraordinary provision for coal miners
retiree health care, net of tax................... - - 2,990
Depreciation and amortization....................... 22,675 22,554 22,897
Deferred and current income taxes................... 3,178 (2) 157
Net (gain) loss on sale of assets................... 42 (35) (475)
Other changes in assets and liabilities:
Trade and other receivables....................... 19 6,804 (389)
Materials, supplies and fuel...................... (562) (199) 322
Accounts payable.................................. 6,975 (6,292) 5,811
Accrued expenses and other current
liabilities....................................... (2,771) (2,473) 9,879
Post-retirement health care......................... (229) 72 14
Other............................................... (2,101) 3,649 (160)
-------- -------- --------
Net cash provided by operating activities................... $ 43,849 $ 54,675 $ 68,605
-------- -------- --------
Cash flows from investing activities:
Capital expenditures................................ $(25,700) $(47,851) $(20,900)
(Increase) decrease in Parent receivable (3,082) (3,505) 1,508
Proceeds from other asset dispositions.............. 2,138 1,548 3,561
-------- -------- --------
Net cash used by investing activities....................... $(26,644) $(49,808) $(15,831)
Cash flows from financing activities:
Repayment of long-term debt......................... $ (4,806) $ (7,288) $ (3,575)
Cash dividends paid to Parent....................... (12,467) (22,948) (27,559)
Other............................................... 65 (268) -
-------- -------- --------
Net cash used by financing activities....................... $(17,208) $(30,504) $(31,134)
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents............................................... $ (3) $(25,637) $ 21,640
-------- -------- --------
Cash and cash equivalents at beginning of year 91 25,728 4,088
-------- -------- --------
Cash and cash equivalents at end of year.................... $ 88 $ 91 $ 25,728
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest, net of amounts capitalized................ $ 13,582 $ 14,167 $ 14,629
Income taxes........................................ $ 5,293 $ 17,450 $ 17,087
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
(1) SIGNIFICANT ACCOUNTING POLICIES
Midland Enterprises Inc. (the "Company") is a wholly-owned subsidiary of Eastern
Enterprises ("Eastern") of Weston, Massachusetts. The Company's principal
business is barge transportation of bulk commodities on the Ohio and Mississippi
Rivers and their tributaries. The major commodity transported is coal, which
accounts for nearly two thirds of the Company's tonnage, the majority of which
is transported to various electric utilities in the eastern half of the United
States. The Company also provides bulk terminalling and shipyard repair services
at select locations which accounts for approximately 10% of its consolidated
revenues. A substantial amount of the Company's revenues relate to spot or
annual contracts for transportation and terminalling. Approximately 44% of the
Company's revenues are derived from multi-year transportation and terminalling
contracts.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All material intercompany balances and transactions have been
eliminated. The significant accounting policies followed by the Company and its
subsidiaries are described below:
(a) Cash equivalents - Cash equivalents are comprised of highly liquid
investment instruments with original maturities of three months or
less. Such short-term investments are classified as investments
available for sale and are valued at market in accordance with SFAS
No. 115. Unrealized gains/losses on investments available for sale are
immaterial.
(b) Transactions with Parent - Parent receivables represent advances to
Eastern which bear interest at the applicable Federal rate as defined
in the Internal Revenue Code: 5.9% in 1997, 5.75% in 1996, and 6.4% in
1995. The Company was also charged a corporate overhead allocation
from its parent computed on several factors including direct corporate
management time, revenues, capitalization and employees, which
management believes is a reasonable method of allocation.
(c) Materials, supplies and fuel - Materials, supplies and fuel are stated
at the lower of cost (first-in, first-out or average) or market.
(d) Unamortized debt expense - Unamortized debt expense represents fees
and discounts incurred in obtaining long-term debt. Such costs are
being amortized over the terms of the respective bond issues.
(e) Accounting for income on tows in progress - The Company recognizes
income on tows in progress on the percentage of completion method by
relating the number of miles completed to date to the total miles to
be traveled.
(f) Reserve for insurance claims - The Company is self-insured for
personal injury and property claims, which are insured above a
deductible amount of $600,000 per occurrence. The Company's estimate
of liability for the self-insured claims is included in the reserve
for insurance claims in the Consolidated Balance Sheets. Payments made
for losses incurred are netted against the related liability for the
loss.
F-8
<PAGE>
(1) SIGNIFICANT ACCOUNTING POLICIES (Continued)
(g) Reclassifications - Certain reclassifications of previously reported
amounts have been made to conform with current classifications.
(h) Environmental matters - Accruals for environmental matters are
recorded in operating expenses when it is probable that a liability
has been incurred and the amount of the liability can be reasonably
estimated. Accrued liabilities are exclusive of claims against third
parties and are not discounted.
(i) Impairment of long-lived assets - The recoverability of long-lived
assets is evaluated by the Company on a continuing basis. In the event
that facts and circumstances indicate that the cost of an asset may be
impaired, an evaluation of recoverability would be performed. If an
evaluation is required, the estimated future undiscounted cash flows
associated with the asset would be compared to the asset's carrying
amount to determine if a write-down to market value or discounted cash
flow value is required. Based on such evaluations, there were no
impairment charges in 1997.
(j) Deferred maintenance - The Company defers the cost of engine overhauls
on certain towboats and amortizes these costs over the estimated life
of the repair, which generally range from 2 to 4 years.
(2) RETIREMENT AND EMPLOYEE BENEFIT PLANS
The Company and its subsidiaries, through various Company-administered plans and
union-administered plans, provide retirement benefits for substantially all of
their employees. Normal retirement age is 65, but provision is made for earlier
retirement. Benefits under non-union plans are based on salary or wages and
years of service, while benefits under union plans are based on negotiated
amounts and years of service.
The funding of retirement and employee benefit plans is in accordance with the
requirements of the plans and collective bargaining agreements and, where
applicable, is in sufficient amount to satisfy the "Minimum Funding Standards"
of the Employee Retirement Income Security Act of 1974.
The net pension cost for these plans and agreements charged to income was as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- -------
(000 Omitted)
<S> <C> <C> <C>
Company-administered plans $ 35 $ 4 $ 86
Multi-employer union retirement and welfare plans 270 293 294
-------- ------- -------
Total Net Pension Cost $ 305 $ 297 $ 380
======== ======= =======
</TABLE>
The net pension cost for Company-administered plans consisted of:
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- -------
(000 Omitted)
<S> <C> <C> <C>
Service cost $ 1,451 $ 1,318 $ 1,280
Interest cost on projected benefit obligation 2,230 2,021 1,821
Actual return on plan assets (12,255) (4,543) (7,094)
Net amortization and deferral 8,609 1,208 4,079
-------- ------- -------
Total Net Pension Cost $ 35 $ 4 $ 86
======== ======= =======
</TABLE>
F-9
<PAGE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(2) RETIREMENT AND EMPLOYEE BENEFIT PLANS (Continued)
The assumptions used to determine the annual pension expense and the projected
benefit obligation at the end of the year were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Assumed discount rate 7.5% 7.5% 7.5%
Assumed rate of compensation increase 4.8% 4.8% 4.8%
Expected rate of return on plan assets 8.5% 8.5% 8.5%
</TABLE>
The following table sets forth the funded status of the Company-administered
plans and amounts recognized in the consolidated balance sheets as of December
31, 1997 and 1996 respectively, utilizing actuarial measurement dates as of
October 1, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
-------- -------
(000 Omitted)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligations, including:
Vested benefits $ 23,637 $19,120
Non-vested benefits 3,073 2,502
-------- -------
26,710 21,622
Effect of future salary increases 5,955 4,961
-------- -------
Projected benefit obligations for services
rendered to date $ 32,665 $26,583
======== =======
Plan assets at fair value, primarily listed
stocks and bonds $ 57,123 $45,929
Less-Projected benefit obligations 32,665 26,583
-------- -------
Excess of plan assets over projected benefit
obligations 24,458 19,346
Unrecognized net obligation at December 31, 1985
amortized over 13-15 years (154) (228)
Unrecognized net actuarial gain (11,576) (7,272)
Unrecognized prior service cost 1,529 1,491
Amounts contributed to plans during fourth quarter 48 26
Unfunded accumulated benefits (614) (730)
-------- -------
Net Pension Assets $ 13,691 $12,633
======== =======
</TABLE>
Certain of the Company's subsidiaries participate in one or more multi-employer
pension plans, and contribute to such plans in amounts required by the
applicable union contracts. Contribution levels are negotiated between the
subsidiaries and the unions. A subsidiary would be required under the Federal
law to compute its liability for, and accelerate its funding of, its
proportionate share of a multi-employer plan's unfunded vested benefits (if any)
upon its withdrawal from, or the termination of, such a plan.
F-10
<PAGE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(3) POST-RETIREMENT BENEFITS OTHER THAN PENSIONS
The Company and its subsidiaries, through various Company-administered plans and
other union retirement and welfare plans under collective bargaining agreements,
provide certain health care and life insurance benefits for retired employees.
The Company's employees, who are participants in the pension plans, become
eligible for these benefits if they reach retirement age while working for the
Company.
The net post-retirement benefit cost of these plans and agreements charged to
expense was as follows:
<TABLE>
<CAPTION>
December 31
1997 1996 1995
---- ---- ----
(000 Omitted)
<S> <C> <C> <C>
Service cost $ 106 $ 113 $126
Interest cost on accumulated benefit obligation 876 852 733
Net amortization and deferral 92 71 51
------ ------ ----
Net periodic post-retirement benefit costs $1,074 $1,036 $910
====== ====== ====
</TABLE>
The following table sets forth the funded status of the plans and amounts
recognized in the Company's consolidated balance sheets as of December 31, 1997
and 1996 (using a measurement date of October 1, 1997 and 1996):
<TABLE>
<CAPTION>
December 31
1997 1996
------- -------
(000 Omitted)
<S> <C> <C>
Accumulated benefit obligation:
Retirees $11,535 $ 9,134
Fully eligible plan participants 2,174 2,008
Other active plan participants 1,559 1,649
------- -------
$15,268 $12,791
Plan assets at fair value - -
------- -------
Accumulated benefit obligation in excess of
plan assets $15,268 $12,791
Unrecognized net (loss)/gain (8,071) (5,531)
Unrecognized prior service cost 1,372 1,538
------- -------
Post-retirement health care reserve $ 8,569 $ 8,798
======= =======
</TABLE>
The weighted average discount rate used in determining the accumulated benefit
obligation was 7.5%. A 7% increase in cost of covered health care benefits has
been assumed for 1997 and 1996. The health care inflation rate is assumed to be
7% through 1999, 6% in 2000 and 5% thereafter. A one percentage point increase
in the assumed health care cost trend would have increased the net periodic
post-retirement benefit cost by $90,000 in 1997 and $61,000 in 1996 and the
accumulated post-retirement benefit obligation by $1,194,000 and $792,000 in
1997 and 1996, respectively.
F-11
<PAGE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(4) LONG-TERM OBLIGATIONS AND CREDIT AGREEMENTS
(a) Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31
1997 1996
------ ----
(000 Omitted)
<S> <C> <C>
First Preferred Ship Mortgage Bonds -
9.9% Series, payable in annual amounts of
$5,000,000 beginning in 1999 to 2008 $ 50,000 $ 50,000
8.1%-9.85% Medium Term Notes, Series A,
due 2002-2012 68,000 68,000
-------- --------
Total Mortgage Bonds $118,000 $118,000
-------- --------
Obligations under Capital Leases and Other -
BA Leasing & Capital Corporation (Successor
to Wells Fargo Leasing Corporation) $ 4,082 $ 5,146
Security Pacific Equipment Leasing, Inc. 10,534 12,397
Westinghouse Credit Corporation 6,086 7,358
Other (including unamortized debt discount) (679) (746)
-------- -------
$ 20,023 $ 24,155
-------- --------
Less:
Current portion of long-term debt included above $ 4,351 $ 3,986
Monies on deposit (d) 1,530 856
-------- --------
$ 5,881 $ 4,842
-------- --------
Total Long-Term Debt $132,142 $137,313
======== ========
</TABLE>
The First Preferred Ship Mortgage Bonds and obligations under capital leases are
secured by approximately half of the Company's towboats and barges and by
assignment of rentals for that equipment payable to the Company by its
subsidiaries. The 9.9% Series Bonds are callable beginning April 1, 1998.
Under the most restrictive of the mortgage indentures, the Company, (a) may not
pay dividends, reacquire its common stock or make any advances or loans to its
stockholder or subsidiaries of its stockholder except to the extent of the sum
of (i) Consolidated Net Earnings after December 31, 1988, (ii) the net proceeds
of the sale of stock of the Company after December 31, 1988, and (iii) the
amount of $50,000,000 with respect to any advances or loans to its stockholder
or to subsidiaries of its stockholder, (b) is required to maintain Consolidated
Net Current Assets at least equal to $1,250,000, and (c) may not incur or permit
any of its subsidiaries to incur additional Senior Unsecured Funded Debt except
for refunding unless immediately thereafter Consolidated Net Tangible Assets
will aggregate at least 150% of (i) Consolidated Senior Unsecured Funded Debt
(excluding therefrom unsecured loans or advances to the Company from its
stockholder, plus (ii) Consolidated Senior Secured Funded Debt (all terms as
defined in the applicable indenture). Under these agreements, $29,050,000 of
retained earnings at December 31, 1997 are available for additional dividends to
Eastern.
F-12
<PAGE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(4) LONG-TERM OBLIGATIONS AND CREDIT AGREEMENTS (Continued)
Included in obligations under capital leases is $20,702,000 of barge lease
obligations having a weighted average interest rate of 10%. Minimum lease
payments under these agreements are due in installments through 2003; principal
payments due for the next five years amount to $4,351,000 in 1998, $4,793,000 in
1999, $5,280,000 in 2000, $4,228,000 in 2001, $1,695,000 in 2002, and $335,000
thereafter.
(b) Credit Agreements
Eastern maintains a credit agreement with a group of banks which provides for
the borrowing by Eastern and certain subsidiaries of up to $100,000,000 at any
time through December 31, 2001. The Company's maximum available borrowings under
the credit agreement are $50,000,000. The agreement requires a facility fee of
1/8 of 1% of the commitment. The Registrant had no borrowings outstanding under
this agreement in 1996 or 1997. The interest rate for borrowings is the agent
bank's prime rate, or, at borrower's option, various alternatives.
(c) Consolidated Five Year Sinking Funds and Maturities
The aggregate annual sinking fund requirements and current maturities of
long-term debt, including capital leases, for the next five years amount to
$4,351,000 in 1998, $9,793,000 in 1999, and $10,280,000 in 2000, $9,228,000 in
2001, and $9,695,000 in 2002.
(d) Deposited Monies
Monies on deposit with trustee are netted against long-term debt. In accordance
with the provision of certain bond indentures, these amounts represent deposits
with the bond trustee for the equipment mortgaged under the bond indenture and
subsequently retired from service. It is the Company's intention to repurchase
its own bonds with these funds to be used for sinking fund requirements.
(5) INCOME TAXES
The Company and its subsidiaries are members of an affiliated group of companies
which files a consolidated Federal Income Tax return with Eastern. The Companies
follow the policy, established for the group, of providing for Federal Income
Taxes which would be payable on a separate company basis. For financial
reporting purposes, investment tax credits were deferred and are being amortized
to income over the book life of the related property and equipment.
The following is a summary of the provision for income taxes:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1997 1996 1995
---- ---- ----
(000 omitted)
<S> <C> <C> <C>
Current:
Federal $5,564 $ 16,071 $15,569
State (227) 1,035 1,028
------ -------- -------
Total Current Provisions $5,337 $ 17,106 $16,597
Deferred:
Federal $3,301 $ 460 $ 765
State (174) - 230
------ -------- -------
Total Deferred Provision $3,127 $ 460 $ 995
------ -------- -------
Total Provision $8,464 $ 17,566 $17,592
====== ======== =======
</TABLE>
F-13
<PAGE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(5) INCOME TAXES (Continued)
The following reconciles the statutory U.S. Federal Income Tax provision to the
recorded income tax provision:
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
---- ---- ----
(000 Omitted)
<S> <C> <C> <C>
Statutory rate 35% 35% 35%
Computed provision for income taxes
at statutory Federal rate $8,781 $16,857 $16,850
Increase (decrease) from statutory
rate resulting principally from:
State taxes, net of Federal benefit (261) 673 817
Nondeductible expenses 47 40 53
Non taxable interest -- (126) (128)
Other, net (103) 122 --
------ ------- -------
Provision for income taxes $8,464 $17,566 $17,592
====== ======= =======
</TABLE>
Significant items making up deferred tax liabilities and deferred tax assets
including amounts classified as current, as of December 31, 1997 and 1996, are
as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
(000 Omitted)
<S> <C> <C>
Assets:
Post-retirement benefits $ 2,914 $ 2,989
Other 6,758 7,859
-------- --------
Total Deferred Tax Assets 9,672 10,848
Liabilities:
Accelerated depreciation (61,014) (58,836)
Other (5,900) (6,092)
-------- --------
Total Deferred Tax Liabilities $(66,914) $(64,928)
-------- --------
Total Deferred Taxes $(57,242) $(54,080)
======== ========
</TABLE>
(6) PROPERTY AND EQUIPMENT
(a) Depreciation and Amortization - Depreciation and amortization are
provided using the straight-line method over the estimated useful
lives of property and equipment which range from 2 to 40 years.
Depreciation and amortization as a percentage of average depreciable
assets was 3.6% in 1997 and 3.7% in 1996, respectively.
(b) Maintenance & Repairs - The costs of routine maintenance and repairs
are charged to expense as incurred. Major renovations and renewals,
which benefit future periods or extend the life of the asset, are
capitalized and amortized over their estimated useful lives.
F-14
<PAGE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(6) PROPERTY AND EQUIPMENT (Continued)
(c) Interest During Construction - The Company reflects as an element of
cost in all major construction projects the estimated cost of borrowed
funds employed during the period of construction. Capitalized interest
is amortized over the estimated useful life of the property or
equipment.
(d) The following is the property value of leased barges under capitalized
leases:
<TABLE>
<CAPTION>
1997 1996
---- ----
(000 Omitted)
<S> <C> <C>
Assets:
Leased Barges $ 55,887 $ 56,411
Less: Accumulated Depreciation (45,624) (43,063)
-------- --------
Total Leased Barges Under Capitalized Leases $ 10,263 $ 13,348
======== ========
</TABLE>
(7) COMMITMENTS
The Company has entered into purchase commitments for new hopper barges to be
delivered during 1998 totaling approximately $46 million.
The Company and its subsidiaries lease certain facilities, vessels and equipment
under long-term operating leases which expire on various dates through 2079. The
minimum rental commitment for noncancelable operating leases at December 31,
1997 is as follows:
<TABLE>
<CAPTION>
Minimum
Years Ending Annual Rental
------------ -------------
(000 Omitted)
<S> <C>
1998 $ 2,231
1999 2,220
2000 1,964
2001 1,909
2002-2079 5,673
-------
Total $13,997
=======
</TABLE>
(8) SIGNIFICANT CUSTOMERS
In 1997, one utility customer, The Cincinnati Gas and Electric Co., accounted
for approximately 10% of the Company's total consolidated operating revenues. In
addition, amounts due from Cincinnati Gas and Electric Co. comprised
approximately 11% of the Company's trade accounts receivable as of December 31,
1997. No other customer, or group of customers under common control, accounted
for more than 10% of revenues in 1997, 1996 or 1995.
(9) FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
disclosures for financial instruments:
Cash, trade receivables and accounts payable: The carrying amounts approximate
fair value because of the short maturity of these instruments.
F-15
<PAGE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(9) FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)
Long-term debt: The fair value of long-term debt is estimated using discounted
cash flow analyses based on the current incremental borrowing rates for similar
types of borrowing arrangements.
The carrying amounts and estimated fair values of the Company's financial
instruments at December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
------ -----
(000 Omitted)
<S> <C> <C>
December 31, 1997
Long-term debt $115,791 $130,451
December 31, 1996
Long-term debt $116,398 $137,940
</TABLE>
(10) UNAUDITED INTERIM FINANCIAL INFORMATION
The following table summaries the Company's reported unaudited consolidated
quarterly results of operations for the years ended December 31, 1997 and 1996.
<TABLE>
<CAPTION>
Mar. 31 June 30 Sept. 30 Dec. 31
------- ------- -------- -------
(000 Omitted)
1997
- ----
<S> <C> <C> <C> <C>
Revenues $64,382 $68,113 $67,650 $69,114
Operating earnings $ 5,425 $ 9,104 $10,060 $10,024
Net earnings $ 2,126 $ 4,275 $ 5,125 $ 5,097
1996
Revenues $75,879 $77,000 $74,497 $74,504
Operating earnings $14,011 $15,612 $14,663 $14,129
Net earnings $ 7,377 $ 8,086 $ 7,791 $ 7,343
</TABLE>
(11) Extraordinary Item - Coal Miners Retiree Health Care
In 1993, Midland's Parent, Eastern Enterprises ("Parent"), received notice from
the Social Security Administration claiming that the Parent is responsible for
health care and death benefit premiums for a certain group of retired coal
miners and their beneficiaries under the federal Coal Industry Retiree Health
Benefit Act of 1992 ("Coal Act"). In 1995, 1996, and 1997 the Parent received
further notices from the Social Security Administration for an additional group
of retired coal miners and their beneficiaries. In 1993 and 1995, the Parent
recorded extraordinary charges to provide for its estimated undiscounted
obligations under the Coal Act with respect to the retired coal miners and their
beneficiaries assigned to the Parent as discussed in the Parent's 1996 Annual
Report. A portion of the assignments to the Parent is allegedly due to the
Parent's relationship to a predecessor entity of Midland which is no longer in
business.
F-16
<PAGE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(11) Extraordinary Item - Coal Miners Retiree Health Care (Continued)
The Parent's constitutional challenge to the Coal Act failed in the First
Circuit Court of Appeals, which affirmed the federal district court's finding of
constitutionality. However, the Parent's petition for a writ of certiorari in
the Supreme Court was granted and oral argument will be heard in March 1998. The
Parent has asserted a claim against Peabody Holding Company, Inc. ("Peabody"),
to which the Parent sold its coal subsidiaries in 1987, that any liabilities
under the Coal Act should be borne by Peabody and such subsidiaries. The Parent
has posted security to delay payment of premiums pending the final outcome of
its constitutional challenge. The Parent is also aware of several other lawsuits
challenging the constitutionality of the Coal Act.
In 1995, Midland recorded a reserve of $4,600,000 ($2,990,000 after-tax) to
provide for its estimated undiscounted obligations under the Coal Act. This
after-tax amount of $2,990,000 was properly reflected as an extraordinary item.
No additional reserve was recorded for 1996 or 1997, as the impact of the
additional notices received in 1996 was offset by a decrease in the estimated
rate of medical inflation. As of December 31, 1997 and 1996, $1.3 million and
$1.1 million, respectively, of this reserve is included in Other current
liabilities. Midland's obligation could range from a nominal amount to more than
$8 million depending on the outcome of challenges to the constitutionality of
the Coal Act or other factors including administrative review of assigned
individuals, the availability of transfers from the Abandoned Mine Reclamation
Fund to pay for the health care premiums of unassigned miners and their
beneficiaries, the setting of premiums, medical inflation rates, Medicare
reimbursements, other changes in government health care programs, and possible
changes in the terms of, or repeal of, the Coal Act.
F-17
<PAGE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
(000 OMITTED)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
-------------------------- ------------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $65,163 $68,113 $127,821 $132,495
------- ------- -------- --------
Operating costs and expenses:
Operating expenses............................... $44,156 $46,323 $ 87,315 $ 92,849
Depreciation and amortization.................... 5,921 5,667 11,737 11,323
Selling, general & administrative................ 3,030 2,880 6,164 5,386
Overhead allocation from Parent.................. 750 725 1,500 1,450
Taxes, other than income......................... 3,585 3,415 7,297 6,956
------- ------- -------- --------
$57,442 $59,010 $114,013 $117,964
------- ------- -------- --------
Operating earnings $ 7,721 $ 9,103 $ 13,808 $ 14,531
------- ------- -------- --------
Other income (expense):
Interest income from Parent...................... $ 86 $ 1,034 $ 990 $ 2,051
Interest income other ........................... 37 4 57 14
Gain (Loss) on sale of assets
and other, net................................. 89 (44) 184 (97)
------- ------- -------- --------
$ 212 $ 994 $ 1,231 $ 1,968
------- ------- -------- --------
Interest expense:
Long-term debt................................... $ 2,044 $ 3,406 $ 5,346 $ 6,819
Other, including amortization
of debt expense................................ 39 51 86 95
------- ------- -------- --------
$ 2,083 $ 3,457 $ 5,432 $ 6,914
------- ------- -------- --------
Earnings before income taxes........................ $ 5,850 $ 6,640 $ 9,607 $ 9,585
Provision for income taxes.......................... 2,106 2,365 3,475 3,184
------- ------- -------- --------
Earnings before extraordinary items................. $ 3,744 $ 4,275 $ 6,132 $ 6,401
------- ------- -------- --------
Extraordinary items, net of tax:
Credit for coal
miners retiree health care (Note 2)............ $ 2,827 $ - 2,827 $ -
Loss on early retirement of
debt (Note 3).................................. - - (1,465) -
------- ------- -------- --------
Net earnings........................................ $ 6,571 $ 4,275 7,494 $ 6,401
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(000 OMITTED)
ASSETS
------
<TABLE>
<CAPTION>
June 30, June 30,
1998 1997
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents........................ $ 65 $ 58
Receivables
Trade, net.................................... 16,556 17,016
Parent........................................ - 73,576
Other......................................... 1,273 1,325
Materials, supplies & fuel....................... 7,497 7,992
Prepaid expenses................................. 2,926 1,081
-------- --------
Total current assets................................ $ 28,317 $101,048
-------- --------
Property and equipment, at cost..................... $664,262 $623,720
Less-accumulated depreciation.................... 342,831 327,255
-------- --------
Net property and equipment.......................... $321,431 $296,465
-------- --------
Other assets:
Deferred pension charges......................... $ 14,520 $ 13,845
Other............................................ 4,999 3,857
-------- --------
Total other assets.................................. $ 19,519 $ 17,702
-------- --------
Total assets........................................ $369,267 $415,215
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDER'S EQUITY
(000 OMITTED)
<TABLE>
<CAPTION>
June 30, June 30,
1998 1997
---- ----
<S> <C> <C>
Current liabilities:
Current portion of long-term debt.......................... $ 4,545 $ 4,183
Accounts payable Parent.................................... 2,436 -
Accounts payable trade..................................... 10,465 10,043
Reserve for insurance claims............................... 11,918 13,326
Interest payable........................................... 2,649 4,009
Taxes payable.............................................. 3,175 1,518
Accrued expenses........................................... 3,923 4,888
Other current liabilities.................................. 9,841 9,707
-------- --------
Total current liabilities..................................... $ 48,952 $ 47,674
-------- --------
Long-term debt................................................ $ 81,461 $135,084
-------- --------
Reserves and deferred credits:
Deferred income taxes...................................... $ 61,063 $ 57,552
Unamortized investment tax credits......................... 2,306 2,747
Post-retirement health care................................ 8,873 8,763
Coal miners retiree health care............................ - 3,400
Other reserves............................................. 2,110 2,108
-------- --------
Total reserves and deferred credits........................... $ 74,352 $ 74,570
-------- --------
Stockholder's equity:
Common stock, $100 par value 0
Authorized shares - 1,000
Issued shares - 15 1/2................................... $ 1 $ 1
Capital in excess of par value............................. 52,519 52,519
Retained earnings.......................................... 111,982 105,367
-------- --------
Total Stockholder's equity.................................... $164,502 $157,887
-------- --------
Total liabilities and stockholder's equity.................... $369,267 $415,215
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(000 OMITTED)
<TABLE>
<CAPTION>
For the Six Months Ended
------------------------
June 30, June 30,
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings....................................................... $ 7,494 $ 6,401
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Extraordinary items, net...................................... (1,362) -
Depreciation and amortization................................. 11,737 11,323
Deferred and current income taxes............................. 949 (730)
Net loss on sale of assets.................................... 2 40
Other changes in assets and liabilities
Trade and other receivables.............................. 1,651 (288)
Materials, supplies & fuel............................... 1,241 184
Accounts payable......................................... (7,734) (1,181)
Accrued expenses and other current liabilities 332 484
Other.................................................... (1,850) 1,537
-------- --------
Net cash provided by operating activities............................... $ 12,460 $ 17,770
-------- --------
Cash flows from investing activities:
Capital expenditures............................................... $(26,540) $ (2,363)
Decrease (increase) in Parent receivable........................... 69,381 (9,713)
Proceeds from asset dispositions................................... 725 1,106
-------- --------
Net cash provided (used) in investing activities........................ $ 43,566 $(10,970)
-------- --------
Cash flows from financing activities:
Repayment of long-term debt........................................ $(52,549) $ (2,032)
Cash dividends paid to Parent...................................... (3,500) (4,801)
-------- --------
Net cash used in financing activities................................... $(56,049) $ (6,833)
-------- --------
Net decrease in cash and cash equivalents............................... $ (23) $ (33)
Cash and cash equivalents at beginning of period........................ 88 91
-------- --------
Cash and cash equivalents at end of period.............................. $ 65 $ 58
======== ========
Supplemental disclosures of cash flows information:
Cash paid during the period for:
Interest, net of amounts capitalized.......................... $ 6,631 $ 6,839
Income taxes.................................................. $ 2,468 $ 3,575
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
Notes to Unaudited Interim Financial Statements
June 30, 1998
(1) ACCOUNTING POLICIES
It is Midland's opinion that the financial information contained in this report
reflects all adjustments necessary to present a fair statement of the results
for the periods reported, but such results are not necessarily indicative of
results to be expected for the year, due to the somewhat seasonal nature of
Midland's operations. All such adjustments were of a normal, recurring nature.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in this Prospectus pursuant to the rules and
regulations of the Commission. However, the disclosures herein when read with
the annual report to 1997 filed on Form 10-K are adequate to make the
information presented not misleading.
(2) COAL MINERS RETIREE HEALTH CARE
On June 25, 1998, the U.S. Supreme Court ruled that the Coal Industry Retiree
Health Benefit Act of 1992 (the "Coal Act") is unconstitutional as applied to
Midland's parent, Eastern Enterprises.
In 1995, the Company had established a reserve of $4.6 million to fund its
portion of Eastern's liability under the Coal Act. As a result of the Supreme
Court's decision, the Company reversed this reserve, less associated expenses,
resulting in an extraordinary gain of $4.3 million pre-tax or $2.8 million net
in the second quarter of 1998.
(3) DEBT
In March 1998, the Company utilized the receivable from Parent to call $50
million of 9.9% First Preferred Ship Mortgage Bonds, due 2008. In extinguishing
this debt, the Company recognized an extraordinary charge of $2.3 million pretax
or $1.5 million net.
The Company has entered into forward treasury rate lock agreements in order to
hedge the interest rate on long-term debt anticipated to be issued in late 1998.
The treasury rate locks are for $75 million at a 10-year treasury rate of 5.68%
with a final determination date of September 29, 1998. Upon issuance of the
debt, any gain or loss associated with the treasury rate lock agreements will be
amortized to interest expense over the term of the related debt.
F-22
<PAGE>
SCHEDULE II
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
(000 OMITTED)
<TABLE>
<CAPTION>
ADDITIONS DEDUCTIONS
------------- --------------
Charges
for which
Balance Charged Charged Reserves Balance
Beginning Costs & to Other Were End of
Of Year Expenses Accounts Created Year
------- -------- -------- ------- ----
<S> <C> <C> <C> <C> <C>
1997
- ----
Allowances and reserves deducted
from assets-
Allowance for doubtful accounts $ 685 - - $ (20) $ 665
======= ======= ====== ======== =======
Reserves included in liabilities-
Reserves for environmental expenses 915 - - (158) 757
Reserve for insurance claims 11,881 6,248 (530) (5,619) 11,980
Reserve for post-retirement
health care 8,798 1,073 - (1,302) 8,569
Reserve for employee benefits 4,840 6,083 - (6,440) 4,483
Reserve for coal miners retiree
health care 4,600 - - - 4,600
------- ------- ------ -------- -------
Total Other Reserves $31,034 $13,404 $ (530) $(13,519) $30,389
======= ======= ====== ======== =======
1996
- ----
Allowances and reserves deducted
from assets-
Allowance for doubtful accounts $ 685 - - - $ 685
======= ======= ====== ======== =======
Reserves included in liabilities -
Reserves for environmental expenses 1,051 - (17) (119) 915
Reserve for insurance claims 13,037 6,596 1,972 (9,724) 11,881
Reserve for post-retirement
health care 8,727 1,036 - (965) 8,798
Reserve for employee benefits 3,339 6,570 - (5,069) 4,840
Reserve for coal miners retiree
health care 4,600 - - - 4,600
------- ------- ------ -------- -------
Total Other Reserves $30,754 $14,202 $1,955 $(15,877) $31,034
======= ======= ====== ======== =======
</TABLE>
F-23
<PAGE>
MIDLAND ENTERPRISES INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
(000 OMITTED)
<TABLE>
<CAPTION>
ADDITIONS DEDUCTIONS
------------- --------------
Charges
for which
Balance Charged Charged Reserves Balance
Beginning Costs & to Other Were End of
Of Year Expenses Accounts Created Year
------- -------- -------- ------- ----
<S> <C> <C> <C> <C> <C>
1995
- ----
Allowances and reserves deducted
from assets-
Allowance for doubtful accounts $ 469 $ 268 - $ (52) $ 685
======= ======= ====== ======== =======
Reserves included in liabilities
Reserve for environmental expenses 754 - 297 - 1,051
Reserve for insurance claims 8,809 8,063 5,876 (9,711) 13,037
Reserve for post-retirement
health care 8,713 910 - (896) 8,727
Reserve for employee benefits 2,292 6,177 240 (5,370) 3,339
Reserve for coal miners retiree
health care - 4,600 - - 4,600
------- ------ ------ -------- -------
Total Other Reserves $20,568 $19,750 $6,413 $(15,977) $30,754
======= ======= ====== ======== =======
</TABLE>
F-24
<PAGE>
================================================================================
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized. This Prospectus does not constitute an
offer to sell or the solicitation of an offer to buy any securities other than
the securities to which it relates or any offer to sell or the solicitation of
an offer to buy such securities in any circumstances in which such offer or
solicitation is unlawful. Neither the delivery of this Prospectus nor any offer
or sale made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of the Company or its subsidiaries
since the date hereof or that the information contained herein is correct as of
any time subsequent to its date.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information................................. 2
Incorporation of Certain Documents by
Reference........................................... 2
Summary............................................... 3
Use of Proceeds....................................... 5
Capitalization........................................ 5
Selected Financial Data............................... 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations......................................... 7
Business.............................................. 10
Eastern Enterprises................................... 14
Description of the Bonds ............................. 15
Underwriting.......................................... 21
Validity of the Bonds................................. 22
Experts............................................... 22
Index to Financial Statements......................... F-1
</TABLE>
================================================================================
================================================================================
$75,000,000
MIDLAND ENTERPRISES INC.
___% First Preferred Ship Mortgage
Bonds due 2018
- --------------------------------------------------------------------------------
PROSPECTUS
- --------------------------------------------------------------------------------
DONALDSON, LUFKIN & JENRETTE
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......................................... $ 22,125
Printing and engraving...................................................................... 27,000*
Legal fees and expenses..................................................................... 100,000*
Accounting fees and expenses................................................................ 15,000*
Blue Sky fees and expenses.................................................................. 10,000*
Rating Agency Fees.......................................................................... 50,000*
Charges of trustee, transfer agent and registrar............................................ 14,500*
Miscellaneous............................................................................... 10,000*
---------
Total............................................................................. $248,625*
=========
</TABLE>
- -------------
* Estimated
Item 15. Indemnification of Directors and Officers
Article VIII of the Company's by-laws provides that the directors,
officers, employees and agents of the Company shall be indemnified to the extent
permitted by the Delaware General Corporation Law, as amended ("DGCL"). Section
145 of the DGCL provides that a corporation may indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding whether civil, criminal or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Section 145 further provides that a corporation similarly may indemnify any such
person serving in any such capacity who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor, against expenses
actually and reasonably incurred in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Delaware Court of Chancery or
such other court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 102(b)(7) of the DGCL permits a corporation to include in its
certificate of incorporation a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such provision
shall not eliminate or limit the liability of a director: (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL (relating to
unlawful payment of dividends and unlawful stock purchase and redemption) or
(iv) for any transaction from which the director derived an improper personal
benefit.
II-1
<PAGE>
Eastern maintains an insurance policy on behalf of the Company and its
subsidiaries, and on behalf of their respective directors and officers, covering
certain liabilities which may arise as a result of the actions or omissions of
said directors and officers.
The Underwriting Agreement provides that the Underwriter will indemnify the
Company's directors, officers and controlling persons against certain
liabilities, including certain liabilities under the Securities Act.
Item 16. Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------ ----------------------
<S> <C>
1 Form of Underwriting Agreement.
4.1 Form of % First Preferred Ship Mortgage Bond due 2018 (included in Exhibit
4.2).
4.2 Form of Indenture of First Preferred Ship Mortgage from the Company to The
Chase Manhattan Bank, as Trustee.
4.3 Form of Charter Agreement between the Company and Orgulf Transport Co.
4.4 Form of Assignment from the Company to The Chase Manhattan Bank, as
Trustee.
5.1 Opinion of Ropes & Gray.
12 Statement re Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Independent Public Accountants.
23.2 Consent of Ropes & Gray (included in Exhibit 5.1 hereto.)
23.3 Consent of Thompson Coburn.
24 Power of Attorney (included in the signature pages to the Registration Statement).
25 Statement of Eligibility and Qualification of Trustee.
</TABLE>
Item 17. Undertakings
The undersigned Company hereby undertakes that, for purposes of determining
any liability under the Securities Act, each filing of the Company's Annual
Report pursuant to Section 13(a) or 15(d) of the Exchange Act that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The undersigned Company hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to securityholders that is incorporated by
II-2
<PAGE>
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information is required to be presented by Article 3 of
Regulation S-X is not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such financial information.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the provisions described in Item 15, or otherwise, the Company has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Company of expenses incurred or paid by a director,
officer or controlling person of the Company in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person or controlling person in connection with the securities being registered,
the Company will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act of 9133 shall be deemed to be part of the registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cincinnati, State of Ohio, on the 10th day of August,
1998.
MIDLAND ENTERPRISES INC.
By: /s/ R. Faillo
------------------------------
Name: R. Faillo
Title: Vice President, Finance and Treasurer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities indicated
below on the 10th day of August, 1998. Each person whose signature appears below
hereby authorizes and appoints Robert Faillo, Jean A. Scholtens and David B.
Walek, and each of them, severally with full power of substitution, to execute
in the name and on behalf of such person, any amendment or any post-effective
amendment to this Registration Statement (or any other registration statement
for the same offering that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act) and to file the same, with exhibits thereto,
and other documents in connection therewith, making such changes in this
Registration Statement as the Registrant deems appropriate, and appoints each of
such persons, with full power of substitution, attorney-in-fact to sign any
amendment and any post-effective amendment to this Registration Statement (or
any other registration statement for the same offering that is to be effective
upon filing pursuant to Rule 462(b) under the Securities Act) and to file the
same, with any exhibits thereto and other documents in connection therewith.
<TABLE>
<CAPTION>
Signature Title
- --------- -----
<S> <C>
/s/ R. R. Clayton Director
- -------------------------
R. R. Clayton
/s/ R. L. Doettling Senior Vice President, Transportation Services and R.
- ------------------------- Director
R. L. Doettling
/s/ R. Faillo Vice President, Finance and Treasurer (principal
- ------------------------- financial and accounting officer)
R. Faillo
/s/ W. J. Flaherty Director
- -------------------------
W. J. Flaherty
/s/ S. A. Frasher Senior Vice President, Operations and Director
- -------------------------
S. A. Frasher
/s/ P. E. Hubbard Senior Vice President, Sales and Marketing and Director
- -------------------------
P. E. Hubbard
/s/ J. A. Ives Director
- -------------------------
J. A. Ives
/s/ F. C. Raskin President and Director (principal executive officer)
- -------------------------
F. C. Raskin
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
Number Description of Exhibit Number
- ------ ---------------------- ------
<S> <C>
1 Form of Underwriting Agreement.
4.1 Form of % First Preferred Ship
Mortgage Bond due 2018 (included in
Exhibit 4.2).
4.2 Form of Indenture of First Preferred Ship Mortgage
from the Company to The Chase Manhattan Bank,
as Trustee.
4.3 Form of Charter Agreement between the Company
and Orgulf Transport Co.
4.4 Form of Assignment from the Company to
The Chase Manhattan Bank, as Trustee.
5.1 Opinion of Ropes & Gray.
12 Statement re Computation of Ratio of Earnings to
Fixed Charges.
23.1 Consent of Independent Public Accountants.
23.2 Consent of Ropes & Gray (included in Exhibit 5.1 hereto.)
23.3 Consent of Thompson Coburn.
24 Power of Attorney (included in the
signature pages to the Registration
Statement).
25 Statement of Eligibility and Qualification of Trustee.
</TABLE>
II-5
$75,000,000
MIDLAND ENTERPRISES INC.
___% FIRST PREFERRED SHIP MORTGAGE BONDS DUE 2018
UNDERWRITING AGREEMENT
_______________, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue
New York, New York 10172
Dear Sirs:
Midland Enterprises Inc., a Delaware corporation (the "Company"), proposes
to issue and sell to Donaldson, Lufkin & Jenrette Securities Corporation (the
"Underwriter") an aggregate of $75,000,000 in principal amount of its ___% First
Preferred Ship Mortgage Bonds Due 2018 (the "Bonds"), subject to the terms and
conditions set forth herein. The Bonds are to be issued pursuant to the
provisions of an indenture (the "Indenture"), to be dated as of the Closing Date
(as defined below), between the Company and The Chase Manhattan Bank, as trustee
(the "Trustee"). The Bonds will be secured by a first preferred ship mortgage on
the Vessels referred to in the Granting Clause of the Indenture (the "Vessels"),
and by an assignment of charter hire on the Vessels. This Agreement, the Bonds
and the Indenture are hereinafter sometimes referred to as the "Operative
Documents." Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Indenture.
1. Registration Statement and Prospectus. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-3, including a prospectus, relating
to the Bonds. The registration statement, as amended at the time it became
effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Act, is hereinafter referred to as the "Registration Statement"; and the
prospectus in the form first used to confirm sales of the Bonds is hereinafter
referred to as the "Prospectus" (including, in the case of all references to the
Registration Statement or the Prospectus, documents incorporated therein by
reference). If the Company has filed or is required pursuant to the
1
<PAGE>
terms hereof to file a registration statement pursuant to Rule 462(b) under the
Act registering additional ___% First Preferred Ship Mortgage Bonds Due 2018 (a
"Rule 462(b) Registration Statement"), then, unless otherwise specified, any
reference herein to the term "Registration Statement" shall be deemed to include
such Rule 462(b) Registration Statement. The terms "supplement" and "amendment"
or "amend" as used in this Agreement with respect to the Registration Statement
or the Prospectus shall include all documents subsequently filed by the Company
with the Commission pursuant to the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder (the "Exchange Act")
that are deemed to be incorporated by reference in the Registration Statement or
the Prospectus.
2. Agreements to Sell and Purchase. On the basis of the representations,
warranties and covenants contained in this Agreement, and subject to the terms
and conditions contained herein, the Company agrees to issue and sell to the
Underwriter, and the Underwriter agrees to purchase from the Company, an
aggregate principal amount of $75,000,000 of Bonds at a purchase price equal to
___% of the principal amount thereof (the "Purchase Price").
3. Terms of Public Offering. The Underwriter has advised the Company that
the Underwriter proposes (i) to make a public offering of the Bonds as soon
after the execution and delivery of this Agreement as is advisable in the
judgment of the Underwriter, and (ii) initially to offer the Bonds upon the
terms set forth in the Prospectus.
4. Delivery and Payment. The Bonds shall be represented by definitive
certificates and shall be issued in such authorized denominations and registered
in such names as the Underwriter shall request no later than two business days
prior to the Closing Date (as defined below). The Company shall deliver the
Bonds, with any transfer taxes thereon duly paid by the Company, to the
Underwriter through the facilities of The Depository Trust Company ("DTC"), for
the account of the Underwriter, against payment to the Company of the Purchase
Price therefor by wire transfer of Federal or other funds immediately available
in New York City. The certificates representing the Bonds shall be made
available for inspection not later than 9:30 A.M., New York City time, on the
business day prior to the Closing Date (as defined below), at the office of DTC
or its designated custodian (the "Designated Office"). The time and date of
delivery and payment for the Bonds shall be 9:00 A.M., New York City time, on
September __, 1998 or such other time on the same or such other date as the
Underwriter and the Company shall agree in writing. The time and date of such
delivery and payment are hereinafter referred to as the "Closing Date".
The documents to be delivered on the Closing Date on behalf of the parties
hereto pursuant to Section 8 of this Agreement shall be delivered at the offices
of Choate, Hall & Stewart, Exchange Place, 53 State Street, Boston,
Massachusetts 02109, and the Bonds shall be delivered at the Designated Office,
all on the Closing Date.
2
<PAGE>
5. Agreements of the Company. The Company hereby agrees with the
Underwriter as follows:
(a) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information, (ii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the suspension
of qualification of the Bonds for offering or sale in any jurisdiction, or the
initiation of any proceeding for such purposes, (iii) when any amendment to the
Registration Statement becomes effective, (iv) if the Company is required to
file a Rule 462(b) Registration Statement after the effectiveness of this
Agreement, when such Rule 462(b) Registration Statement has become effective and
(v) of the happening of any event during the period referred to in Section 5(d)
below which makes any statement of a material fact made in the Registration
Statement or the Prospectus untrue or which requires any additions to or changes
in the Registration Statement or the Prospectus in order to make the statements
therein not misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, the Company will use
its best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time.
(b) To furnish the Underwriter two (2) signed copies of the
Registration Statement as first filed with the Commission and of each amendment
to it, including all exhibits and documents incorporated therein by reference,
and to furnish to the Underwriter such number of conformed copies of the
Registration Statement as so filed and of each amendment to it, without exhibits
but including documents incorporated therein by reference, as the Underwriter
may reasonably request.
(c) To prepare the Prospectus, the form and substance of which shall
be satisfactory to the Underwriter, and to file the Prospectus in such form with
the Commission within the applicable period specified in Rule 424(b) under the
Act; during the period specified in Section 5(d) below, not to file any further
amendment to the Registration Statement and not to make any amendment or
supplement to the Prospectus of which the Underwriter shall not previously have
been advised or to which the Underwriter shall reasonably object after being so
advised; and, during such period, to prepare and file with the Commission,
promptly upon your reasonable request, any amendment to the Registration
Statement or amendment or supplement to the Prospectus which may be necessary or
advisable in connection with the distribution of the Securities by the
Underwriter, and to use its best efforts to cause any such amendment to the
Registration Statement to become promptly effective.
(d) Prior to 10:00 A.M., New York City time, on the first business day
after the date of this Agreement and from time to time thereafter for such
period as in the opinion of counsel for the Underwriter a prospectus is required
by law to be delivered in connection with sales by the Underwriter or a dealer,
to furnish in New York City to the Underwriter and any dealer as many copies of
the Prospectus (and of any amendment or
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supplement to the Prospectus) and any documents incorporated by reference, as
the Underwriter or dealer may reasonably request.
(e) If during the period specified in Section 5(d), any event shall
occur or condition shall exist as a result of which, in the opinion of counsel
for the Underwriter, it becomes necessary to amend or supplement the Prospectus
in order to make the statements therein, in the light of the circumstances when
the Prospectus is delivered to a purchaser, not misleading, or if, in the
opinion of counsel for the Underwriter, it is necessary to amend or supplement
the Prospectus to comply with applicable law, forthwith to prepare and file with
the Commission an appropriate amendment or supplement to the Prospectus so that
the statements in the Prospectus, as so amended or supplemented, will not in the
light of the circumstances when it is so delivered, be misleading, or so that
the Prospectus will comply with applicable law, and to furnish to the
Underwriter and to any dealer as many copies thereof as the Underwriter or
dealer may reasonably request.
(f) Prior to any public offering of the Bonds, to cooperate with the
Underwriter and its counsel in connection with the registration or qualification
of the Bonds for offer and sale by the Underwriter and by dealers under the
state securities or Blue Sky laws of such jurisdictions as the Underwriter may
request, to continue such registration or qualification in effect so long as
required for distribution of the Bonds and to file such consents to service
of process or other documents as may be necessary in order to effect such
registration or qualification; provided, however, that the Company shall not be
required in connection therewith to qualify as a foreign corporation in any
jurisdiction in which it is not now so qualified or to take any action that
would subject it to general consent to service of process or taxation other than
as to matters and transactions relating to the Prospectus, the Registration
Statement, any preliminary prospectus or the offering or sale of the Bonds, in
any jurisdiction in which it is not now so subject.
(g) To mail and make generally available to its security holders as
soon as practicable an earnings statement covering the twelve-month period
ending December 31, 1999 that shall satisfy the provisions of Section 11(a) of
the Act, and to advise the Underwriter in writing when such statement has been
so made available.
(h) So long as the Bonds are outstanding, (i) to mail and make
generally available as soon as practicable, but not later than 120 days, after
the end of each fiscal year to the record holders of the Bonds a financial
report of the Company and its subsidiaries on a consolidated basis (and a
similar financial report of all unconsolidated subsidiaries, if any), all such
financial reports to include a consolidated balance sheet, a consolidated
statement of operations, a consolidated statement of cash flows and a
consolidated statement of shareholders' equity as of the end of and for such
fiscal year, together with comparable information as of the end of and for the
preceding year, certified by independent public accountants and (ii) to mail and
make generally available as soon as practicable, but not later than 45 days,
after the end of each quarterly period (except for the last quarterly period of
each fiscal year) to such holders, a consolidated balance sheet, a consolidated
statement of operations and a consolidated statement of cash flows (and similar
financial reports of all unconsolidated
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subsidiaries, if any) as of the end of and for such period, and for the period
from the beginning of such year to the close of such quarterly period, together
with comparable information for the corresponding periods of the preceding year.
(i) So long as the Bonds are outstanding, to furnish to the
Underwriter as soon as available copies of all reports or other communications
furnished to its security holders or furnished to or filed with the Commission
or any national securities exchange on which any class of securities of the
Company is listed and such other publicly available information concerning the
Company and its subsidiaries as the Underwriter may reasonably request.
(j) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of its obligations under this Agreement,
including: (i) the fees, disbursements and expenses of the Company's counsel and
the Company's accountants in connection with the registration and delivery of
the Bonds under the Act and all other fees and expenses in connection with the
preparation, printing, filing and distribution of the Registration Statement
(including financial statements and exhibits), any preliminary prospectus, the
Prospectus and all amendments and supplements to any of the foregoing, including
the mailing and delivering of copies thereof to the Underwriter and dealers in
the quantities specified herein, (ii) all costs and expenses related to the
transfer and delivery of the Bonds to the Underwriter, including any transfer or
other taxes payable thereon, (iii) all costs of printing or producing this
Agreement and any other agreements or documents in connection with the offering,
purchase, sale or delivery of the Bonds, (iv) all expenses in connection with
the registration or qualification of the Bonds for offer and sale under the
securities or Blue Sky laws of the several states and all costs of printing or
producing any Preliminary and Supplemental Blue Sky Memoranda in connection
therewith (including the filing fees and fees and disbursements of counsel for
the Underwriters in connection with such registration or qualification and
memoranda relating thereto), (v) the filing fees and disbursements of counsel
for the Underwriter in connection with the review and clearance of the offering
of the Bonds by the National Association of Securities Dealers, Inc., (vi) all
fees and expenses in connection with the preparation and filing of the
registration statement on Form 8-A relating to the Bonds and all costs and
expenses incident to the listing of the Bonds on any national securities
exchanges and/or foreign securities exchanges, (vii) the cost of printing the
Bonds, (viii) the costs and charges of any transfer agent, registrar and/or
depositary (including DTC), (ix) any fees charged by rating agencies for the
rating of the Bonds, (x) the fees and expenses of the Trustee and the Trustee's
counsel in connection with the Indenture and the Bonds and (xi) all other costs
and expenses incident to the performance of the obligations of the Company
hereunder for which provision is not otherwise made in this Section.
(k) During the period beginning on the date hereof and continuing to
and including the Closing Date, not to offer, sell, contract to sell or
otherwise transfer or dispose of any debt securities of the Company or any
warrants, rights or options to purchase or otherwise acquire debt securities of
the Company substantially similar to the Bonds, other
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<PAGE>
than (i) the Bonds, (ii) securities issued under the Existing Mortgage (as
defined in the Indenture), (iii) commercial paper issued in the ordinary course
of business and (iv) promissory notes issued for working capital purposes under
the Company's existing bank credit facilities, without the prior written consent
of the Underwriter.
(l) Not to voluntarily claim, and to actively resist any attempts to
claim, the benefit of any usury laws against the holders of the Bonds.
(m) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company prior to
the Closing Date and to satisfy all conditions precedent to the delivery of the
Bonds.
(n) If the Registration Statement at the time of the effectiveness of
this Agreement does not cover all of the Bonds, to file a Rule 462(b)
Registration Statement with the Commission registering the Bonds not so covered
in compliance with Rule 462(b) by 10:00 P.M., New York City time, on the date of
this Agreement and to pay to the Commission the filing fee for such Rule 462(b)
Registration Statement at the time of the filing thereof or to give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act.
6. Representations, Warranties and Agreements of the Company. The Company
represents and warrants to, and agrees with, the Underwriter that:
(a) The Registration Statement has become effective (other than any
Rule 462(b) Registration Statement to be filed by the Company after the
effectiveness of this Agreement); any Rule 462(b) Registration Statement filed
after the effectiveness of this Agreement will become effective no later than
10:00 P.M., New York City time, on the date of this Agreement. No stop order
suspending the effectiveness of the Registration Statement is in effect, and no
proceedings for such purpose are pending before or threatened by the Commission.
(b) (i) Each document filed or to be filed pursuant to the Exchange
Act and incorporated by reference in the Prospectus complied or will comply when
so filed in all material respects with the Exchange Act; (ii) the Registration
Statement (other than any Rule 462(b) Registration Statement to be filed by the
Company after the effectiveness of this Agreement), when it became effective,
did not contain and, as amended, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, (iii)
the Registration Statement (other than any Rule 462(b) Registration Statement to
be filed by the Company after the effectiveness of this Agreement) and the
Prospectus comply and, as amended or supplemented, if applicable, will comply in
all material respects with the Act, (iv) if the Company is required to file a
Rule 462(b) Registration Statement after the effectiveness of this Agreement,
such Rule 462(b) Registration Statement and any amendments thereto, when they
become effective (A) will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading and (B) will comply in all material
respects with the Act and (v) the
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Prospectus does not contain and, as amended or supplemented, if applicable, will
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations and
warranties set forth in this paragraph do not apply to statements or omissions
in the Registration Statement or the Prospectus based upon information relating
to the Underwriter furnished to the Company in writing by the Underwriter
expressly for use therein.
(c) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Act, complied when so filed in all material
respects with the Act, and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and warranties
set forth in this paragraph do not apply to statements or omissions in any
preliminary prospectus based upon information relating to the Underwriter
furnished to the Company in writing by the Underwriter expressly for use
therein.
(d) Each of the Company and its subsidiaries has been duly formed, is
validly existing and in good standing under the laws of its jurisdiction of
formation and has the power and authority to carry on its business as described
in the Prospectus and to own, lease and operate its properties, and each is duly
qualified and is in good standing as a foreign organization authorized to do
business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on the
business, prospects, financial condition or results of operations of the Company
and its subsidiaries, taken as a whole (a "Material Adverse Effect").
(e) All outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid, non-assessable and not
subject to any preemptive or similar rights, and all of such shares are owned
beneficially and of record by Eastern Enterprises, an unincorporated voluntary
association organized in Massachusetts.
(f) The entities listed on Schedule A hereto are the only
subsidiaries, direct or indirect, of the Company. All of the outstanding shares
of capital stock or other ownership interests of each of the Company's
subsidiaries have been duly authorized and validly issued and are fully paid and
non-assessable, and are owned by the Company, directly or indirectly through one
or more subsidiaries, free and clear of any security interest, claim, lien,
encumbrance or adverse interest of any nature (each, a "Lien").
(g) This Agreement has been duly authorized, executed and delivered by
the Company.
(h) The Indenture has been duly qualified under the Trust Indenture
Act of 1939, as amended (the "TIA" or "Trust Indenture Act"), has been duly
authorized,
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<PAGE>
executed and delivered by the Company and is a valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms except
as (i) the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability.
(i) The Indenture constitutes a first "preferred mortgage" on each of
the Vessels under the Ship Mortgage Act, as amended, and the Bonds are validly
secured by the Indenture in accordance with the terms thereof.
(j) The Bonds have been duly authorized and, on the Closing Date, will
have been validly executed and delivered by the Company. When the Bonds have
been issued, executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Underwriter in accordance with
the terms of this Agreement, the Bonds will be entitled to the benefits of the
Indenture and will be valid and binding obligations of the Company, enforceable
in accordance with their terms, subject to the qualifications set forth in (i)
and (ii) of Section 6(h) of this Agreement. On the Closing Date, the Bonds will
conform as to legal matters to the description thereof contained in the
Prospectus.
(k) Neither the Company nor any of its subsidiaries is in violation of
its respective charter documents or by-laws or in default in the performance of
any obligation, agreement, covenant or condition contained in any indenture,
loan agreement, mortgage, lease or other agreement or instrument that is
material to the Company and its subsidiaries, taken as a whole, and to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or their respective properties is bound.
(l) The execution, delivery and performance of this Agreement and the
other Operative Documents, compliance by the Company with all provisions hereof
and thereof and the consummation of the transactions contemplated hereby and
thereby will not (i) require any consent, approval, authorization or other order
of, or qualification with, any court or governmental body or agency (except such
as may be required under the securities or Blue Sky laws of the various states),
(ii) conflict with or constitute a breach of any of the terms or provisions of,
or a default under, the charter or by-laws of the Company or any of its
subsidiaries or any indenture, loan agreement, mortgage, lease or other
agreement or instrument that is material to the Company and its subsidiaries,
taken as a whole, to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries or their respective properties
are bound, (iii) violate or conflict with any applicable law or any rule,
regulation, judgment, order or decree of any court or any governmental body or
agency having jurisdiction over the Company, any of its subsidiaries or their
respective properties, (iv) result in the imposition or creation of (or the
obligation to create or impose) a Lien under any agreement or instrument (other
than the Indenture) to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries or their respective
properties are bound, or (v) result in the termination, suspension or revocation
of any Authorization (as defined below) of the Company or any of
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<PAGE>
its subsidiaries or result in any other impairment of the rights of the holder
of any such Authorization.
(m) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is or could be a
party or to which any of their respective properties are or could be subject
that are required to be described in the Registration Statement or the
Prospectus and are not so described; nor are there any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not so described or filed as required.
(n) Neither the Company nor any of its subsidiaries has violated any
provision of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or any provision of the Foreign Corrupt Practices Act, as amended
("Corrupt Practices Act"), or the rules and regulations promulgated under such
statutes, except for such violations which, singly or in the aggregate, would
not have a Material Adverse Effect.
(o) Neither the Company nor any of its subsidiaries has violated any
foreign, federal, state or local law, regulation or code relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"), except
for such violations that, singly or in the aggregate, would not have a Material
Adverse Effect. There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with Environmental
Laws or any Authorization (as defined below), any related constraints on
operating activities or any potential liabilities to third parties) which would,
singly or in the aggregate, have a Material Adverse Effect.
(p) There is no (i) unfair labor practice complaint, grievance or
arbitration proceeding pending or threatened against the Company or any of its
subsidiaries before the National Labor Relations Board or any state or local
labor relations board, or (ii) strike, labor dispute, slowdown or stoppage
pending or threatened against the Company or any of its subsidiaries, except in
the case of both clauses (i) and (ii) for such actions which, singly or in the
aggregate, would not have a Material Adverse Effect.
(q) Each of the Company and its subsidiaries has such permits,
licenses, consents, exemptions, franchises, authorizations and other approvals
(each, an "Authorization") of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations and all
courts and other tribunals, including, without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license and operate its
respective properties and to conduct its business, except where the failure to
have any such Authorization or to make any such filing or notice would not,
singly or in the aggregate, have a Material Adverse Effect. Each such
Authorization is valid and in full force and effect and each of the Company and
its subsidiaries is in compliance with all the terms and conditions thereof and
with the rules and regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and no event has
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occurred (including, without limitation, the receipt of any notice from any
authority or governing body) which allows or, after notice or lapse of time or
both, would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both, would result
in any other impairment of the rights of the holder of any such Authorization;
and such Authorizations contain no restrictions that are burdensome to the
Company or any of its subsidiaries; except where such failure to be valid and in
full force and effect or to be in compliance, the occurrence of any such event
or the presence of any such restriction would not, singly or in the aggregate,
have a Material Adverse Effect.
(r) The Company has good and marketable title to each of the Vessels,
and all other real property and personal property described in the Prospectus as
being owned by it (if any), free and clear of any Liens, other than the Liens
established pursuant to or permitted by the Indenture. No party other than the
Company and its subsidiaries has any right, option or first refusal to purchase
or lease any of the Vessels.
(s) Each of the Company and its subsidiaries, as applicable, carries
insurance on the Vessels in such amounts and covering such risks as is customary
for companies engaged in similar businesses. Neither the Company nor any of its
subsidiaries has received notice from any insurer that capital improvements or
expenditures are necessary or required to be made in order to continue such
insurance.
(t) Arthur Andersen LLP is an independent public accountant with
respect to the Company and its subsidiaries as required by the Act.
(u) The consolidated, historical financial statements included in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto), together with related schedules and notes, present fairly the
consolidated financial position, results of operations and changes in financial
position of the Company and its subsidiaries on the basis stated therein at the
respective dates or for the respective periods to which they apply; such
statements and related schedules and notes have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, except as disclosed therein; the supporting schedules, if any,
included in the Registration Statement present fairly in accordance with
generally accepted accounting principles the information required to be stated
therein; and the other financial and statistical information and data set forth
in the Registration Statement and the Prospectus (and any amendment or
supplement thereto) are, in all material respects, accurately presented and
prepared on a basis consistent with such financial statements and the books and
records of the Company.
(v) The Company is not and, after giving effect to the offering and
sale of the Bonds and the application of the net proceeds thereof as described
in the Prospectus, will not be, an "investment company," as such term is defined
in the Investment Company Act of 1940, as amended.
(w) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
file a
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registration statement under the Act with respect to any securities of the
Company or to require the Company to include such securities with the Bonds
registered pursuant to the Registration Statement.
(x) No "nationally recognized statistical rating organization" as such
term is defined for purposes of Rule 436(g)(2) under the Act (i) has imposed (or
has informed the Company that it is considering imposing) any condition
(financial or otherwise) on the Company's retention of any rating assigned to
the Company or any securities of the Company or (ii) has indicated to the
Company that it is considering (A) the downgrading, suspension, or withdrawal
of, or any review for a possible change that does not indicate the direction of
the possible change in, any rating so assigned or (B) any change in the outlook
for any rating of the Company or any securities of the Company.
(y) Since the respective dates as of which information is given in the
Prospectus, other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there has not occurred any Material Adverse Effect or any development involving
a prospective Material Adverse Effect, (ii) there has not been any material
adverse change or any development involving a prospective material adverse
change in the capital stock or in the long-term debt of the Company or any of
its subsidiaries and (iii) neither the Company nor any of its subsidiaries has
incurred any material liability or obligation, direct or contingent.
(z) Each certificate signed by any officer of the Company and
delivered to the Underwriter or counsel for the Underwriter shall be deemed to
be a representation and warranty by the Company to the Underwriter as to the
matters covered thereby.
The Company acknowledges that the Underwriter and, for purposes of the
opinions to be delivered to the Underwriter pursuant to Section 8 hereof,
counsel to the Underwriter will rely upon the accuracy and truth of the
foregoing representations and hereby consents to such reliance.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Underwriter,
its directors, its officers and each person, if any, who controls such
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages, liabilities
and judgments (including, without limitation, any legal or other expenses
reasonably incurred in connection with investigating or defending any matter,
including any action, that could give rise to any such losses, claims, damages,
liabilities or judgments) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
amendment or supplement thereto), the Prospectus (or any amendment or supplement
thereto) or any preliminary prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
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except insofar as such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to the Underwriter furnished in writing
to the Company by such Underwriter expressly for use therein; provided, however,
that the foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of the Underwriter if it failed to
deliver a Prospectus, as then amended or supplemented, (so long as the
Prospectus and any amendment or supplement thereto was provided by the Company
to the Underwriter in the requisite quantity and on a timely basis to permit
proper delivery on or prior to the Closing Date) to the person asserting any
losses, claims, damages, liabilities or judgements caused by any untrue
statement or alleged untrue statement of a material act contained in any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, if such material misstatement or omission or
alleged material misstatement or omission was cured in the Prospectus, as so
amended or supplemented, and such Prospectus was required by law to be delivered
at or prior to the written confirmation of sale to such person.
(b) The Underwriter agrees to indemnify and hold harmless the Company,
its directors, its officers who sign the Registration Statement and each person,
if any, who controls (within the meaning of Section 15 of the Act or Section 20
of the Exchange Act) the Company, to the same extent as the foregoing indemnity
from the Company to the Underwriter but only with reference to information
relating to the Underwriter furnished in writing to the Company by the
Underwriter expressly for use in the Registration Statement (or any amendment or
supplement thereto), the Prospectus (or any amendment or supplement thereto) or
any preliminary prospectus.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 7(a) or 7(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 7(a) and 7(b), the Underwriter shall not be required to assume
the defense of such action pursuant to this Section 7(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
the Underwriter). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the indemnified party
unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses
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<PAGE>
available to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party).
In any such case, the indemnifying party shall not, in connection with any one
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all indemnified parties and all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be designated
in writing by the Underwriter, in the case of the parties indemnified pursuant
to Section 7(a), and by the Company, in the case of parties indemnified pursuant
to Section 7(b). The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
liabilities and judgments by reason of any settlement of any action (i) effected
with its written consent or (ii) effected without its written consent if the
settlement is entered into more than twenty business days after the indemnifying
party shall have received a request from the indemnified party for reimbursement
for the fees and expenses of counsel (in any case where such fees and expenses
are at the expense of the indemnifying party) and, prior to the date of such
settlement, the indemnifying party shall have failed to comply with such
reimbursement request. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement or compromise of, or
consent to the entry of judgment with respect to, any pending or threatened
action in respect of which the indemnified party is or could have been a party
and indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i) includes
an unconditional release of the indemnified party from all liability on claims
that are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this Section 7
is unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, on the one hand, and the Underwriter on the other hand from the
offering of the Bonds or (ii) if the allocation provided by clause 7(d)(i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause 7(d)(i) above but
also the relative fault of the Company, on the one hand, and the Underwriter, on
the other hand, in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative benefits received by the
Company, on the one hand and the Underwriter, on the other hand, shall be deemed
to be in the same proportion as the total net proceeds from the offering of the
Bonds (after underwriting discounts and commissions, but before deducting
expenses) received by the Company, and the total discounts and commissions
received by the Underwriter bear to the total price to investors of the Bonds,
in each case as set forth in the table on the cover page of the Prospectus. The
relative fault of
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the Company, on the one hand, and the Underwriter, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, on the one hand,
or the Underwriter, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Underwriter agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter, including any action,
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 7, the Underwriter
shall not be required to contribute any amount in excess of the amount by which
the total discounts and commissions received by such Underwriters exceeds the
amount of any damages which the Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(e) The remedies provided for in this Section 7 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
8. Conditions of Underwriter's Obligations. The obligation of the
Underwriter to purchase the Bonds under this Agreement is subject to the
satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained in
this Agreement shall be true and correct on the Closing Date with the same force
and effect as if made on and as of the Closing Date.
(b) If the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, such Rule 462(b)
Registration Statement shall have become effective by 10:00 P.M., New York City
time, on the date of this Agreement; and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or contemplated by the Commission
(c) On or after the date hereof, (i) there shall not have occurred any
downgrading, suspension or withdrawal of, nor shall any notice have been given
of any
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potential or intended downgrading, suspension or withdrawal of, or of any review
(or of any potential or intended review) for a possible change that does not
indicate the direction of the possible change in, any rating of the Company or
any securities of the Company (including, without limitation, the placing of any
of the foregoing ratings on credit watch with negative or developing
implications or under review with an uncertain direction) by any "nationally
recognized statistical rating organization" as such term is defined for purposes
of Rule 436(g)(2) under the Act, (ii) there shall not have occurred any change,
nor shall any notice have been given of any potential or intended change, in the
outlook for any rating of the Company or any securities of the Company by any
such rating organization and (iii) no such rating organization shall have given
notice that it has assigned (or is considering assigning) a lower rating to the
Bonds than that on which the Bonds were marketed.
(d) The Underwriter shall have received on the Closing Date a
certificate dated the Closing Date, of the President or any Vice President and a
principal financial or accounting officer of the Company, confirming the matters
set forth in Sections 6(y), 8(a), 8(b) and 8(c) and that the Company has
complied with all of the agreements and satisfied all of the conditions herein
contained and required to be complied with or satisfied by the Company on or
prior to the Closing Date.
(e) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there shall not have occurred any change or any development involving a
prospective change in the condition, financial or otherwise, or the earnings,
business, management or operations of the Company and its subsidiaries, taken as
a whole, (ii) there shall not have been any change or any development involving
a prospective change in the capital stock or in the long-term debt of the
Company or any of its subsidiaries and (iii) neither the Company nor any of its
subsidiaries shall have incurred any liability or obligation, direct or
contingent, the effect of which, in any such case described in clause 8(e)(i),
8(e)(ii) or 8(e)(iii), in the Underwriter's reasonable judgment, is material and
adverse and, in the Underwriter's reasonable judgment, makes it impracticable to
market the Bonds on the terms and in the manner contemplated in the Prospectus.
(f) The Underwriter shall have received on the Closing Date an opinion
(satisfactory to the Underwriter and its counsel), dated the Closing Date, of
Ropes & Gray, counsel for the Company, to the effect that:
(i) each of the Company and its subsidiary, Orgulf Transport Co.
("Orgulf"), has been duly incorporated, is validly existing and in
good standing under the laws of its jurisdiction of incorporation and
has the corporate power and authority to carry on its business as
described in the Prospectus and to own, lease and operate its
properties;
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(ii) the Company has all requisite corporate power and authority
to execute, deliver and perform its obligations under the Bonds.
(iii) the Bonds have been duly executed, authorized
authenticated, issued and delivered, are entitled to the benefits
provided by the Indenture and constitute valid and binding obligations
of the Company, enforceable in accordance with their terms except as
(x) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and
(y) rights of acceleration and the availability of equitable remedies
may be limited by equitable principles of general applicability;
(iv) the Company has all requisite corporate power and authority
to execute, deliver and perform its obligations under the Indenture.
(v) the Indenture has been duly qualified under the TIA, has been
duly authorized, executed and delivered by the Company and is a valid
and binding instrument of the Company, enforceable in accordance with
its terms subject to the qualifications set forth in (x) and (y) of
clause (iii) above;
(vi) the Company has all requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement.
(vii) this Agreement has been duly authorized, executed and
delivered by the Company;
(viii) the Charter Agreement (the "Charter Agreement"), dated as
of September __, 1998 between the Company and Orgulf, and the
Assignment, dated as of September __, 1998, between the Company and
The Chase Manhattan Bank, as Trustee, together with the signed Consent
and Agreement ("Consent and Assignment") with respect thereto of
Orgulf have each been duly authorized, executed and delivered by each
of the respective parties thereto and constitute valid and binding
instruments, enforceable in accordance with their respective terms.
Such conclusion may be subject to the qualifications set forth in (x)
and (y) of clause (iii) above;
(ix) the Registration Statement has become effective under the
Act, no stop order suspending its effectiveness has been issued and no
proceedings for that purpose are, to the best of such counsel's
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knowledge after due inquiry, pending or threatened before or
contemplated by the Commission;
(x) the statements under the captions "Description of The Bonds"
and "Underwriting" in the Prospectus, and Item 15 of Part II of the
Registration Statement, insofar as such statements constitute a
summary of the legal matters, documents or proceedings referred to
therein, fairly present in all material respects such legal matters,
documents and proceedings;
(xi) the Company is not and, after giving effect to the offering
and sale of the Bonds and the application of the proceeds thereof as
described in the Prospectus, will not be, an "investment company" as
such term is defined in the Investment Company Act of 1940, as
amended; and
(xii) (A) the Registration Statement and the Prospectus and any
supplement or amendment thereto (except for the financial statements
and other financial or statistical data included therein as to which
no opinion need be expressed) comply as to form in all material
respects with the Act, (B) such counsel has no reason to believe that
at the time the Registration Statement became effective or on the date
of this Agreement, the Registration Statement and the prospectus
included therein (except for the financial statements and other
financial and statistical data as to which such counsel need not
express any belief and except for that part of the Registration
Statement that constitutes the Statement of Eligibility (Form T-1)
under the Trust Indenture Act) contained any untrue statement of a
17
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material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading and (C) such counsel has no reason to believe that the
Prospectus, as amended or supplemented, if applicable (except for the
financial statements and other financial data, as aforesaid) contains
any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
In rendering its opinion, Ropes & Gray will not pass upon the security
afforded by the Indenture and may rely as to such matters and all matters
governed by admiralty law upon the opinion of Thompson Coburn referred to below.
The opinion of Ropes & Gray shall be rendered to the Underwriter at the request
of the Company and shall so state therein. In giving such opinion with respect
to the matters covered by Section 8(f)(xii), Ropes & Gray may state that its
opinion and belief are based upon their participation in the preparation of the
Registration Statement and Prospectus and any amendments or supplements thereto
(other than documents incorporated therein by reference) and review and
discussion of the contents thereof (including the documents incorporated therein
by reference), but are without independent check or verification except as
specified.
(g) The Underwriter shall have received on the Closing Date an opinion
(satisfactory to the Underwriter and its counsel), dated the Closing Date, of
Thomas J. Schmidt, Esq., General Counsel and Secretary to the Company, to the
effect that:
(i) each of the Company and its subsidiaries has been duly
formed, is validly existing and in good standing under the laws of its
jurisdiction of formation and has the corporate power and authority to
carry on its business as described in the Prospectus and to own, lease
and operate its properties;
(ii) each of the Company and its subsidiaries is duly qualified
and is in good standing as a foreign organization authorized to do
business in each jurisdiction in which the nature of its business or
its ownership or leasing of property requires such qualification,
except where the failure to be so qualified would not have a Material
Adverse Effect;
(iii) all the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid,
non-assessable and not subject to any preemptive or similar rights,
and all such shares are owned beneficially and of record by Eastern
Enterprises, an unincorporated voluntary association organized in
Massachusetts;
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(iv) all of the outstanding shares of capital stock of each of
the Company's subsidiaries have been duly authorized and validly
issued and are fully paid and non-assessable, and are owned by the
Company, free and clear of any Lien;
(v) the Company has all requisite corporate power and authority
to execute, deliver and perform its obligations under the Bonds. The
Bonds have been duly executed, authorized authenticated, issued and
delivered, are entitled to the benefits provided by the Indenture and
constitute valid and binding obligations of the Company, enforceable
in accordance with their terms except as (x) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (y) rights of acceleration
and the availability of equitable remedies may be limited by equitable
principles of general applicability;
(vi) the Company has all requisite corporate power and authority
to execute, deliver and perform its obligations under the Indenture.
The Indenture has been duly authorized, executed and delivered and is
a valid and binding instrument, enforceable in accordance with its
terms subject to the qualifications set forth in (x) and (y) of clause
(v) above;
(vii) the Company has all requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement.
This Agreement has been duly authorized, executed and delivered by the
Company;
(viii) The Charter Agreement (the "Charter Agreement"), dated as
of September __, 1998 between the Company and Orgulf and the
Assignment, dated as of September __, 1998, between the Company and
The Chase Manhattan Bank, as Trustee, together with the signed Consent
and Agreement ("Consent and Assignment") with respect thereto of
Orgulf have each been duly authorized, executed and delivered by each
of the respective parties thereto and constitute valid and binding
instruments, enforceable in accordance with their respective terms.
Such conclusion may be subject to the qualifications set forth in (x)
and (y) of clause (v) above;
(ix) the statements under the caption "Description of The Bonds"
in the Prospectus, insofar as such statements constitute a summary of
the legal matters, documents or proceedings referred to therein,
fairly present in all material respects such legal matters, documents
and proceedings;
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(x) neither the Company nor any of its subsidiaries is in
violation of its respective charter or by-laws and, to the best of
such counsel's knowledge after due inquiry, neither the Company nor
any of its subsidiaries is in default in the performance of any
obligation, agreement, covenant or condition contained in any
indenture, loan agreement, mortgage, lease or other agreement or
instrument that is material to the Company and its subsidiaries, taken
as a whole, to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries or their respective
property is bound;
(xi) the execution, delivery and performance of this Agreement
and the other Operative Documents by the Company, the compliance by
the Company with all provisions hereof and thereof and the
consummation of the transactions contemplated hereby and thereby will
not (i) require any consent, approval, authorization or other order
of, or qualification with, any court or governmental body or agency
(except such as may be required under the securities or Blue Sky laws
of the various states), (ii) conflict with or constitute a breach of
any of the terms or provisions of, or a default under, the charter or
by-laws of the Company or any of its subsidiaries or any indenture,
loan agreement, mortgage, lease or other agreement or instrument that
is material to the Company and its subsidiaries, taken as a whole, to
which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries or their respective property is
bound, (iii) violate or conflict with any applicable law or any rule,
regulation, judgment, order or decree of any court or any governmental
body or agency having jurisdiction over the Company, any of its
subsidiaries or their respective property, (iv) result in the
imposition or creation of (or the obligation to create or impose) a
Lien under, any agreement or instrument to which the Company or any of
its subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective property is bound, or (v) result in
the termination, suspension or revocation of any Authorization (as
defined above) of the Company or any of its subsidiaries or result in
any other impairment of the rights of the holder of any such
Authorization;
(xii) after due inquiry, such counsel does not know of any legal
or governmental proceedings pending or threatened to which the Company
or any of its subsidiaries is or could be a party or to which any of
their respective properties is or could be subject, that are required
to be described in the Registration Statement or the Prospectus and
are not so described, or of any statutes, regulations, contracts or
other documents that are required to be described in the Registration
Statement and are not so described or filed;
(xiii) neither the Company nor any of its subsidiaries has
violated any Environmental Law, or any provisions of ERISA or the
20
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Corrupt Practices Act or the rules and regulations promulgated under
such statutes, except for such violations which, singly or in the
aggregate, would not have a Material Adverse Effect;
(xiv) each of the Company and its subsidiaries has such
Authorizations of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including without
limitation, under any applicable Environmental Laws, as are necessary
to own, lease, license and operate its respective properties and to
conduct its business, except where the failure to have any such
Authorization or to make any such filing or notice would not, singly
or in the aggregate, have a Material Adverse Effect. Each such
Authorization is valid and in full force and effect and each of the
Company and its subsidiaries is in compliance with all the terms and
conditions thereof and with the rules and regulations of the
authorities and governing bodies having jurisdiction with respect
thereto; and no event has occurred (including the receipt of any
notice from any authority or governing body) which allows or, after
notice or lapse of time or both, would allow, revocation, suspension
or termination of any such Authorization or results or, after notice
or lapse of time or both, would result in any other impairment of the
rights of the holder of any such Authorization; and such
Authorizations contain no restrictions that are burdensome to the
Company or any of its subsidiaries; except where such failure to be
valid and in full force and effect or to be in compliance, the
occurrence of any such event or the presence of any such restriction
would not, singly or in the aggregate, have a Material Adverse Effect;
(xv) to the best of such counsel's knowledge after due inquiry,
there are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the
Company to file a registration statement under the Act with respect to
any securities of the Company or to require the Company to include
such securities with the Bonds registered pursuant to any Registration
Statement; and
(xvi) (A) each document filed pursuant to the Exchange Act and
incorporated by reference in the Prospectus (except for financial
statements and other financial or statistical data included therein as
to which no opinion need be expressed) complied when so filed as to
form with the Exchange Act), (B) the Registration Statement and the
Prospectus and any supplement or amendment thereto (except for the
financial statements and other financial or statistical data included
therein as to which no opinion need be expressed) comply as to form
with the Act, (C) such counsel has no reason to believe that at the
time the Registration
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Statement became effective or on the date of this Agreement, the
Registration Statement and the prospectus included therein (except for
the financial statements and other financial data as to which such
counsel need not express any belief and except for that part of the
Registration Statement that constitutes the Statement of Eligibility
(Form T-1) under the Trust Indenture Act) contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading and (D) such counsel has no reason to believe
that the Prospectus, as amended or supplemented, if applicable (except
for the financial statements and other financial and statistical data,
as aforesaid) contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
In rendering his opinion, Thomas J. Schmidt, Esq. may rely upon the
opinion of Ropes & Gray as to all matters governed by Massachusetts law. The
opinion of Thomas J. Schmidt, Esq. shall be rendered to the Underwriter at the
request of the Company and shall so state therein.
(h) The Underwriter shall have received on the Closing Date an opinion
(satisfactory to the Underwriter and its counsel), dated the Closing Date, of
Thompson Coburn, special admiralty counsel for the Company, to the effect that:
(i) The Company has good and marketable title to each of the
Vessels referred to in the granting clause of the Indenture
("Vessels") and each of the Vessels is a "vessel of the United
States", as defined in Chapter 313 of Title 46 of the United States
Code, as amended (the "Ship Mortgage Act"), duly and lawfully
documented under the laws of the United States in the name of the
Company. The Company and its subsidiary, Orgulf, are each citizens of
the United States within the meaning of Section 2 of the Shipping Act,
1916, as amended.
(ii) The Indenture has been duly authorized, executed and
delivered, and constitutes a valid and binding instrument in
accordance with its terms; the Indenture is a "preferred mortgage" as
defined in the Ship Mortgage Act, as amended, has been duly executed
and delivered as such by duly authorized officers of the Company and
was duly filed at ____ o'clock A.M. and recorded on the Closing Date
in the Office of the U.S. Coast Guard National Vessel Documentation
Center in Falling Waters, West Virginia in Book _____ at page ___.
(iii) The Indenture constitutes a "preferred mortgage" lien on
each of the Vessels under the Ship Mortgage Act having the effect and
with the priority provided for by said Act, and the Bonds are validly
secured by the
22
<PAGE>
Indenture in accordance with the terms thereof. Such conclusions may
be subject to qualification with respect to the effect of certain laws
and judicial decisions upon the remedies provided in the Indenture,
which will not materially interfere with the practical realization of
the benefits of the security provided by such Indenture, and to the
further qualifications set forth in (x) and (y) of Section 8(f)(iii)
above;
(iv) Original jurisdiction of a suit to foreclose the Indenture
rests in the District Courts of the United States and may be enforced
in such courts by a suit in admiralty; such jurisdiction is exclusive
of the courts of the States to enforce the preferred mortgage lien of
the Indenture in a civil action in rem for a vessel documented under
the laws of the United States;
(v) The Charter Agreement and the Assignment, together with the
Consent and Agreement with respect thereto of Orgulf have each been
duly authorized, executed and delivered by each of the respective
parties thereto and constitute valid and binding instruments,
enforceable in accordance with their respective terms. Such conclusion
may be subject to qualification with respect to the effect of certain
laws and judicial decisions upon the remedies provided in such Charter
Agreement and Assignment, which will not materially interfere with the
practical realization of the benefits of the security provided by such
Charter Agreement and Assignment, and to the further qualifications
set forth in (x) and (y) of Section 8(f)(iii) above;
(vi) No consent or approval of or filing or recording with any
federal, state or local governmental regulatory authority with respect
to maritime matters (except as described in (ii) above) is required as
a condition precedent to the validity or enforceability of the Bonds,
the Indenture, the Charter Agreement, the Assignment or the Consent
and Agreement in accordance with the respective terms thereof; and
(vii) Assuming the Bonds have been duly executed, authenticated,
issued and delivered, they constitute valid and legally binding
obligations of the Company entitled to the benefits provided by the
Indenture.
In rendering its opinion Thompson Coburn may rely upon the opinion of
Ropes & Gray as to all matters governed by Massachusetts law and may rely upon
the opinion of Thomas J. Schmidt, Esq. as to corporate procedures and
requirements relating to the due authorization, execution and delivery of the
Indenture, the Bonds, the Charter Agreement, the Assignment, and the Consent and
Agreement. The opinion of Thompson Coburn shall be rendered to the Underwriter
at the request of the Company and shall so state therein.
(i) The Underwriter shall have received on the Closing Date an
opinion, dated the Closing Date, of Choate, Hall & Stewart, counsel
for the Underwriter, in form and
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<PAGE>
substance reasonably satisfactory to the Underwriter. In rendering such opinion,
Choate, Hall & Stewart will not pass upon the security afforded by the Indenture
and may rely as to such matters and all matters governed by admiralty law upon
the opinion of Thompson Coburn referred to above. In giving such opinion with
respect to the Registration Statement and Prospectus, Choate, Hall & Stewart may
state that its opinion and belief are based upon its participation in the
preparation of the Registration Statement and Prospectus and any amendments or
supplements thereto (other than the documents incorporated therein by reference)
and review and discussion of the contents thereof (including the documents
incorporated therein by reference), but are without independent check or
verification except as specified.
(j) The Underwriter shall have received, on each of the date hereof
and the Closing Date, a letter dated the date hereof or the Closing Date, as the
case may be, in form and substance satisfactory to the Underwriter, from Arthur
Andersen LLP, independent public accountants, containing the information and
statements of the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in the Registration Statement and Prospectus.
(k) The Bonds shall have been rated "____" or better by Standard &
Poor's Corporation and "____" or better by Moody's Investor Services, Inc.
(l) The Underwriter shall have received a counterpart, conformed as
executed, of the Indenture which shall have been entered into by the Company and
the Trustee.
(m) The Company shall not have failed at or prior to the Closing Date
to perform or comply with any of the agreements herein contained and required to
be performed or complied with by the Company at or prior to the Closing Date.
9. Effectiveness of Agreement and Termination.
(a) This Agreement shall become effective upon its execution and
delivery by the parties hereto.
(b) This Agreement may be terminated at any time on or prior to the
Closing Date by the Underwriter by written notice to the Company if any of the
following has occurred: (i) any outbreak or escalation of hostilities or other
national or international calamity or crisis or change in economic conditions or
in the financial markets of the United States or elsewhere that, in the
Underwriter's reasonable judgment, is material and adverse and, in the
Underwriter's reasonable judgment, makes it impracticable to market the Bonds on
the terms and in the manner contemplated in the Prospectus, (ii) the suspension
or material limitation of trading in securities or other instruments on the New
York Stock Exchange, the American Stock Exchange, the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade or the
Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension
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<PAGE>
of trading of any securities of the Company on any exchange or in the
over-the-counter market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority which in the Underwriter's reasonable
opinion materially and adversely affects, or will materially and adversely
affect, the business, prospects, financial condition or results of operations of
the Company and its subsidiaries, taken as a whole, (v) the declaration of a
banking moratorium by either federal or New York State authorities or (vi) the
taking of any action by any federal, state or local government or agency in
respect of its monetary or fiscal affairs which in the Underwriter's reasonable
opinion has a material adverse effect on the financial markets in the United
States.
10. Miscellaneous.
(a) Notices given pursuant to any provision of this Agreement shall be
addressed as follows: (i) if to the Company, to Midland Enterprises, Inc., 300
Pike Street, Cincinnati, Ohio 45202, Attention: Vice President, Finance,
Tel.: (513) 721-4000 and (ii) if to the Underwriter, Donaldson, Lufkin &
Jenrette Bonds Corporation, 277 Park Avenue, New York, New York 10172,
Attention: Corporate Bond Syndicate Department, or in any case to such other
address as the person to be notified may have requested in writing.
(b) The respective indemnities, contribution agreements,
representations, warranties and other statements of the Company and the
Underwriter set forth in or made pursuant to this Agreement shall remain
operative and in full force and effect, and will survive delivery of and payment
for the Bonds, regardless of (i) any investigation, or statement as to the
results thereof, made by or on behalf of the Underwriter, the officers or
directors of the Underwriter, any person controlling the Underwriter, the
Company, the officers or directors of the Company, or any person controlling the
Company, (ii) acceptance of the Bonds and payment for them hereunder and (iii)
termination of this Agreement.
(c) If for any reason the Bonds are not delivered by or on behalf of
the Company as provided herein (other than as a result of any termination of
this Agreement pursuant to Section 9), the Company agrees to reimburse the
Underwriter for all out-of-pocket expenses (including the fees and disbursements
of counsel) incurred by them. Notwithstanding any termination of this Agreement,
the Company shall be liable for all expenses which it has agreed to pay pursuant
to Section 5(j) hereof. The Company also agrees to reimburse the Underwriter and
its officers, directors and each person, if any, who controls such Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
for any and all fees and expenses (including without limitation the fees and
expenses of counsel) reasonably incurred by them in connection with enforcing
their rights under this Agreement (including without limitation its rights under
Section 7).
(d) Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the
Underwriter, the Underwriter's directors and officers, any controlling persons
referred to herein, the Company's directors and the Company's officers who sign
the Registration Statement, and the respective successors and assigns of each of
the foregoing, all as and to the extent provided in this
25
<PAGE>
Agreement, and no other person shall acquire or have any right under or by
virtue of this Agreement. The term "successors and assigns" shall not include a
purchaser of any of the Bonds from the Underwriter merely because of such
purchase.
(e) This Agreement shall be governed and construed in accordance with
the laws of the State of New York.
(f) This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the Underwriter.
Very truly yours,
MIDLAND ENTERPRISES INC. (the
"Company")
By:____________________________
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION (the "Underwriter")
By:_____________________
Name:
Title:
26
Exhibit 4.2
MIDLAND ENTERPRISES INC.
TO
THE CHASE MANHATTAN BANK,
TRUSTEE
Indenture of
First Preferred Ship Mortgage
Dated as of , 1998
$75,000,000
% First Preferred Ship Mortgage Bonds Due 2018
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<PAGE>
MIDLAND ENTERPRISES INC.
Reconciliation and tie between Trust Indenture Act of 1939 and
Indenture, dated as of __________, 1998
<TABLE>
<CAPTION>
Trust Indenture Act Section Indenture Section
<S> <C>
ss.310(a)(1)............................................................................ 609
(a)(2)............................................................................ 609
(a)(3)............................................................................ Not Applicable
(a)(4)............................................................................ Not Applicable
(b)............................................................................... 608, 610
ss.311(a)............................................................................... 613(a)
(b)............................................................................... 613(b)
(b)(2)............................................................................ 703(a)(2, 702(a)
ss.312(a)............................................................................... 701, 702(a)
(b)............................................................................... 702(b)
(c)............................................................................... 702(c)
ss.313(a)............................................................................... 703(a)
(b)............................................................................... 703(b)
(c)............................................................................... 703(a), 703(b)
(d)............................................................................... 703(c)
ss.314(a)............................................................................... 704
(b)............................................................................... 1002
(c)(1)............................................................................ 102
(c)(2)............................................................................ 102
(c)(3)............................................................................ Not Applicable
(d)............................................................................... 103, 902, 1101, 1105
(e)............................................................................... 102
ss.315(a)............................................................................... 601(a)
(b)............................................................................... 602, 703(a)(7)
(c)............................................................................... 601(b)
(d)............................................................................... 601(c)
(d)(1)............................................................................ 601(a)(1)
(d)(2)............................................................................ 601(c)(2)
(d)(3)............................................................................ 601(c)(3)
(e)............................................................................... 527
ss.316(a)............................................................................... 101
(a)(1)(A)......................................................................... 519
(a)(1)(B)......................................................................... 522
(a)(2)............................................................................ Not Applicable
(b)............................................................................... 520(B)
ss.317(a)(1)............................................................................ 513
(a)(2)............................................................................ 513
(b)............................................................................... 1303
ss.318(a)............................................................................... 108
</TABLE>
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Note: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Indenture.
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<PAGE>
TABLE OF CONTENTS
ARTICLE I
<TABLE>
<S> <C>
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION...........................................................................2
Section 101. Definitions...................................................................2
Section 102. Compliance Certificates and Opinions..........................................8
Section 103. General and Special Provisions Regarding Certificates and Opinions, Etc.......8
Section 104. Form of Documents Delivered to Trustee.......................................10
Section 105. Act of Holders...............................................................10
Section 106. Notices, Etc., to Trustee and Company........................................11
Section 107. Notice to Holders; Waiver....................................................11
Section 108. Conflict with Trust Indenture Act............................................11
Section 109. Effect of Headings and Table of Contents.....................................11
Section 110. Successors and Assigns.......................................................12
Section 111. Separability Clause..........................................................12
Section 112. Benefits of Indenture........................................................12
Section 113. Governing Law................................................................12
ARTICLE II
BOND FORMS......................................................................................12
Section 201. Forms Generally..............................................................12
Section 202. Form of Face of Bond.........................................................13
Section 203. Form of Reverse of Bond......................................................14
Section 204. Form of Trustee's Certificate of Authentication..............................16
ARTICLE III
THE BONDS.......................................................................................16
Section 301. Title and Terms..............................................................16
Section 302. Denominations................................................................16
Section 303. Execution, Delivery and Dating...............................................16
Section 304. Temporary Bonds..............................................................17
Section 305. Registration, Transfer and Exchange..........................................17
Section 306. Mutilated, Destroyed, Lost and Stolen Bonds..................................18
Section 307. Payment of Interest; Interest Rights Preserved...............................18
Section 308. Persons Deemed Owners........................................................19
Section 309. Cancellation.................................................................19
ARTICLE IV
SATISFACTION AND DISCHARGE......................................................................20
Section 401. Discharge of Indebtedness by Certain Payments................................20
Section 402. Money Deposited with Trustee to Be Held in Trust.............................20
ARTICLE V
REMEDIES........................................................................................20
Section 501. Default, Acceleration, Rescission of Acceleration............................20
Section 502. Powers of Trustee upon an Event of Default...................................22
</TABLE>
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<TABLE>
<S> <C>
Section 503. Right of Judicial Sale; Appointment of Receiver..............................24
Section 504. Sale as Entirety or in Parcels...............................................24
Section 505. Notice of Sale...............................................................24
Section 506. Adjournment of Sale..........................................................24
Section 507. Purchaser Not Liable for Application of Purchase Money.......................24
Section 508. Application of Bonds Toward Purchase Price, etc..............................25
Section 509. Conveyance of Property to Purchaser..........................................25
Section 510. Sale a Bar Against Company...................................................25
Section 511. Application of Proceeds of Sale..............................................25
Section 512. Acceleration of Maturity of Bonds upon Sale..................................26
Section 513. Covenants of Company to Pay Bonds with Interest if Any Is Due; Proof of Debt
by Trustee; Recovery of Judgment by Trustee and Application of Proceeds......26
Section 514. Proceedings by Trustee to Protect Security...................................27
Section 515. Payment by Receiver or Holders of Amounts Payable by Company.................27
Section 516. Waiver of Stay or Extension Laws, etc........................................28
Section 517. Waiver of Service of Process and Consent to Entry of Judgment by Company.....28
Section 518. Surrender of Possession of Trust Estate to Trustee or Receiver...............28
Section 519. Rights of Holders to Control Proceedings by Trustee..........................29
Section 520. Limitation on Holders' Right to Sue..........................................29
Section 521. Waiver of Period of Grace by Company.........................................30
Section 522. Waiver of Certain Defaults by Holders........................................30
Section 523. Delay or Omission in Exercising Remedy Not Waiver of Default.................30
Section 524. Effect of Abandonment of Foreclosure or Other Proceedings....................30
Section 525. Remedies Cumulative..........................................................30
Section 526. Rights of Action Enforceable by Trustee Without Possession or
Production of Bonds .........................................................30
Section 527. Undertaking for Costs........................................................31
Section 528. Remedies in Article Five Subject to Applicable Laws..........................31
ARTICLE VI
THE TRUSTEE.....................................................................................31
Section 601. Certain Duties and Responsibilities..........................................31
Section 602. Notice of Defaults and Other Specified Events................................32
Section 603. Certain Rights of Trustee....................................................32
Section 604. Not Responsible for Recitals or Issuance of Bonds............................33
Section 605. May Hold Bonds...............................................................33
Section 606. Money Held in Trust..........................................................34
Section 607. Compensation and Reimbursement...............................................34
Section 608. Disqualification; Conflicting Interests......................................34
Section 609. Corporate Trustee Required; Eligibility......................................35
Section 610. Resignation and Removal; Appointment of Successor............................35
Section 611. Acceptance of Appointment of Successor.......................................36
Section 612. Merger, Conversion, Consolidation or Succession to Business..................36
Section 613. Preferential Collection of Claims Against Company............................36
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY...............................................37
Section 701. Company to Furnish Trustee Names and Addresses of Holders....................37
Section 702. Preservation of Information; Communications to Holders.......................37
Section 703. Reports by Trustee...........................................................37
Section 704. Reports by Company...........................................................38
</TABLE>
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<PAGE>
ARTICLE VIII
<TABLE>
<S> <C>
CONSOLIDATION, MERGER AND SALE...................................................................38
Section 801. Company May Consolidate, etc., Only on Certain Terms.........................38
ARTICLE IX
AUTHENTICATION AND DELIVERY OF BONDS............................................................39
Section 901. Authentication and Delivery of Bonds.........................................39
Section 902. Deposit of Certain Sums......................................................40
ARTICLE X
SUNDRY PROVISIONS...............................................................................41
Section 1001. Possession and Use of Vessels................................................41
Section 1002. Opinions of Counsel as to Filing and Recording of Indenture and
Supplemental Indentures......................................................41
Section 1003. No Recourse Against Officers, Directors, etc.................................41
Section 1004. Amount of Obligations Secured................................................42
Section 1005. Detention of Vessels.........................................................42
ARTICLE XI
RELEASE OF VESSELS; DISPOSITION OF DEPOSITED MONEYS.............................................42
Section 1101. Releases; Substitutions of Vessels; Instruments to Be Delivered to Trustee...42
Section 1102. Releases after Event of Default with Consent.................................44
Section 1103. Release at Request of a Receiver or Trustee..................................44
Section 1104. Deposited Moneys.............................................................44
Section 1105. Withdrawal of Deposited Moneys; Instruments to Be Delivered to Trustee.......44
Section 1106. Investment of Deposited Moneys and Other Funds by Trustee....................46
Section 1107. Deposit of Deposited Moneys for Account of Trustee...........................47
Section 1108. Application of Deposited Moneys on Default...................................47
Section 1109. Original Release Price, Release Percentage and Release Price.................47
ARTICLE XII
SUPPLEMENTAL INDENTURES.........................................................................48
Section 1201. Supplemental Indentures Without Consent of Holders...........................48
Section 1202. Supplemental Indentures with Consent of Holders..............................49
Section 1203. Execution of Supplemental Indentures.........................................49
Section 1204. Effect of Supplemental Indentures............................................49
Section 1205. Conformity with Trust Indenture Act..........................................49
Section 1206. Reference in Bonds to Supplemental Indentures................................50
ARTICLE XIII
COVENANTS.......................................................................................50
Section 1301. Payment of Principal, Premium and Interest...................................50
Section 1302. Maintenance of Office of Agency..............................................50
Section 1303. Money for Bond Payments to Be Held in Trust..................................50
Section 1304. Statement as to Compliance...................................................51
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Section 1305. Corporate Existence..........................................................51
Section 1306. Intentionally Omitted........................................................52
Section 1307. Sundry Covenants.............................................................52
Section 1308. Maintenance of Lien as First Preferred Mortgage under Chapter 313............52
Section 1309. Inspection of Vessels........................................................52
Section 1310. Prohibition Against Liens on Vessels, etc....................................53
Section 1311. Liens or Encumbrances on Vessels Not Permitted; Discharge Thereof............53
Section 1312. Prohibitions Against Liens or Encumbrances by Company and Barge
Line Subsidiaries on their Properties; Exceptions............................53
Section 1313. Notice to Trustee of and Release of Vessels from Libels or Liens Against
Vessels, etc.................................................................55
Section 1314. Insurance....................................................................55
Section 1315. Lien Attaches to Claim for Compensation or Award in Event of Requisition.....57
Section 1316. Payment of Taxes, Assessments, etc...........................................57
Section 1317. Intentionally Omitted .......................................................58
Section 1318. Intentionally Omitted........................................................58
Section 1319. Limitations on Disposition of Capital Stock of Barge Line Subsidiaries;
Limitation on Indebtedness of Barge Line Subsidiaries, etc. .................58
Section 1320. Performance of Charter Agreements; Termination and Amendment Thereof.........58
Section 1321. Charter Hire Received by Company Payable over to Trustee; Charter
Subordinate to Indenture.....................................................59
Section 1322. Prohibition Against Permitting Set-offs on Behalf of Charterer to Arise......59
Section 1323. Waiver of Certain Covenants..................................................59
ARTICLE XIV
REDEMPTION OF BONDS.............................................................................59
Section 1401. Right of Redemption..........................................................59
Section 1402. Applicability of Article.....................................................59
Section 1403. Election to Redeem; Notice to Trustee........................................60
Section 1404. Selection by Trustee of Bonds to Be Redeemed.................................60
Section 1405. Notice of Redemption.........................................................60
Section 1406. Deposit of Redemption Price..................................................61
Section 1407. Bonds Payable on Redemption Date.............................................61
Section 1408. Bonds Redeemed in Part.......................................................61
ARTICLE XV
SINKING FUND....................................................................................61
Section 1501. Sinking Fund Payments........................................................61
Section 1502. Satisfaction of Sinking Fund Payments with Bonds.............................61
Section 1503. Redemption of Bonds for Sinking Fund.........................................62
</TABLE>
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<PAGE>
INDENTURE OF FIRST PREFERRED SHIP MORTGAGE (hereinafter called the
"Indenture") dated as of , 1998 and made by MIDLAND ENTERPRISES INC., a
corporation organized and existing under the laws of the State of Delaware and
having its principal place of business at 300 Pike Street, Cincinnati, Ohio
45202 (hereinafter called the "Company"), party of the first part, and THE CHASE
MANHATTAN BANK, a banking corporation organized and existing under the laws of
the State of New York and having its corporate trust offices at 450 West 33rd
Street, 15th Floor, New York, New York 10001 (hereinafter called the "Trustee"),
party of the second part.
WHEREAS, the Company is authorized by law, and deems it necessary, to
borrow money for its proper corporate purposes, and to mortgage and pledge its
property hereinafter described to secure the payment thereof; and to that end,
in the exercise of said authority, the Company has duly authorized and directed
the creation of an issue of its bonds, to an amount limited only by law and the
terms of this Indenture, to be known generally as its
% First Preferred Ship Mortgage Bonds Due 2018 and, in order to secure the
payment of the principal of and interest and premium, if any, on said bonds
(hereinafter called the "Bonds"), to provide for the authentication and delivery
thereof by the Trustee and to establish and declare the terms and conditions
upon which the Bonds are to be issued and secured, the Company has heretofore
duly authorized and directed the execution and delivery of this Indenture; and
WHEREAS, the Company is the sole and lawful owner of the whole and
every part of each of the vessels described in Schedule A annexed hereto and
made a part hereof; and
WHEREAS, all acts and proceedings required by law and by the
Certificate of Incorporation and by-laws of the Company necessary to secure the
payment of the principal of and interest and premium, if any, on the Bonds and
to make the Bonds to be issued hereunder, when executed by the Company,
authenticated and delivered by the Trustee and duly issued, the valid, binding
and legal obligations of the Company and to constitute this Indenture a valid
and binding lien for the security of all the Bonds, in accordance with its and
their terms, have been done and taken; and the execution and delivery of this
Indenture have been in all respects duly authorized;
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that in order to secure the
payment of the principal of, premium, if any, and interest on all Bonds at any
time issued and outstanding under this Indenture according to their tenor,
purport and effect, and to secure the performance and observance of all the
covenants and conditions therein and herein contained, and to declare the terms
and conditions upon and subject to which the Bonds are and are to be issued and
secured, and for and in consideration of the premises and of the mutual
covenants herein contained and of the purchase and acceptance of the Bonds by
the holders thereof, and of the sum of Ten Dollars ($10) duly paid to the
Company by the Trustee, at or before the ensealing and delivery hereof, and for
other valuable considerations, the receipt whereof is hereby acknowledged, the
Company has granted, bargained, sold, assigned, transferred, mortgaged and
conveyed, and by these presents does grant, bargain, sell, assign, transfer,
mortgage and convey, unto The Chase Manhattan Bank, Trustee, its successors in
the trust and its and their successors and assigns, the whole and every part of
each of the vessels described in Schedule A hereto annexed and made a part
hereof and also the whole and every part of all other vessels which pursuant to
the terms hereof shall by supplemental indenture be subjected to the lien of
this Indenture for the security of the Bonds; together with all machinery,
tools, tackle, apparel, fittings and equipment, and all other appurtenances,
improvements, additions and replacements to said vessels or any of them,
respectively, appertaining and belonging, whether now owned or hereafter
acquired, whether on board or not, and all hire, freights, earnings, revenues,
profits and income therefrom all of which shall be deemed to be included in any
reference herein made to said vessels.
TO HAVE AND TO HOLD all of the property and all and singular the
properties, estates, rights, franchises, privileges and appurtenances hereby
granted, bargained, sold, aliened, remised, released, conveyed, assigned,
transferred, mortgaged, pledged, set over or confirmed, or intended so to be,
unto the Trustee and its successors in trust and to its and their assigns,
forever; provided, however, that these presents are upon the express condition
that, if the Company shall pay and discharge or provide for the payment and
discharge of the entire indebtedness evidenced by the Bonds in accordance with
the terms thereof and of this Indenture, and all other sums that may be
-1-
<PAGE>
secured by this Indenture are paid in accordance with the terms hereof, then
this Indenture and the estate and rights hereby granted shall cease, determine
and be void, otherwise to remain in full force and effect.
BUT IN TRUST, NEVERTHELESS, for the equal and proportionate use,
benefit, security and protection of those who from time to time shall hold the
Bonds authenticated and delivered hereunder and duly issued by the Company,
without any discrimination, preference or priority of any one Bond over any
other by reason of priority in the time of issue, sale or negotiation thereof or
otherwise, so that each and all of said Bonds shall have the same right, lien
and privilege under this Indenture and shall be equally and proportionately
secured hereby with the same effect as if all of the Bonds had been issued, sold
and negotiated simultaneously on the date of the delivery hereof.
It is hereby covenanted, declared and agreed by and between the parties
hereto that all Bonds are to be authenticated, delivered and issued and that all
property subject or to become subject hereto is to be held subject to the
further covenants, conditions, uses and trusts herein set forth, and the Company
for itself and its successors or assigns does hereby covenant and agree to and
with the Trustee and its successor or successors in such trust, for the benefit
of those who shall hold said Bonds, or any of them, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
Section 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meaning assigned to them, from time to time, in accordance with
generally accepted accounting principles; and
(4) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
Certain terms, used principally in Article Six, are defined in that
Article.
"Act" when used with respect to any Holder has the meaning specified in
Section 105.
"Adjusted Treasury Rate" means, with respect to any date of redemption,
the rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such date of redemption, plus ___%.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies
-2-
<PAGE>
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Application" by the Company for action by the Trustee hereunder means
an application which shall consist of, and shall not be deemed complete until
the Trustee shall have been furnished with, such resolutions, certificates,
opinions, cash, Bonds and other instruments as are required to establish the
right of the Company to such action and the date of such application shall be
deemed to be the date upon which all such instruments shall have been furnished.
"Appraiser" shall mean a Person engaged in the business of appraising
property or otherwise competent to determine the value of the particular
property in question, and who may be, unless otherwise specified, in the employ
of the Company or a Subsidiary.
"Appraiser's Certificate" shall mean a certificate signed by an
Appraiser.
"Assignment" shall mean the assignment of charter hire payable under
the Charter delivered to the Trustee as further security for the Bonds.
"Barge Line Subsidiary" shall mean any Subsidiary of the Company which
is engaged, either entirely or substantially, in the conduct of a barge line
business.
"Board of Directors" means either the board of directors of the Company
or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Bond Register" and "Bond Registrar" have the respective meanings
specified in Section 305.
"Bonds" shall have the meaning specified in the Preamble.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday on which the banking institutions in the City of New York are not
authorized to close.
"Chapter 313" shall mean Chapter 313 of Title 46 of the United States
Code, as amended and in effect on the date hereof.
"Charter" shall mean the Charter Agreement dated as of the date of this
Indenture, by and between the Company and the Charterer, as the same may be
supplemented or amended from time to time. "Charterer" shall mean Orgulf
Transport Co., a Delaware corporation, and its successors and assigns under the
Charter.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Securities Exchange Act of 1934, or if at
any time after the execution of this instrument such Commission is not existing
and performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties on such date.
"Common Stock", as applied to the capital stock of any corporation,
shall mean any capital stock of such corporation other than Preferred Stock.
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<PAGE>
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation.
"Company Request" and "Company Order" mean, respectively, a written
request or order signed in the name of the Company by its Chairman of the Board,
Vice Chairman of the Board, President or any Vice President, and by its
Treasurer, an Assistant Treasurer, Secretary or an Assistant Secretary, and
delivered to the Trustee.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the Remaining Average Life of the Bonds to be redeemed that would be utilized,
at the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
Remaining Average Life of such Bonds.
"Comparable Treasury Price" means, with respect to any date of
redemption, (i) the average of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount)
on the third Business Day preceding such date of redemption, as set forth in the
daily statistical release (or any successor release) published by the Federal
Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities," or (ii) if such release (or any successor release) is
not published or does not contain such prices on such Business Day, (A) the
average of the Reference Treasury Dealer Quotations, or (B) if the Trustee
obtains fewer than three such Reference Treasury Dealer Quotations, the average
of all such Reference Treasury Dealer Quotations.
"Corporate Trust Office" means the principal office of the Trustee in
the City of New York, at which at any particular time its corporate trust
business shall be administered. The Corporate Trust Office at the date of the
original execution of this Indenture is located at 450 West 33rd Street, 15th
Floor, New York, New York 10001.
"default" means the occurrence and continuance of an event which, with
the giving of notice or the lapse of time or both, would constitute an Event of
Default.
"Defaulted Interest" has the meaning specified in Section 307.
"Deposited Moneys" shall have the meaning specified in Section 1104.
"Engineer" means a Person engaged in engineering work or business
relating to the construction or operation of vessels, and who may be, unless
otherwise specified, in the employ of the Company or a Subsidiary.
"Engineer's Certificate" means a certificate signed by an Engineer.
"Event of Default" has the meaning specified in Article Five.
"Existing Leases" shall mean all leases, charters and subcharters in
existence on the date of this Agreement which may be capitalized in accordance
with generally accepted accounting principles.
"Existing Mortgage" shall mean the Indenture of First Preferred Ship
Mortgage dated as of April 2, 1990, as supplemented and amended, made by the
Company to The First National Bank of Boston, as Trustee as from time to time
further supplemented and amended.
"Fair Value" when used in Section 1312(c) with respect to any vessels
or other property of the Company or of any Barge Line Subsidiary shall mean the
fair value thereof to such company as determined in good faith by the Board of
Directors and supported by an Appraiser, who shall set forth the basis of such
appraisal in an Appraiser's Certificate in form satisfactory to the Trustee.
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<PAGE>
"Funded Debt" means, at any date, any indebtedness for borrowed money,
whether incurred, assumed or guaranteed, maturing by its terms more than one
year from the date of creation thereof or which is extendible or renewable at
the option of the obligor in such manner that it may become payable more than
one year from the date of creation thereof and, any liability or obligation of a
lessee required to be capitalized in accordance with generally accepted
accounting principles; provided, however, that Funded Debt shall not include (a)
any indebtedness maturing by its terms within one year from the time of any
computation of the amount of outstanding Funded Debt unless such indebtedness
shall be so extendible or renewable in such manner that it may become payable
more than one year from such time, (b) any contingent liabilities or obligations
arising out of the sale, discount or guarantee of notes, chattel mortgages,
leases, accounts receivable, trade acceptances or other paper, or contingent
repurchase obligations, arising out of transactions in the ordinary course of
business, (c) any indebtedness for the payment or redemption of which money in
the necessary amount shall have been deposited in trust either at or before the
maturity or redemption date thereof, or (d) any liability or obligation of a
lessee, not required to be capitalized in accordance with generally accepted
accounting principles, in respect of the lease of property to be used in the
ordinary course of business but not involving the issuance by such lessee of any
of its direct obligations for borrowed money or the direct guarantee of payment
by the lessee of any obligation of a third person for borrowed money.
"Holder" means a Person in whose name a Bond is registered in the Bond
Register.
"Indenture" means this instrument as originally executed and as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"independent" means, when applied to any Person, a Person who (1) is in
fact independent, (2) does not have any direct financial interest or any
material indirect financial interest in the Company or in any Affiliate of the
Company and (3) is not connected with the Company or any Affiliate of the
Company as an officer, employee, promoter, underwriter, trustee, partner,
director or Person performing similar functions, whether or not such Person is
regularly retained by the Company or any Affiliate of the Company. Whenever it
is herein provided that any independent Person's opinion or certificate shall be
furnished to the Trustee, such Person shall be acceptable to the Holders of a
majority in principal amount of the Bonds at the time outstanding or to the
Trustee and such opinion or certificate shall state that the signer has read
this definition and that the signer is independent within the meaning hereof.
"Independent Investment Banker" means an independent investment banking
institution of national standing appointed by the Company.
"Interest Payment Date" means the Stated Maturity of an instalment of
interest on the Bonds.
"Investment Securities" shall mean (a) obligations of the United States
of America or agencies thereof and obligations backed by the full faith and
credit of the United States of America, (b) commercial paper rated P- 1 by
NCO/Moody's Commercial Paper Division of Moody's Investors Service, Inc. or
having the highest rating for investment issued by any other nationally
recognized organization regularly engaged in rating the investment quality of
such obligations, (c) certificates of deposit or time deposits or other interest
bearing deposits in banks or trust companies, including the Trustee, or (d)
securities of an investment fund, trust, mutual fund, or other investment entity
the assets of which are primarily invested in securities of the types referred
to in subparagraphs (a), (b), or (c) of this paragraph.
"Issue Date" means the date on which the Bonds are originally issued.
"Maturity" when used with respect to any Bond means the date on which
the principal of such Bond becomes due and payable as therein or herein
provided, whether at the Stated Maturity or by declaration of acceleration, call
for redemption or otherwise.
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"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the Vice Chairman of the Board, the President or any Vice President,
and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary of the Company and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of legal counsel, who may
be legal counsel for the Company.
"Original Release Price" has the meaning specified in Section 1109.
"outstanding" when used with respect to Bonds means, as of the date of
determination, all Bonds theretofore authenticated and delivered under this
Indenture, except:
(i) Bonds theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Bonds for whose payment or redemption money in
the necessary amount has been theretofore deposited with the Trustee or
any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Bonds, provided that, if such
Bonds are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefore satisfactory to the
Trustee has been made; and
(iii) Bonds in exchange for or in lieu of which other
Bonds have been authenticated and delivered pursuant to this Indenture;
provided, however, that in determining whether the Holders of the requisite
principal amount of Bonds outstanding have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Bonds owned by
the Company or any other obligor upon the Bonds or any Affiliate of the Company
or such other obligor shall be disregarded and deemed not to be outstanding,
except that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent or
waiver, only Bonds which a Responsible Officer of the Trustee knows to be so
owned shall be so disregarded. Bonds so owned which have been pledged in good
faith may be regarded as outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Bonds and that the pledgee is not the Company or any other obligor upon the
Bonds or any Affiliate of the Company or such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Bond on behalf of the
Company.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Place of Payment" means a city or political subdivision thereof
designated as such in Article Three.
"Predecessor Bond" of any particular Bond means every previous Bond
evidencing all or a portion of the same debt as that evidenced by such
particular Bond; and, for the purposes of this definition, any Bond
authenticated and delivered under Section 306 in lieu of a mutilated, lost,
destroyed, or stolen Bond shall be deemed to evidence the same debt as the
mutilated, lost, destroyed, or stolen Bond.
"Preferred Stock" as applied to the capital stock of any corporation,
means capital stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
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upon any voluntary or involuntary liquidation, dissolution or winding up of such
corporation, over shares of capital stock of any other class of such
corporation.
"Redemption Date" when used with respect to any Bond to be redeemed
means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price" when used with respect to any Bond to be redeemed
means the price at which it is to be redeemed pursuant to this Indenture.
"Reference Treasury Dealer" means, for the Bonds, Donaldson, Lufkin &
Jenrette Securities Corporation, and its successors; provided, however, that if
the foregoing shall not be a primary U.S. Government securities dealer in New
York City (a "Primary Treasury Dealer"), the Company shall substitute therefor
another Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to the
Reference Treasury Dealer and any date of redemption, the average, as determined
by the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by the Reference Treasury Dealer at 5:00 p.m. on the
third Business Day preceding such date of redemption.
"Regular Record Date" for the interest payable on any Interest Payment
Date March 10 or September 10 (whether or not a Business Day), as the case may
be, next preceding such Interest Payment Date.
"Release Percentage" has the meaning specified in Section 1109.
"Release Price" has the meaning specified in Section 1109.
"Remaining Average Life" means, with respect to any Bond, the principal
of which is to be redeemed (the "Called Principal"), the number of years
(calculated to the nearest one-twelfth year) obtained by dividing (i) such
Called Principal into (ii) the sum of the products obtained by multiplying (a)
the principal component of each Remaining Scheduled Payment (as defined below)
with respect to such Called Principal by (b) the number of years (calculated to
the nearest one-twelfth year) that will elapse between the date on which such
Called Principal is to be redeemed (the "Settlement Date") and the scheduled due
date of such Remaining Scheduled Payments. For purposes of this definition, the
term "Remaining Scheduled Payments" means, with respect to the Called Principal
of any Bond, all payments of such Called Principal and interest thereon that
would be due after the Settlement Date with respect to such Called Principal if
no payment of such Called Principal were made prior to its scheduled due date.
"Responsible Officer" when used with respect to the Trustee means any
officer of the Trustee assigned to administer this Indenture.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.
"Stated Maturity" when used with respect to any Bond or any instalment
of interest thereon means the date specified in such Bond as the fixed date on
which the principal of such Bond or such instalment of interest is due and
payable.
"Subsidiary" means any corporation a majority of the Voting Shares of
which is at the time owned directly or indirectly by the Company or by the
Company and one or more of its Subsidiaries and which has total assets in excess
of $25,000.
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"trust estate" means all of the property, rights, privileges, or
franchises (except property held by the Trustee for the payment or redemption of
particular Bonds) which at the time in question is subject or intended to be
subject to the lien of this Indenture whether such lien be created by the
Granting Clause hereof or by subsequent conveyance or delivery to or pledge with
the Trustee hereunder or otherwise.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
as of the date hereof.
"Vessel" shall mean any vessel which shall be subjected to the lien of
this Indenture either by this instrument as originally executed or by any
supplemental indenture hereto, in each case so long as such vessel remains
subject to the lien of this Indenture.
"vessel" shall mean any vessel which is eligible to be mortgaged under
Chapter 313, as from time to time in effect.
"Voting Shares" means outstanding shares of capital stock having voting
power for the election of directors, whether at all times or only so long as no
senior class of stock has such voting power because of default in dividends or
other default.
Section 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent, if
any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such
certificate or opinion has read such covenant or condition and the
definitions herein relating thereto;
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such
individual, he has made such examination or investigation as is
necessary to enable him to express an informed opinion as to whether or
not such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each
such individual, such condition or covenant has been complied with.
Section 103. General and Special Provisions Regarding Certificates
and Opinions, Etc.
Any certificate or opinion of an Engineer, Appraiser or other expert
required to be delivered to the Trustee under any provision of this Indenture
may be signed by an Engineer, Appraiser or other expert who is an
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officer or employee of the Company or a Subsidiary, except that certificates or
opinions to be furnished the Trustee in the following cases shall be signed by
an independent Engineer, Appraiser or other expert:
(1) A certificate or opinion of an Engineer,
Appraiser or other expert as to the fair value of any property or
securities to be released from the lien of the Indenture, if the fair
value of such property or securities and of all the other property or
securities released since the commencement of the then current calendar
year, as set forth in the certificates or opinions required by Article
Eleven, is ten percent (10%) or more of the aggregate principal amount
of the Bonds at the time outstanding; but such a certificate or opinion
of an independent Engineer, Appraiser or other expert shall not be
required in the case of any release of property or securities if the
fair value thereof as set forth in the certificate or opinion required
by Article Eleven is less than $25,000 or less than one per cent (1%)
of the aggregate principal amount of the Bonds at the time outstanding.
(2) A certificate or opinion of an Engineer,
Appraiser or other expert as to the fair value to the Company of any
property the subjection of which to the lien of this Indenture is to be
made the basis for the authentication and delivery of Bonds, the
withdrawal of cash constituting a part of the trust estate or the
release of property or securities subject to the lien of this
Indenture, if
(a) within six months prior to the date of
acquisition thereof by the Company, such property has
been used or operated, by a Person or Persons other
than the Company, in a business similar to that in
which it has been or is to be used or operated by the
Company, and
(b) the fair value to the Company of such
property as set forth in such certificate or opinion
is $25,000 or more and is one percent (1%) or more of
the aggregate principal amount of the Bonds at the
time outstanding.
In the case of the authentication and delivery of Bonds, such
certificate shall also cover the fair value to the Company of any
property so used or operated which has been so subjected to the lien of
this Indenture since the commencement of the then current calendar
year, and as to which a certificate or opinion of an independent
Engineer, Appraiser or other expert has not previously been furnished.
(3) A certificate or opinion of an Engineer,
Appraiser or other expert as to the fair value to the Company of any
securities (other than Bonds and securities secured by a lien prior to
the lien of this Indenture upon property subject to the lien of this
Indenture), the deposit of which with the Trustee is to be made the
basis for the authentication and delivery of Bonds, the withdrawal of
cash constituting a part of the trust estate, or the release of
property or securities subject to the lien of this Indenture, if the
fair value to the Company of such securities and of all other such
securities made the basis of any such authentication and delivery,
withdrawal, or release since the commencement of the then current
calendar year, as set forth in the certificates or opinions required by
the provisions of this Indenture, is ten percent (10%) or more of the
aggregate principal amount of Bonds at the time outstanding and, in the
case of the authentication and delivery of Bonds, such certificate or
opinion shall also cover the fair value to the Company of all other
such securities so deposited since the commencement of the then current
calendar year and as to which a certificate or opinion of an
independent Engineer, Appraiser or other expert has not previously been
furnished; but such a certificate or opinion of an independent
Engineer, Appraiser or other expert shall not be required with respect
to any securities so deposited, if the fair value thereof to the
Company as set forth in the certificate or opinion required by the
provisions of this Indenture is less than $25,000 or less than one
percent (1%) of the aggregate principal amount of the Bonds at the time
outstanding.
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Section 104. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon the written advice or opinion of
legal counsel, unless such officer knows, or in the exercise of reasonable care
should know, that the written advice or opinion with respect to matters upon
which his written advice or opinion is based are erroneous. Any such written
advice or Opinion of Counsel may be based, insofar as it relates to factual
matters, upon a certificate or opinion of, or representations by, an officer or
officers of the Company stating that the information with respect to such
factual matters is in the possession of the Company, unless such counsel knows,
or in the exercise of reasonable care should know, that the certificate or
opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Any Opinion of Counsel required by Section 901, 1002 or 1105 may state
that the conclusions set forth therein are subject to qualification with respect
to the effect of certain laws and judicial decisions upon the remedies provided
in this Indenture which, in the opinion of such Counsel, will not materially
interfere with the practical realization of the benefits of the security
provided hereby and to the further qualification that the rights and remedies of
the Trustee and the Holders are also subject to any applicable bankruptcy,
insolvency, reorganization or other laws or judicial decisions relating to or
affecting the enforcement of creditors' rights and that the availability of the
remedy of specific performance or of injunctive relief is subject to the
discretion of the court before which any proceeding therefor may be brought.
Section 105. Act of Holders.
(a) Any request, demand, authorization, direction,
notice, consent, waiver or other action provided by this Indenture to
be given or taken by Holders may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed by such Holders
in person or by agent duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Trustee, and, where
it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced whereby) are
herein sometimes referred to as the "Act" of the Holders signing such
instrument or instruments. Proof of execution of any such instrument or
of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 601) conclusive in
favor of the Trustee and the Company and any agent of the Trustee or
the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person
of any such instrument or writing may be proved by the affidavit of a
witness of such execution or by the certificate of any notary public or
other officer authorized by law to take acknowledgments of deeds,
certifying that the individual signing such instrument or writing
acknowledged to him the execution thereof. Where such execution is by
an officer of a corporation or association or a member of a partnership
or an official of a public or governmental body, on behalf of such
corporation, association, partnership, or public or governmental body
or by a fiduciary, such certificate or affidavit shall also constitute
sufficient proof of his authority.
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(c) The fact and date of the execution by any Person
of any such instrument or writing, or the authority of the person
executing the same, may also be proved in any other manner which the
Trustee deems sufficient and in accordance with such reasonable rules
as the Trustee may determine
(d) The ownership of Bonds shall be proved by the
Bond Register.
(e) Any request, demand, authorization, direction,
notice, consent, waiver or other action by the Holder of any Bond shall
bind every future Holder of the same Bond and the Holder of every Bond
issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done or suffered to
be done by the Trustee, any Bond Registrar, any Paying Agent or the
Company in reliance thereon, whether or not notation of such action is
made upon such Bond.
Section 106. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall
be sufficient for every purpose hereunder if made, given, furnished or
filed in writing by registered or certified mail to or with the Trustee
at its Corporate Trust Office and shall not be effective until actual
receipt by a Responsible Officer, or
(2) the Company by the Trustee or by any Holder shall
be sufficient for every purpose hereunder if in writing and mailed, by
registered or certified mail, postage prepaid, to the Company addressed
to it at 300 Pike Street Cincinnati, Ohio 45202, Attention of the
Secretary, with a copy to 9 Riverside Road, Weston, Massachusetts
02193, Attention of the Secretary, or at any other address previously
furnished in writing to the Trustee by the Company.
Section 107. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Bond Register, not later than
the latest date, and not earlier than the earliest date, prescribed for the
giving of such notice. In any case where notice to Holders is given by mail,
neither the failure to mail such notice, nor any defect in any notice so mailed,
to any particular Holder shall affect the sufficiency of such notice with
respect to other Holders. Where this Indenture provides for notice in any
manner, such notice may be waived in writing by the Person entitled to receive
such notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
Section 108. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Indenture by any of
the provisions of the Trust Indenture Act, such required provision shall
control.
Section 109. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
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Section 110. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
Section 111. Separability Clause.
No provision of this Indenture, of the Assignment or of the Bonds is
intended or shall be construed to be a waiver of the preferred status of this
Indenture under Chapter 313, or in derogation of any of the benefits,
privileges, rights or remedies provided for by said Act. If any provision of
this Indenture or of any of the foregoing instruments should be held by a court
of competent jurisdiction to be inconsistent, at variance, or in conflict with
the provisions of this Section, then such provision shall be deemed to be of no
force or effect, and the provisions of this Section shall prevail over and
supersede such provision.
Section 112. Benefits of Indenture.
Nothing in this Indenture or in the Bonds, express or implied, shall
give to any Person, other than the parties hereto, and their successors and
assigns hereunder and the Holders of Bonds, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
Section 113. Governing Law.
This Indenture and the Bonds shall be governed by and construed in
accordance with the laws of the United States, to the extent applicable, and
otherwise in accordance with the law of the State of New York.
ARTICLE II
BOND FORMS
Section 201. Forms Generally.
The Bonds and the Trustee's certificate of authentication thereon shall
be substantially in the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Bonds, as
evidenced by their execution of the Bonds.
The definitive Bonds shall be printed, lithographed or engraved or
produced by any combination of these methods on a steel engraved border or steel
engraved borders or may be produced in any other manner permitted by the rules
of any securities exchange on which the Bonds may be listed, all as determined
by the officers executing such Bonds, as evidenced by their execution of such
Bonds.
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Section 202. Form of Face of Bond.
MIDLAND ENTERPRISES INC.
% FIRST PREFERRED SHIP MORTGAGE BOND DUE 2018
$ . . . . No. . . . .
MIDLAND ENTERPRISES INC., a Delaware corporation (hereinafter called
the "Company", which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay
to___________, or registered assigns, the principal sum of ___________ Dollars
on September 25, 2018, and to pay interest thereon from 1998, or if this Bond is
dated after the most recent Interest Payment Date to which interest has been
paid or duly provided for, from the most recent such Interest Payment Date, or
if this Bond be dated between a Record Date specified below and the Interest
Payment Date in respect thereof and the interest due on said Interest Payment
Date is paid, from such Interest Payment Date, semi-annually on March 25 and
September 25 in each year, commencing March 25, 1999, at the rate of % per
annum, until the principal hereof is paid or duly provided for. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in said Indenture, be paid to the Person in whose name this
Bond (or one or more Predecessor Bonds, as defined in said Indenture) is
registered at the close of business on the Regular Record Date for such
interest, which shall be March 10 or September 10 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for shall forthwith cease to be
payable to the registered Holder on such Regular Record Date, and may be paid to
the Person in whose name this Bond (or one or more Predecessor Bonds) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Bonds not less than 15 days prior to such Special Record
Date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Bonds may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in such Indenture. Payment of the principal of (and premium, if
any) and interest on, this Bond will be made at the office or agency of the
Company in the Borough of Manhattan, The City of New York, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that payment
of interest may be made at the option of the Company by check mailed to the
address of the Person entitled thereto as such address shall appear on the Bond
Register.
Reference is hereby made to the further provisions of this Bond set
forth on the reverse hereof which further provisions shall for all purposes have
the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
The Chase Manhattan Bank, the Trustee under the Indenture, or its successor
thereunder, by the manual signature of one of its authorized officers, this Bond
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
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IN WITNESS WHEREOF, the Company has caused this Bond to be signed by
its President or one of its Vice Presidents by a facsimile of his signature and
has caused a facsimile of its corporate seal to be imprinted hereon and to be
attested by its Secretary or one of its Assistant Secretaries by a facsimile of
his signature.
Dated ___________________________
MIDLAND ENTERPRISES INC.
[SEAL]
By_______________________________
President
Attest:
- ------------------------------
Secretary
Section 203. Form of Reverse of Bond.
This Bond is one of a duly authorized issue of Bonds of the Company
designated as its % First Preferred Ship Mortgage Bonds Due 2018 (herein called
the "Bonds"), limited in aggregate principal amount to $75,000,000, issued under
and secured by an indenture dated as of , 1998 (herein called the "Indenture"),
between the Company and The Chase Manhattan Bank, as Trustee (herein called the
"Trustee", which term includes any successor trustee under the Indenture) to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights thereunder of the Company, the Trustee
and the Holders of the Bonds, for a description of the property securing the
Bonds and the nature and extent of the security provided thereby and the terms
upon which the Bonds are, and are to be, authenticated and delivered.
The Bonds are subject to redemption upon not less than 30 nor more than
60 days' notice by mail, at any time in whole or in part, on a pro rata basis,
at the election of the Company, at a Redemption Price equal to the greater of
(1) 100% of the principal amount of such Bonds or (2) as determined by an
Independent Investment Banker, the sum of the present values of the remaining
scheduled payments of principal and interest thereon discounted to the
Redemption Date on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate; together with accrued and
unpaid interest to the Redemption Date (but interest installments whose Stated
Maturity is on the Redemption Date will be payable to the Holders of such Bonds,
or one or more Predecessor Bonds, of record at the close of business on the
relevant Record Date referred to on the face hereof), all as provided in the
Indenture; provided, however, that the Company may not designate as a Redemption
Date any date between a Record Date and the Interest Payment Date with respect
thereto.
The Sinking Fund provides for the redemption on September 25 in each
year beginning with the year 2003 and continuing to and including 2018 of
$4,687,500 principal amount of Bonds ("Sinking Fund"), on notice as set forth
above, at the principal amount thereof, together, in each case, with interest
accrued thereon to the date fixed for redemption. Bonds acquired or redeemed by
the Company otherwise than through the Sinking Fund may be credited against
subsequent Sinking Fund requirements.
In the event of redemption of this Bond in part only, a new Bond or
Bonds for the unredeemed portion hereof shall be issued in the name of the
Holder hereof upon the cancellation hereof.
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If an Event of Default, as defined in the Indenture, shall occur, and
be continuing, the principal of all the Bonds may be declared due and payable in
the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Bonds under the Indenture at
anytime by the Company with the consent of the Holders of a majority in
aggregate principal amount of the Bonds at the time outstanding, as defined in
the Indenture. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Bonds at the time out
standing, as defined in the Indenture, on behalf of the Holders of all the
Bonds, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the lndenture and their consequences.
Any such consent or waiver by the Holder of this Bond shall be conclusive and
binding upon such Holder and upon all future Holders of this Bond and of any
Bond issued upon the transfer hereof or in exchange herefor or in lieu hereof
whether or not notation of such consent or waiver is made upon this Bond.
No reference herein to the Indenture and no provision of this Bond or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Bond at the times, place, and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, this Bond is transferable on the Bond Register of the Company, upon
surrender of this Bond for registration of transfer at the principal office or
agency of the Trustee in the Borough of Manhattan, City of New York, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Bond Registrar duly executed by, the Holder
hereof or his attorney duly authorized in writing, and thereupon one or more new
Bonds of authorized denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees.
The Bonds are issuable only as registered Bonds without coupons in a
minimum denomination of $1,000 and in integral multiples thereof. As provided in
the Indenture and subject to certain limitations therein set forth, Bonds are
exchangeable for a like aggregate principal amount of Bonds of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange but the Company may require payment of a sum sufficient to reimburse
it for any stamp tax or other governmental charge payable in connection
therewith.
The Company, the Trustee and any agent of the Company may treat the
Person in whose name this Bond is registered as the owner hereof for all
purposes whether or not this Bond be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse for the payment of the principal of (or premium, if any) or
the interest on this Bond, or for any claim based hereon or otherwise in respect
hereof, or based on or in respect of the Indenture or any indenture supplemental
thereto, shall be had against any incorporator, stockholder, officer or
director, as such, past, present or future, of the Company or of any predecessor
or successor corporation, whether by virtue of any constitution, statute or rule
of law or equity, or by the enforcement of any assessment or penalty or
otherwise, all such personal liability of every such incorporator, stockholder,
officer or director, as such, being, by the acceptance hereof and as part of the
consideration for the issue hereof, expressly waived and released by every
Holder or owner hereof, as more fully provided in the Indenture.
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Section 204. Form of Trustee's Certificate of Authentication.
This is one of the Bonds referred to in the within-mentioned Indenture.
The Chase Manhattan Bank,
as Trustee
By___________________________
Authorized Officer
ARTICLE III
THE BONDS
Section 301. Title and Terms.
The aggregate principal amount of Bonds which may be authenticated and
delivered under this Indenture is limited to $75,000,000, except for Bonds
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of other Bonds pursuant to Sections 304, 305, 306, and 1206.
The Bonds shall be known and designated as in the title of the form of
Bond hereinbefore set forth. Their Stated Maturity shall be September 25, 2018.
The Bonds shall bear interest at the rate of percent ( . %) per annum, payable
on March 25 and September 25 in each year, from the date specified in the form
hereinbefore recited until the principal thereof is paid or duly provided for.
The principal of and the interest on the Bonds shall be payable at the
office or agency of the Company in the Borough of Manhattan, The City of New
York (the "Place of Payment"), provided, however, that payment of interest may
be made at the option of the Company by check mailed to the address of the
person entitled thereto as such address shall appear on the Bond Register.
Section 302. Denominations.
The Bonds shall be issuable only in registered form without coupons in
a minimum denomination of $1,000 and in any integral multiples thereof approved
by the Company.
Section 303. Execution, Delivery and Dating.
The Bonds shall be executed on behalf of the Company by its President
or one of its Vice Presidents under its corporate seal reproduced thereon and
attested by its Secretary or one of its Assistant Secretaries. The signature of
any of these officers on the Bonds may be manual or facsimile.
Bonds bearing the manual or facsimile signature of individuals who were
at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Bonds or did not hold
such offices at the date of such Bonds.
Each Bond shall be dated the date of its authentication.
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No Bond shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Bond a
certificate of authentication substantially in the form provided for herein
executed by or on behalf of the Trustee by the manual signature of an authorized
signatory, and such certificate upon any Bond shall be conclusive evidence, and
the only evidence, that such Bond has been duly authenticated and delivered
hereunder.
Section 304. Temporary Bonds.
Pending the preparation of definitive Bonds, the Company may execute,
and upon Company Order the Trustee shall authenticate and deliver, temporary
Bonds which are printed, lithographed, typewritten, mimeographed or otherwise
produced, in any denomination, substantially of the tenor of the definitive
Bonds in lieu of which they are issued and with such appropriate insertions,
omissions, substitutions and other variations as the officers executing such
Bonds may determine, as evidenced by their execution of such Bonds.
If temporary Bonds are issued, the Company will cause definitive Bonds
to be prepared without unreasonable delay. After the preparation of definitive
Bonds, the temporary Bonds shall be exchangeable for definitive Bonds upon
surrender of the temporary Bonds at the office or agency of the Company in a
Place of Payment, without charge to the Holder. Upon surrender for cancellation
of any one or more temporary Bonds the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor a like principal amount of
definitive Bonds of authorized denominations. Until so exchanged, the temporary
Bonds shall in all respects be entitled to the same benefits under this
Indenture as definitive Bonds.
Section 305. Registration, Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (herein sometimes referred to as the "Bond Register") in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of Bonds and of transfers of Bonds. The
Trustee is hereby appointed "Bond Registrar" for the purpose of registering
Bonds and transfers of Bonds as herein provided.
Upon surrender for registration of transfer of any Bond at the
Corporate Trust Office of the Trustee, the Company shall execute, and the
Trustee shall authenticate and deliver, in the name of the designated transferee
or transferees, one or more new Bonds of any authorized denominations, of a like
aggregate principal amount.
At the option of the Holder, Bonds may be exchanged for other Bonds of
any authorized denominations, of a like aggregate principal amount, upon
surrender of the Bonds to be exchanged at such office or agency. Whenever any
Bonds are so surrendered for exchange, the Company shall execute, and the
Trustee shall authenticate and deliver, the Bonds which the Holder making the
exchange is entitled to receive.
All Bonds surrendered upon any exchange or for registration of transfer
provided for in this Indenture shall be promptly cancelled by the Trustee and
thereafter disposed of in accordance with the Trustee's customary procedures.
All Bonds issued upon any registration of transfer or exchange of Bonds
shall be the valid obligations of the Company, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Bonds surrendered
upon such registration of transfer or exchange.
Every Bond presented or surrendered for registration of transfer or
exchange shall (if so required by the Company or the Bond Registrar) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Bond Registrar duly executed, by the Holder
thereof or his attorney duly authorized in writing.
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No service charge shall be made for any registration of transfer or
exchange of Bonds, but the Company may require payment of a sum sufficient to
reimburse it for any stamp tax or other governmental charge that may be imposed
in connection with any transfer or exchange of Bonds, other than exchanges
pursuant to Section 304 or 1206 not involving any transfer.
Section 306. Mutilated, Destroyed, Lost and Stolen Bonds.
If (i) any mutilated Bond is surrendered to the Trustee, or the Company
and the Trustee receive evidence to their satisfaction of the destruction, loss
or theft of any Bond, and (ii) there is delivered to the Company and the Trustee
such security or indemnity as may be required by them to save each of them
harmless, then, in the absence of notice to the Company or the Trustee that such
Bond has been acquired by a bona fide purchaser, the Company shall execute and
upon its request the Trustee shall authenticate and deliver, in exchange for or
in lieu of any such mutilated, destroyed, lost or stolen Bond, a new Bond of
like tenor and principal amount, bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Bond has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Bond, pay such Bond.
Upon the issuance of any new Bond under this Section, the Company may
require the payment of a sum sufficient to reimburse it for any stamp tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Bond issued pursuant to this Section in lieu of any
destroyed, lost or stolen Bond shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Bond shall be at any time enforceable by anyone, and shall be entitled to
all the benefits of this Indenture equally and proportionately with any and all
other Bonds duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Bonds.
Section 307. Payment of Interest; Interest Rights Preserved.
Interest on any Bond which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name that Bond (or one or more Predecessor Bonds) is registered at the close of
business on the Regular Record Date, which shall be the fifteenth day (whether
or not a Business Day) of the calendar month next preceding the Interest Payment
Date.
Any interest on any Bond which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date (herein called "Defaulted
Interest") shall forthwith cease to be payable to the registered Holder on the
relevant Regular Record Date by virtue of having been such Holder; and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any
Defaulted Interest to the Persons in whose names the Bonds (or their
respective Predecessor Bonds) are registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest,
which shall be fixed in the following manner: The Company shall notify
the Trustee in writing in the amount of Defaulted Interest proposed to
be paid on each Bond and the date of the proposed payment, and at the
same time the Company shall deposit with the Trustee an amount of money
equal to the aggregate amount proposed to be paid in respect of such
Defaulted Interest or shall make arrangements satisfactory to the
Trustee for such deposit prior to the date of the proposed payment,
such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this Clause provided.
Thereupon the Trustee shall fix a Special Record Date for the payment
of such Defaulted Interest which shall not be
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more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such Special Record Date and, in the
name and at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first-class, postage prepaid, to each Holder at
his address as it appears in the Bond Register not less than 10 days
prior to such Special Record Date. The Trustee may, in the name and at
the expense of the Company, cause a similar notice to be published at
least once in newspapers customarily published in the English language
on each Business Day and of general circulation in the Borough of
Manhattan, The City of New York, but such publication shall not be a
condition precedent to the establishment of such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been mailed as aforesaid, such
Defaulted Interest shall be paid to the Persons in whose names the
Bonds (or their respective Predecessor Bonds) are registered on such
Special Record Date and shall no longer be payable pursuant to the
following Clause (2).
(2) The Company may make payment of any Defaulted
Interest in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Bonds may be
listed, and upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustee of the proposed
payment pursuant to this Clause, such payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Bond
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of one or more Predecessor Bonds shall carry all the rights to
interest accrued and unpaid and to accrue, which were carried by the whole or
such part, as the case may be, of such one or more Predecessor Bonds.
Section 308. Persons Deemed Owners.
Prior to due presentment of a Bond for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name any Bond is registered as the owner of such Bond for the
purpose of receiving payment of principal of, and premium, if any, and interest
on, such Bond and for all other purposes whatsoever, whether or not such Bond be
overdue, and neither the Company, the Trustee nor any agent of the Company or
the Trustee shall be affected by notice to the contrary.
Section 309. Cancellation.
All Bonds surrendered for payment or registration of transfer or
exchange shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee, and any such Bonds and Bonds surrendered directly to
the Trustee for any such purpose shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Bonds previously
authenticated and delivered hereunder which the Company may have acquired in any
manner whatsoever, and all Bonds so delivered shall be promptly cancelled by the
Trustee. The Company may at any time by an Application request the Trustee to
cancel any Bonds acquired with Deposited Moneys pursuant to Section 1106. No
Bonds shall be authenticated in lieu of or in exchange for any Bonds cancelled
as provided in this Section, except as expressly permitted by this Indenture.
All cancelled Bonds held by the Trustee shall be disposed of as directed by a
Company Order. The Trustee shall dispose of all cancelled Bonds in accordance
with its customary procedures.
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ARTICLE IV
SATISFACTION AND DISCHARGE
Section 401. Discharge of Indebtedness by Certain Payments.
If the Company shall pay and discharge or provide for the payment and
discharge of the entire indebtedness evidenced by the Bonds outstanding
hereunder in any one or more of the following ways, to wit:
(a) by well and truly paying or causing to
be paid the principal of and interest and premium, if
any, payable on the Bonds outstanding under this
Indenture as and when the same shall have become due
and payable by their terms or by call for redemption
as herein provided or providing for such payment by
depositing in trust for such purpose with the Trustee
the entire amount so to become due and payable; or
(b) by depositing with the Trustee in trust
for that purpose, at or before maturity, the entire
amount due and to become due on Bonds outstanding
under this Indenture for principal and interest
(other than interest for the payment of which cash
has theretofore been deposited in trust with the
Trustee) to maturity; or
(c) by delivering to the Trustee for
cancellation all the Bonds outstanding under this
Indenture;
and if the Company shall also pay or cause to be paid all other sums payable by
the Company hereunder, the Trustee on demand of the Company and at the cost and
expense of the Company shall execute proper instruments acknowledging
satisfaction of and discharging this Indenture.
In the event of any satisfaction and discharge by the Trustee pursuant
to the provisions of this Article, the right, title and interest of the Trustee
and the Holders of the Bonds in and to any cash or other property held under
this Indenture (other than cash or other property deposited with or paid to the
Trustee under this Section 401) and the estate and rights in and to the trust
estate shall cease and determine and the Trustee shall in such case transfer,
deliver, pay over and release the same to or upon the written order of the
Company.
Section 402. Money Deposited with Trustee to Be Held in Trust.
All moneys deposited with the Trustee pursuant to Section 401 shall be
held in trust and applied by it to the payment, either directly or through any
Paying Agent, to the Holders of the Bonds of all sums due thereon.
ARTICLE V
REMEDIES
Section 501. Default, Acceleration, Rescission of Acceleration.
The following events are hereby defined for all purposes of this
Indenture as "Events of Default", namely:
(a) failure to pay the principal of, or
premium (if any) on, any Bond when and as the same
shall become due and payable, whether at maturity as
therein expressed, upon proceedings for redemption,
by declaration or otherwise;
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(b) failure to pay interest on any Bond for
a period of 30 days after such interest shall have
become due and payable;
(c) failure to discharge or satisfy any
Sinking Fund obligation for a period of 30 days after
such obligation shall have become due;
(d) failure to perform or observe any other
of the covenants, agreements or conditions on the
part of the Company in this Indenture or in any of
the Bonds contained, and the continuance of such
failure for a period of 90 days after written notice
thereof to the Company by the Trustee or to the
Company and to the Trustee by the Holders of not less
than 25% in principal amount of the Bonds then
outstanding;
(e) either (1) the entry of an order
approving a petition seeking reorganization of the
Company upon the basis of insolvency or inability to
pay debts as they mature under the Federal bankruptcy
laws or any other applicable law or statute of the
United States of America or any State thereof; or (2)
the appointment in any judicial proceeding upon the
application of any creditor or creditors of a trustee
or a receiver of all or a substantial part of the
trust estate; and the continuance of such order or
appointment unstayed and in effect for a period of 90
days;
(f) the adjudication of the Company as a
bankrupt by any court of competent jurisdiction or
the filing by the Company of a voluntary petition in
bankruptcy or the making by the Company of an
assignment for the benefit of creditors or the
admission by the Company in writing of its inability
to pay its debts as they become due, the consent by
the Company to the appointment in any judicial
proceedings upon the application of any creditor or
creditors of a receiver or trustee of all or a
substantial part of the trust estate; the filing by
the Company of a petition or answer seeking
reorganization or readjustment on the basis of
insolvency or inability to pay debts as they mature
under the Federal bankruptcy laws or any other
applicable law or statute of the United States of
America or of any State thereof; or the filing by the
Company of a petition to take advantage of any
insolvency act; or
(g) the rendering against the Company of a
judgment for the payment of moneys in excess of the
sum of $5,000,000 and the continuance of such
judgment unsatisfied and without stay of execution
thereon for a period of 90 days after the entry of
such judgment, or the continuance of such judgment
unsatisfied for a period of 90 days after the
termination of any stay of execution thereon entered
within such first mentioned 90 days; but only in
either case if such judgment shall have been
continued unstayed or unsatisfied for a period of 10
days after written notice of default hereunder shall
have been given to the Company by the Trustee, or to
the Company and the Trustee by the Holders of not
less than 25% in principal amount of the Bonds then
outstanding.
An Event of Default shall be deemed for all purposes of this Indenture
to have been cured and made good and no longer to exist when the act or omission
or other event giving rise to such Event of Default shall have been remedied or
terminated whether before or after the expiration of any grace period or the
giving of any notice. Any proceeding instituted by the Trustee based on an Event
of Default may in the discretion of the Trustee continue notwithstanding the
curing thereof except as otherwise provided in the last paragraph of sub-section
(1) of Section 502. If an Event of Default is waived as provided in Section 522,
such Event of Default shall be deemed to have been cured.
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In case one or more of such Events of Default exist and so long as it
shall continue to exist, then, in each and every case, unless the principal of
all the Bonds shall have already become due and payable, either the Trustee (by
notice in writing to the Company) or the Holders of not less than 25% in
principal amount of the Bonds outstanding (by notice in writing to the Company
and the Trustee) may declare the principal of all the Bonds then outstanding,
and the interest accrued thereon, to be due and payable immediately, and upon
any such declaration the same shall become and be immediately due and payable,
anything in this Indenture or in any of the Bonds contained to the contrary
notwithstanding.
This provision, however, is subject to the condition that, if at any
time after the principal of all the Bonds shall have been so declared due and
payable, and before any sale of all or any substantial part of the trust estate
shall have been made, all arrears of interest upon all the Bonds, with interest,
so far as the same may be legally enforceable, on overdue instalments of
interest at the same rates respectively borne by the Bonds the interest on which
shall be in default, together with the reasonable charges and expenses of the
Trustee, its agents and attorneys, and all other sums which may have become due
and payable by the Company under this Indenture, other than the principal of
such Bonds as shall not have become due and payable by their terms (other than
upon such declaration) or upon call for redemption, shall either be paid by the
Company to those entitled thereto (or to the Trustee for their account) or be
collected out of the income from or earnings of the trust estate, and all other
Events of Default known to the Trustee under the Bonds or under this Indenture
shall be made good or be cured to the satisfaction of the Trustee, or provision
deemed by the Trustee to be adequate shall be made therefor, or shall have been
waived as in Section 522 provided, then and in every such case the Holders of
not less than a majority in principal amount of the Bonds then outstanding, by
written notice to the Company and to the Trustee, before any sale of all or any
substantial part of the trust estate pursuant to the provisions of this Article,
may annul any such declaration and its consequences.
The Trustee may exercise all rights and remedies in foreclosure and
otherwise given to mortgagees by Chapter 313, and all acts amendatory thereof
and supplemental thereto, and nothing contained in the Charter shall in any way
limit or restrict the exercise of such rights and remedies by the Trustee.
Section 502. Powers of Trustee upon an Event of Default.
In case one or more Events of Default enumerated in Section 501 shall
have occurred and be continuing, then and in each and every such case the
Trustee, personally or by its attorneys or agents, is hereby authorized and
empowered, whether or not the principal of the Bonds shall have matured or been
declared due, to exercise any one or more of the following remedies, and to do
or cause to be done any or all of the following acts and things, namely:
(1) The Trustee, personally or by agents or
attorneys, may take any Vessels without legal process and without being
responsible for loss or damage, wherever they may be, and the Company
or other Person in possession shall forthwith surrender possession
thereof upon demand of the Trustee, and the Trustee personally or by
its agents or attorneys may enter into and upon all or any Vessels, and
may exclude the Company, its agents and servants wholly therefrom; and
having and holding the same, subject to the provisions of Chapter 313,
may use, operate, manage and control said property, and may hold, lay
up, lease, charter, operate or otherwise use such Vessels for such
time, upon such terms and in any service (excluding the Great Lakes of
the United States except as fully permitted by the United States Coast
Guard) as the Trustee, its agents or attorneys may elect, either in the
name of the Company or otherwise as it shall deem best, in like manner
as the Company itself might, and for the benefit of the Holders of the
Bonds then outstanding, and may, at the expense of the property
subjected to the lien of this Indenture, from time to time, maintain
and restore and insure or keep insured said property, in the same
manner and to the same extent as is usual in companies in the same or
similar lines of business as that of the Company, and make all
necessary or proper repairs, renewals and replacements, useful
alterations, additions, betterments and improvements thereto and
thereon as to it may seem judicious; and the Trustee likewise shall be
entitled to collect and receive all hire, freights, earnings, revenues,
profits
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and income of, or arising out of the operation of management of, the
said property; and after deducting the expenses of operation, and of
conducting the business thereof and of all repairs, maintenance,
renewals, replacements, alterations, additions, betterments and
improvements and all payments which may be made for taxes, assessments,
insurance, and prior or other proper charges thereupon, as well as just
and reasonable compensation for its own services and for all agents,
attorneys and counsel, clerks, servants and other employees by it
properly engaged and employed, the Trustee shall apply the moneys
arising as aforesaid as follows:
(a) In case the principal of none of the
Bonds shall have become due, to the payment of the
interest in default, in the order of the maturity of
the instalments of such interest, with interest, so
far as the same may be legally enforceable, on the
overdue instalments thereof at the same rates
respectively borne by the Bonds the interest on which
shall be in default, such payments to be made ratably
to the parties entitled thereto without
discrimination or preference.
(b) In case the principal of any, but not
all, of the Bonds shall have become due, first to the
payment of the interest in default, in the order of
the maturity of the instalments thereof, with
interest, so far as the same may be legally
enforceable, on the overdue instalments thereof at
the same rates respectively borne by the Bonds the
interest on which shall be in default, and next to
the payment of the principal and premium, if any, of
all Bonds then due, with interest on the overdue
principal and premium, if any, at the rates specified
in the respective Bonds, such payments to be made
ratably to the parties entitled thereto without
discrimination or preference.
(c) In case the principal of all of the
Bonds shall have become due, by declaration or
otherwise, then as provided in Paragraph SECOND of
Section 511.
In case all payments provided for in Clauses (a) and (b) above and any other
payments required by any provision of this Indenture shall have been made in
full, and no sale shall have been made as hereinafter provided, and all other
Events of Default shall have been made good, the Trustee shall surrender
possession of the trust estate (other than cash and/or property required to be
held by the Trustee hereunder) to the Company or whomsoever shall be entitled
thereto, and in such case this Indenture shall continue in full force and effect
until discharged as herein provided.
(2) The Trustee may (if such action shall at the time
be permitted by law), with or without entry, sell, subject to the prior
liens, if any, then existing thereon, or free from such of said liens
as the Trustee in its discretion may elect to discharge, the trust
estate and all the right, title, interest, claim and demand of the
Company therein and thereto, and the right of redemption thereof, to
the highest and best bidder, at public auction, at such times and
places and upon such conditions as to upset or reserve bids or prices
and as to terms of payment and other terms of sale as the Trustee may
fix, or as may be required by law, including power and authority to the
Trustee to rescind or vary any contract of sale that may be entered
into and to resell under the powers herein conferred.
(3) The Trustee may proceed to protect and enforce
its rights and the rights of the Holders under this Indenture by a suit
or suits in equity or at law or by suit in admiralty in rem or in
personam, whether for the specific performance of any covenant or
agreement contained in this Indenture, or in aid of the execution of
any power granted in this Indenture, or for the foreclosure of this
Indenture, or for the enforcement of any other appropriate legal or
equitable remedy or remedy in admiralty as the Trustee being advised by
counsel shall deem most effectual to protect and enforce any of the
rights aforesaid.
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Section 503. Right of Judicial Sale; Appointment of Receiver.
In case the Trustee shall proceed by suit or suits at law or in equity,
or suit in admiralty, after an Event of Default, it shall be entitled to have
the trust estate sold by judicial sale or sales under the orders, judgments or
decrees of a court or courts of competent jurisdiction, or under execution or
other legal process, for or toward the satisfaction of the principal and
interest then due or owing on the Bonds then outstanding, and for the
enforcement of the rights, liens and benefits of the Trustee and the Holders,
and shall be entitled, pending any such suit or proceedings, as a matter of
right, to the appointment of a receiver of the trust estate and of the hire,
freights, earnings, revenues, profits and income thereof, with such powers as
the court making such appointment may confer; but, notwithstanding the
appointment of any receiver, the Trustee shall be entitled as pledgee to the
possession and control of any cash at the time deposited or pledged with, or
required by the provisions hereof to be deposited and pledged with, the Trustee.
Section 504. Sale as Entirety or in Parcels.
In the event of any sale under this Article, whether made under the
power of sale herein granted or by virtue of judicial proceedings, the whole of
the trust estate shall be sold in one parcel and as an entirety, unless such
sale as an entirety, in the judgment of the Trustee, shall not be practicable or
desirable in the interest of the Holders, or unless the Holders of not less than
a majority in principal amount of the Bonds then outstanding shall in writing
request the Trustee to cause the trust estate to be sold in parcels, or the
court entering the decree of sale shall so direct, in which case the sale shall
be made in such parcels and in such order as in the former case the Trustee
shall determine and in the latter case as may be specified in such request or
decree, but, if not so specified, as the Trustee shall determine. The Company,
for itself, its successors and assigns, and for all Persons hereafter claiming
through or under it or them or who may at any time hereafter become holders of
liens junior to the lien of the Indenture, hereby expressly waives and releases
all right to have the trust estate or any part thereof marshaled upon any
foreclosure, sale or other enforcement hereof; and the Trustee or any court in
which the foreclosure of this Indenture or the administration of the trusts
hereby created is sought shall have the right as aforesaid to sell the entire
trust estate as a whole in a single parcel, unless otherwise required by law.
Any sale may be conducted without bringing the Vessels to the place of sale.
Section 505. Notice of Sale.
Notice of any sale pursuant to any provision of this Article shall
state the time and place when and where the same is to be made, shall contain a
brief general description of the property to be sold and shall briefly state the
terms of the sale, and shall be sufficiently given (unless otherwise required by
law) if published in the manner provided in Section 1303 once each week for four
successive calendar weeks prior to such sale in the Borough of Manhattan, City
of New York.
Section 506. Adjournment of Sale.
The Trustee may adjourn from time to time any sale to be made by it
under the provisions of this Indenture by announcement at the time and place
appointed for such sale or for such adjourned sale or sales, and, without
further notice or publication (unless otherwise required by law), it may make
such sale at the time and place to which the same may be adjourned.
Section 507. Purchaser Not Liable for Application of Purchase
Money.
The receipt or receipts of the Trustee or of the court officer
conducting any such sale for the purchase money paid at or under any such sale
shall be a sufficient discharge therefor to any purchaser of the property or any
part thereof sold as aforesaid; and no such purchaser, or his representatives,
grantees, or assigns, after paying such purchase money and receiving such
receipt, shall be bound to see to the application of such purchase money upon or
for any trust or purpose of this Indenture, or in any manner whatsoever be
answerable for any loss,
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misapplication or non-application of any such purchase money or any part
thereof, or be bound to inquire as to the authorization, necessity, expediency
or regularity of any such sale.
Section 508. Application of Bonds Toward Purchase Price, etc.
Upon any sale, as aforesaid, any purchaser, for the purpose of making
settlement or payment for the property purchased, shall be entitled to use and
apply any Bonds then outstanding, and any matured and unpaid interest
appertaining thereto or claims for interest thereon, by presenting the same so
that there may be credited, as paid thereon, the sums payable out of the net
proceeds of such sale to the Holder of such Bonds or claims as his ratable share
of such net proceeds after allowing for the proportion of the total purchase
price required to be paid in cash for the cost and expenses of the sale,
compensation and other charges; and thereupon such purchaser shall be credited
on account of such purchase price payable by him with the portion of such net
proceeds that shall be applicable to the payment of, and that shall have been
credited upon, the Bonds, and claims so presented; and at any such sale any
Holder or Holders may, subject to compliance with applicable law, bid for and
purchase such property, and make payment on account thereof as aforesaid, and,
upon compliance with the terms of sale, may hold, retain and dispose of such
property without further accountability therefor.
Section 509. Conveyance of Property to Purchaser.
Upon the completion of any sale or sales under or by virtue of this
Indenture, the Trustee shall execute and deliver to the purchaser a good and
sufficient deed or other instruments conveying, assigning and transferring the
property sold. The Trustee is hereby irrevocably appointed the true and lawful
attorney of the Company, in its name and stead, to make all necessary
conveyances, assignments and transfers of property thus sold; and for that
purpose may execute all necessary deeds and instruments of conveyance,
assignment and transfer, and may substitute one or more persons with like power,
the Company hereby ratifying and confirming all that its said attorney, or such
substitute or substitutes, shall lawfully do by virtue hereof. Nevertheless, the
Company, if so requested by the Trustee, shall ratify and confirm any such sale
or sales by executing and delivering to the Trustee or to such purchaser or
purchasers all such instruments as may be necessary or in the judgment of the
Trustee proper for the purpose as may be designated in such request.
Section 510. Sale a Bar Against Company.
Any such sale or sales, whether made under the power of sale herein
granted or pursuant to judicial proceedings, shall operate to divest all right,
title, interest, claim and demand whatsoever, either at law or in equity or in
admiralty, of the Company in and to the vessels sold, and shall be a perpetual
bar at law, in equity and in admiralty against the Company, its successors and
assigns, and against all and any persons now or hereafter claiming the vessels
sold or any part thereof from, through or under the Company or its successors or
assigns.
Section 511. Application of Proceeds of Sale.
The purchase money, proceeds and avails of any sale, whether made under
the power of sale herein granted or pursuant to judicial proceedings, together
with any other sums which then may be held by the Trustee under any provision of
this Indenture as part of the trust estate or the proceeds thereof, shall be
applied in the following order:
FIRST: To the payment of the costs and expenses of
such sale and all amounts due to the Trustee, its agents, attorneys and
counsel pursuant to Section 607;
SECOND: To the payment of the whole amount then owing
and unpaid upon the Bonds then outstanding for principal, premium, if
any, and interest, with interest, so far as the same may be legally
enforceable, on overdue principal, premium, if any, and overdue
installments of interest at the same rates, respectively, as were borne
by the respective Bonds, and, in case such proceeds shall be
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insufficient to pay in full the whole amount so due and unpaid upon the
Bonds, then to the payment of such principal, premium and interest,
without preference or priority of one over the other, or of any
installment of interest over any other installment of interest, ratably
to the aggregate of such principal, premium, if any, and unpaid
interest. Such payments shall be made on the date fixed therefor by the
Trustee upon presentation of the several Bonds and stamping such
payment thereon, if partly paid, and upon surrender and cancellation
thereof, if fully paid; and
THIRD: To the payment of the surplus, if any, to the
Company, its successors or assigns, or to whomsoever may be lawfully
entitled to receive the same, or as a court of competent jurisdiction
may direct.
Section 512. Acceleration of Maturity of Bonds upon Sale.
In case of any sale of the trust estate or any part thereof under this
Article, whether made under the power of sale herein granted or pursuant to
judicial proceedings, the principal of all the Bonds, if not previously due,
together with all accrued and unpaid interest thereon, immediately thereupon
shall become due and payable, anything in the Bonds or in this Indenture
contained to the contrary notwithstanding.
Section 513. Covenants of Company to Pay Bonds with Interest if Any Is Due;
Proof of Debt by Trustee; Recovery of Judgment by Trustee and Application of
Proceeds.
The Company covenants that in case it shall fail to pay the interest on
any Bond or Bonds at any time outstanding, and/or to pay the principal of or
premium, if any, on any such Bonds when the same shall have become payable,
whether at the maturity of said Bonds or otherwise as herein provided, then the
Company will pay to the Trustee at its Corporate Trust Office for the benefit of
the Holders of the Bonds then outstanding, the whole amount then due and payable
on all such Bonds then outstanding for interest, principal and premium, if any,
with interest upon the overdue principal and premium, if any, and overdue
installments of interest, so far as the same may be legally enforceable at the
same rate, as was borne by the respective Bonds; and, in case the Company shall
fail to pay the same forthwith, the Trustee shall be entitled in its own name
and as trustee of an express trust to recover judgment against the Company or
any other obligor upon the Bonds for the whole amount so due and unpaid.
The Trustee shall be authorized in its own name and as trustee of an
express trust, or as attorney-in-fact for the Holders, to file such proofs of
claim and other papers or documents as may be necessary or advisable in order to
have the claims of the Trustee and of the Holders allowed in any judicial
proceedings relative to the Company or any other obligor upon the Bonds or the
property of the creditors of the Company or of any such obligor. The Trustee is
hereby appointed, and the Holders, by taking and holding the Bonds, shall be
conclusively deemed to have so appointed the Trustee, the true and lawful
attorney-in-fact of the Holders with authority to make and file, in any such
proceeding, in the names of the Holders or in behalf of the Holders as a class
(subject to deduction from any such claim of the amounts of any claims filed by
any Holders themselves), any proof of debt, amendment to proof of debt, petition
or other document, to receive payment of any sums becoming distributable on
account thereof, and to execute any other papers and documents and to do and
perform any and all such acts and things as may be necessary or advisable, in
the opinion of the Trustee, in order to have the claims of the Holders against
the Company or any obligor upon the Bonds allowed in any such proceeding. The
Trustee shall have full power of substitution and delegation in respect of any
such powers.
Nothing herein shall be deemed, however, to give power to the Trustee
to vote the claims of the Holders in any such proceeding, or to accept or
consent to or reject any plan of reorganization, readjustment, arrangement, or
composition or other like plan, or by other action of any character in any such
proceeding to waive or change any right of any Holder.
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The Trustee shall be entitled to recover judgment or make or file proof
of debt as aforesaid either before or after or during the pendency of any
proceedings for the enforcement of the lien of this Indenture and the right of
the Trustee to recover such judgment or make such proof of debt shall not be
affected by any entry or sale hereunder, or by the exercise of any other right,
power or remedy for the enforcement of the provisions of this Indenture or the
foreclosure of the lien hereof. In the case of a sale of the trust estate, and
of the application of the proceeds of sale to the payment of the indebtedness
hereby secured, the Trustee in its own name and as trustee of an express trust
shall be entitled to enforce payment of and to receive all amounts then
remaining due and unpaid upon any and all of the Bonds then outstanding, for the
benefit of the Holders thereof, and shall be entitled to recover judgment or
make or file proof of debt for any portion of the indebtedness remaining unpaid,
with interest, as aforesaid. No recovery of any such judgment by the Trustee,
nor any attachment or levy of execution under any such judgment upon the trust
estate or any part thereof, or upon any other property, nor any such proof of
debt, shall in any manner or to any extent affect the lien of this Indenture
upon the trust estate or any part thereof, or any lien, rights, powers, or
remedies of the Trustee, or of the Holders of the Bonds, but such lien, rights,
powers and remedies shall continue unimpaired as before.
Any moneys collected by the Trustee under this Section shall be applied
in the following order:
FIRST: To the payment of the costs and expenses of
the proceedings resulting in the collection of such moneys, the
reasonable compensation of the Trustee, its agents, attorneys and
counsel, and of all necessary or proper expenses, liabilities and
advances made or incurred by the Trustee, without negligence or bad
faith, under this Indenture or in executing any trust or power
hereunder; and
SECOND: To the payment of the amounts then due and
unpaid upon the Bonds and for interest in respect whereof such moneys
shall have been collected, ratably and without any preference or
priority of any kind, according to the amounts due and payable upon
such Bonds and for interest, respectively, to the date fixed by the
Trustee for the distribution of such moneys, upon presentation of the
several Bonds and stamping such payment thereon, if partly paid, and
upon surrender and cancellation thereof, if fully paid.
Section 514. Proceedings by Trustee to Protect Security.
The Trustee, when requested by the Holders of not less than a majority
in principal amount of the Bonds then outstanding, shall have power to institute
and to maintain such suits and proceedings as it may be advised by counsel shall
be necessary or expedient to prevent any impairment of the security hereunder by
any acts of the Company, or of others, which are unlawful, or as to which it may
be advised by counsel shall be necessary or expedient to preserve or protect its
interest and the interests of the Holders in respect of the trust estate, and in
respect of the hire, freights, earnings, revenues, profits and income arising
therefrom, including the power to institute and to maintain suits or proceedings
to restrain the enforcement of, or compliance with, or the observance of, any
legislative, municipal or other governmental enactment, rule, or order that may
be or may appear to the Trustee to be unconstitutional or otherwise invalid, if
such enforcement, compliance or observance would impair the security hereunder
or be prejudicial to the interests of the Holders or of the Trustee.
Section 515. Payment by Receiver or Holders of Amounts Payable by
Company.
Upon failure of the Company so to do, either any receiver appointed
hereunder, or the Holders of not less than 25% in principal amount of the Bonds
then outstanding, may make any payment (other than of the principal, premium, if
any, interest and/or any Sinking Fund installment in respect of the Bonds) which
the Company by any provision of this Indenture agrees to make or cause to be
made, and the Company covenants and agrees that it will forthwith repay to such
receiver or Holders all moneys which such receiver or Holders shall so pay, and
will pay interest thereon from the date of such payment by such receiver or
Holders until the repayment thereof at the same rate as was borne by the Bonds;
and until so paid such advances shall be secured by a lien
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under this Indenture upon the trust estate, in preference to the Bonds. No such
payment by any such receiver or by Holders shall be deemed to relieve the
Company from the consequences of any default hereunder.
Section 516. Waiver of Stay or Extension Laws, etc.
In case one or more Events of Default shall exist, the Company agrees,
to the extent it may lawfully do so, that it will not at any time insist upon,
plead, or in any manner whatever claim, take or insist upon the benefit or
advantage of any stay or extension law now or at any time hereafter in force;
nor will it claim, take or insist upon any benefit or advantage of any law now
or at any time hereafter in force providing for the valuation or appraisement of
the trust estate or any part thereof prior to any sale or sales thereof to be
made pursuant to any provisions herein contained or to the decree, judgment or
order of any court of competent jurisdiction; nor after any such sale or sales
will it claim or exercise any right under or conferred by any law now or at any
time hereafter in force to redeem the property sold or any part thereof; and it
hereby expressly waives, renounces and relinquishes all benefit and advantage of
any and all such stay, extension, valuation, appraisement and redemption law or
laws; and it hereby covenants that it will not hinder, delay or impede the
execution of any power herein granted or delegated to the Trustee, but that it
will suffer and permit the execution of every such power as though no such law
or laws had been made or enacted.
Section 517. Waiver of Service of Process and Consent to Entry of
Judgment by Company.
In case one or more Events of Default shall exist, the Company, for
itself, its successors and assigns, hereby expressly covenants to and with the
Trustee that, at and immediately upon the commencement of any action, suit or
other legal proceeding by the Trustee, pursuant to the provisions hereof, (1) to
obtain possession of the trust estate, or any part thereof, the Company, its
successors and assigns, shall and will, severally, waiving the issuance and
service of process, enter its or their voluntary appearance in such action, suit
or proceeding, and consent to the entry of a judgment for the recovery and
possession of the trust estate and every part thereof; (2) for the foreclosure
of the lien of this Indenture, the Company, its successors and assigns, shall
and will, severally, waiving the issuance and service of process, enter its or
their voluntary appearance in such action, suit or proceeding and consent to the
appointment of a receiver of the trust estate and the hire, freights, earnings,
revenues, profits and income thereof for the sole benefit of the Holders of the
Bonds; and (3) to obtain judgment for the principal of, premium, if any, or
interest on any Bonds or for both, or to obtain a judgment or decree of any
other nature in aid of the enforcement of the Bonds or of this Indenture, the
Company, its successors and assigns, shall and will, severally, waiving the
issuance and service of process, enter its or their voluntary appearance in such
action, suit or proceeding and consent to the entry of a judgment for such
principal, premium, if any, and/or interest, with interest on overdue principal
and installments of interest, and for the lawful costs and expenses and
compensations of the Trustee and its agents and attorneys, and for such other
relief as the Trustee may be entitled to under the provisions hereof.
Section 518. Surrender of Possession of Trust Estate to Trustee or
Receiver.
Upon application of the Trustee and with the consent of the Company, if
no Event of Default shall exist, and without such consent if one or more Events
of Default shall exist, a receiver may be appointed to take possession of, and
to operate, maintain and manage the trust estate or any part thereof, and the
Company shall transfer and deliver to such receiver possession of the trust
estate, wheresoever the same may be situated; but, notwithstanding the
appointment of any receiver, the Trustee shall be entitled as pledgee to the
possession and control of any cash at the time held by, or payable or
deliverable under the provisions of this Indenture to, the Trustee. In every
case, when a receiver of the whole or any part of the trust estate shall be
appointed under this Section or otherwise, the hire, freights, earnings,
revenues, profits and income of the trust estate shall be paid over to, and
shall be received by, the Trustee for the benefit of the Holders of the Bonds.
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Section 519. Rights of Holders to Control Proceedings by Trustee.
The Holders of not less than a majority in aggregate principal amount
of the Bonds then outstanding shall, if they so elect and manifest such election
by an instrument or concurrent instruments in writing executed and delivered to
the Trustee, have the right if an Event of Default shall exist (1) to require
the Trustee to proceed to enforce the lien of this Indenture, either by suit or
suits at law, in equity or in admiralty for the enforcement of the payment of
the Bonds then outstanding hereunder and for the foreclosure of this Indenture
and for the sale of the trust estate under the judgment or decree of a court of
competent jurisdiction, or at the election of the Trustee by exercise of its
powers with respect to entry or sale, and (2) to direct and control the time,
method and place of conducting any and all proceedings for any remedy available
to the Trustee, or exercising any trust or power conferred upon the Trustee,
under this Indenture; provided, however, that, subject to Section 601, nothing
in this Indenture shall require the Trustee without its consent to enter into or
take possession of any tangible part of the trust estate, or to transfer into
its name any securities pledged hereunder, and that any such direction shall not
be otherwise than in accordance with the provisions of law and this Indenture,
and, subject to Section 601, the Trustee shall not be responsible to anyone for
any action taken or omitted by it in good faith pursuant to any such direction;
and, provided, further, that, subject to Section 601, the Trustee shall have the
right to decline to follow any such direction if, being advised by counsel, the
Trustee shall determine that the action or proceeding so directed may not be
lawfully taken or if the Trustee in good faith shall by Responsible Officers
determine that the action or proceeding so directed would involve it in personal
liability or be unjustifiably prejudicial to the nonassenting Holders, or that
it will not be sufficiently indemnified for any expenditures in such action or
proceeding.
Section 520. Limitation on Holders' Right to Sue.
(A) No Holder of any Bond issued hereunder shall have
the right to institute any suit, action or proceeding in equity or at
law or in admiralty for the foreclosure of this Indenture, or for the
execution of any trust or power hereof, or for the appointment of a
receiver, or for the enforcement of any other remedy under or upon this
Indenture, unless
(1) such Holder shall have previously given
to the Trustee written notice of the existence of an
Event of Default, as hereinbefore provided;
(2) the Holders of not less than 25% in
principal amount of the Bonds at the time outstanding
shall, after the right to exercise such powers, or
right of action, as the case may be, shall have
accrued, have requested the Trustee in writing to
act;
(3) such Holder or Holders shall have
offered to the Trustee security and indemnity
satisfactory to it against the costs, expenses and
liabilities to be incurred therein or thereby,
without negligence or bad faith; and
(4) the Trustee shall have refused or
neglected to comply with such request for a period of
60 days after receipt of such request.
(B) Nothing in this Indenture shall impair the
obligation of the Company, which is absolute and unconditional, to pay
the principal of and premium, if any, and interest on each of the Bonds
to the respective Holders thereof at the time and place specified in
said Bonds, or without the consent of any Holder shall impair the right
of such Holder, which is also absolute and unconditional, to receive
payment of the principal of and premium, if any, and interest on such
Bond on or after the respective due dates thereof as therein expressed,
or to institute suit for the enforcement of any such payment on or
after such respective dates, except that no such Holder shall have any
right to institute such suit, if and to the extent that the institution
or prosecution thereof or the entry of judgment therein would, under
applicable law, result in the surrender, impairment, waiver or loss of
the lien of this Indenture upon any property
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subject to such lien, and no Holder may, by virtue of this subsection
B, institute any action for the foreclosure of this Indenture or to
enforce any other right given by this Indenture to the Trustee for the
protection of the Holders of the Bonds and Trustee.
Section 521. Waiver of Period of Grace by Company.
The Company, by a resolution of the Board filed with the Trustee, may
waive any period of grace provided for in this Article.
Section 522. Waiver of Certain Defaults by Holders.
The Holders of 25% or more in principal amount of the Bonds then
outstanding may, by written instrument or instruments delivered to the Trustee
and to the Company, waive any past default or Event of Default hereunder and its
consequences, except a default in the payment of the principal of, premium, if
any, or interest on any of the Bonds as and when the same shall become due by
the terms of such Bonds and upon such waiver such default or Event of Default
shall be deemed not to exist for any purpose of this Indenture.
Section 523. Delay or Omission in Exercising Remedy Not Waiver of
Default.
No delay or omission of the Trustee or of any Holder of Bonds to
exercise any right or power arising from any default shall impair any such right
or power or shall be construed as a waiver of such default or an acquiescence
therein, nor shall any waiver of any default or Event of Default affect or
impair the rights of the Trustee or of such Holders in respect of any subsequent
default on the part of the Company or impair any right resulting therefrom; and
every right, power and remedy given by this Article to the Trustee or to the
Holders, respectively, may be exercised from time to time and as often as may be
deemed expedient by the Trustee or by the Holders, respectively.
Section 524. Effect of Abandonment of Foreclosure or Other
Proceedings.
In case the Trustee shall have proceeded to enforce any right, power or
remedy under this Indenture, by foreclosure or otherwise, and such proceedings
shall have been discontinued or abandoned because of any waiver as in this
Article provided or for any other reason, or shall have been determined
adversely to the Trustee, then and in each and every such case the Company and
the Trustee shall be restored to their former positions and rights hereunder,
and all rights, powers and remedies of the Trustee shall continue as though no
such proceedings had been taken.
Section 525. Remedies Cumulative.
Unless herein expressly provided to the contrary, no remedy herein
conferred upon or reserved to the Trustee or the Holders of the Bonds is
intended to be exclusive of any other remedy, but each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or in admiralty or by
statute; and the employment of any remedy hereunder or otherwise shall not
prevent the concurrent employment of any other appropriate remedy or remedies.
Section 526. Rights of Action Enforceable by Trustee Without
Possession or Production of Bonds.
All rights of action under this Indenture may be enforced by the
Trustee, to the extent permitted by the provisions hereof, without the
possession of any of the Bonds or the production thereof on the trial or other
proceedings relative thereto.
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Section 527. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Bond by his
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the outstanding Bonds, or to
any suit instituted by any Holder for the enforcement of the payment of the
principal of or interest on any Bond on or after the respective due dates
expressed in such Bond.
Section 528. Remedies in Article Five Subject to Applicable Laws.
All of the rights, remedies and powers provided for in this Article may
be exercised only to the extent that the exercise thereof does not violate any
applicable provisions of law in the premises, and all of the provisions of this
Article are intended to be subject to all applicable mandatory provisions of law
that may be controlling in the premises and to be limited to the extent
necessary in order that they will not render this Indenture invalid or
unenforceable in whole or in part or prevent the recording or filing thereof
under the provisions of any applicable law.
ARTICLE VI
THE TRUSTEE
Section 601. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of
Default,
(1) the Trustee undertakes to perform such
duties and only such duties as are specifically set
forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against
the Trustee; and
(2) in the absence of bad faith on its part,
the Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions
expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the
requirements of this Indenture; but in the case of
any such certificates or opinions which by any
provisions hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under
a duty to examine the same to determine whether or
not they conform to the requirements of this
Indenture.
(b) In case an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers
vested in it by this Indenture, and use the same degree of care and
skill in their exercise, as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs.
(c) No provision of this Indenture shall be construed
to relieve the Trustee from liability for its own negligent action, its
own negligent failure to act, or its own wilful misconduct, except
that,
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(1) this Subsection shall not be construed
to limit the effect of Subsection (a) of this
Section;
(2) the Trustee shall not be liable for any
error of judgment made in good faith by a Responsible
Officer, unless it shall be proved that the Trustee
was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with
respect to any action taken or omitted to be taken by
it in good faith in accordance with the direction of
the Holders of a majority in principal amount of the
outstanding Bonds relating to the time, method and
place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under this
Indenture; and
(4) no provision of this Indenture shall
require the Trustee to expend or risk its own funds
or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the
exercise of any of its rights or powers, if it shall
have reasonable grounds for believing that repayment
of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it.
(d) Whether or not herein expressly so provided,
every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection of the Trustee shall be
subject to the provisions of this Section.
Section 602. Notice of Defaults and Other Specified Events.
Within 90 days after the occurrence of any default hereunder, the
Trustee shall transmit by mail to all holders of Bonds entitled to receive
reports under Section 703(c) notice of such default known to the Trustee, unless
such default shall have been cured or waived; provided, however, that, except in
the case of a default in the payment of the principal of, premium, if any, or
interest on any Bond, or in the payment of any Sinking Fund installment, the
Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee or a trust committee of directors
and/or Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interest of the Holders. For the purposes
of this Section, the term "default" means any event which is, or after notice or
lapse of time or both would become, an Event of Default.
Section 603. Certain Rights of Trustee.
Except as otherwise provided in Section 601:
(a) the Trustee may rely and shall be
protected in acting or refraining from acting upon
any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent,
order, bond, debenture or other paper or document
believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(b) any request or direction of the Company
mentioned herein shall be sufficiently evidenced by a
Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this
Indenture the Trustee shall deem it desirable that a
matter be proved or established prior to taking,
suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically
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prescribed) may, in the absence of bad faith on its
part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and
the written advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in
reliance thereon;
(e) the Trustee shall be under no obligation
to exercise any of the rights of powers vested in it
by this Indenture at the request or direction of any
of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by
it in compliance with such request or direction;
(f) the Trustee shall not be bound to make
any investigation into the facts or matters stated in
any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent,
order, bond, debenture or other paper or document,
but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or
matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or
investigation, it shall be entitled to examine the
books and records of the Company, personally or by
agent or attorney;
(g) the Trustee may execute any of the
trusts or powers hereunder or perform any duties
hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it
hereunder;
(h) the Trustee shall not be personally
liable in case of entry by it upon the trust estate
for debts contracted or liabilities or damages
incurred in the management or operation of the trust
estate; and
(i) except in the case of an Event of
Default defined in subsection 501(a) or (b), the
Trustee shall not be charged with knowledge of any
default or Event of Default unless either (i) a
Responsible Officer shall have actual knowledge
thereof, or (ii) the Trustee shall have received
written notice thereof from the Company or any Holder
of the Bonds.
Section 604. Not Responsible for Recitals or Issuance of Bonds.
The recitals contained herein and in the Bonds, except the certificate
of authentication, shall be taken as the statements of the Company, and the
Trustee assumes no responsibility for their correctness. The Trustee makes no
representations as to the value or condition of the trust estate or any part
thereof or as to the title of the Company thereto or as to the security afforded
hereby or thereby or as to the validity or sufficiency of this Indenture or of
the Bonds. The Trustee shall not be accountable for the use or application by
the Company of Bonds or the proceeds thereof or of any money paid to the Company
or upon Company Order under any provision hereof.
Section 605. May Hold Bonds.
The Trustee, any Paying Agent, Bond Registrar or any other agent of the
Company or the Trustee, in its individual or any other capacity, may become the
owner or pledgee of Bonds and, subject to Sections 608 and
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613, may otherwise deal with the Company with the same rights it would have if
it were not Trustee, Paying Agent, Bond Registrar or such other agent.
Section 606. Money Held in Trust.
Subject to the provisions of Section 1303, money held by the Trustee in
trust hereunder need not be segregated from other funds except to the extent
required by law. The Trustee shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed in writing with the
Company.
Upon the satisfaction and discharge of this Indenture, all moneys then
held by any Paying Agent other than the Trustee hereunder shall, upon demand of
the Company, be repaid to it and thereupon such Paying Agent shall be released
from all further liability with respect to such moneys.
Section 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time
reasonable compensation for all services rendered by it hereunder
(which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it
harmless against, any loss, liability or expense incurred without
negligence or bad faith on its part, arising out of or in connection
with the acceptance or administration of this trust, including the
costs and expenses of defending itself against any such claim or
liability in connection with the exercise or performance of any of its
powers or duties hereunder.
As security for the performance of the obligations of the Company under
this Section the Trustee shall have a lien under this Indenture prior to the
Bonds upon all property and funds held or collected by the Trustee as such,
except funds held in trust for the payment of principal of or interest on the
Bonds.
When the Trustee incurs expenses or renders services in connection with
an Event of Default specified in Section 501(f) or (g), the expenses and the
compensation for the services are intended to constitute expenses of
administration under any bankruptcy law.
The Company's obligations under this Section 607 and any lien arising
hereunder shall survive the resignation or removal of any Trustee, the
discharge of the Company's obligations pursuant to Article IV of this Indenture
and/or the termination of this Indenture.
Section 608. Disqualification; Conflicting Interests.
The Trustee shall be subject to the provisions of Section 310(b) of the
Trust Indenture Act during the period of time required thereby. Nothing herein
shall prevent the Trustee from filing with the Commission the application
referred to in the penultimate paragraph of Section 310(b) of the Trust
Indenture Act.
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Section 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a state
or national bank or trust company in good standing, organized and doing business
under the laws of the United States of America or of any State authorized under
such laws to exercise corporate trust powers, having a combined capital and
surplus of at least $5,000,000 and subject to supervision or examination by
Federal or State or District of Columbia authority. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section, it shall
resign immediately in the manner and with the effect hereinafter specified in
this Article.
Section 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the successor
Trustee under Section 611.
(b) The Trustee may resign at any time by giving
written notice thereof to the Company. If an instrument of acceptance
by a successor Trustee shall not have been delivered to the Trustee
within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for
the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of
the Holders of a majority in principal amount of the outstanding Bonds,
delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with
Section 608(a) after written request therefor by the
Company or by any Holder who has been a bona fide
Holder of a Bond for at least six months, or
(2) the Trustee shall cease to be eligible
or qualified under Section 609 and shall fail to
resign after written request therefor by the Company
or by any such Holder, or
(3) the Trustee shall become incapable of
acting or shall be adjudged a bankrupt or insolvent
or a receiver of the Trustee or of its property shall
be appointed or any public officer shall take charge
or control of the Trustee or of its property or
affairs for the purpose of rehabilitation,
conservation or liquidation.
then, in any such case, (i) the Company by a Board Resolution may
remove the Trustee, or (ii) subject to the provisions of Section 527,
any Holder who has been a bona fide Holder of a Bond for at least six
months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of
Trustee for any cause, the Company, by a Board Resolution, shall
promptly appoint a successor Trustee. In case all or substantially all
of the trust estate shall be in the possession of a receiver or trustee
lawfully appointed, such receiver or trustee by written instrument may
similarly appoint a successor to fill such vacancy until a new Trustee
shall be appointed by the
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Bondholders. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee
shall be appointed by Act of the Holders of a majority in principal
amount of the outstanding Bonds delivered to the Company and the
retiring Trustee, the successor Trustee so appointed shall, forthwith
upon its acceptance of such appointment, become the successor Trustee
and supersede the successor Trustee appointed by the Company or by such
receiver or trustee. If no successor Trustee shall have been so
appointed by the Company or the Holders and have accepted appointment
in the manner hereinafter provided, subject to Section 527, any Holder
who has been a bona fide Holder of a Bond for at least six months may,
on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
(f) The Company shall give notice of each resignation
and each removal of the Trustee and each appointment of a successor
Trustee by mailing written notice of such event by first-class mail,
postage prepaid, to the Holders of Bonds as their names and addresses
appear in the Bond Register. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
Section 611. Acceptance of Appointment of Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, power, trusts
and duties of the retiring Trustee; but, on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee, and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder, subject nevertheless to its lien, if any,
provided for in Section 607. Upon request of any such successor Trustee, the
Company shall execute any and all instruments from more fully and certainly
vesting in an confirming to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
Section 612. Merger, Conversion, Consolidation or Succession to
Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Bonds shall have been
authenticated, but not delivered, by or on behalf of the Trustee then in office,
any successor by merger, conversion or consolidation to such authenticating
Trustee may adopt such authentication and deliver the Bonds so authenticated
with the same effect as if such successor Trustee had itself authenticated such
Bonds.
Section 613. Preferential Collection of Claims Against Company.
The Trustee shall comply with Section 311(a) of the Trust Indenture
Act, excluding any creditor relationship listed in Section 311(b) of the Trust
Indenture Act. A Trustee who has resigned or been removed shall be subject to
Section 311(a) of the Trust Indenture Act to the extent indicated therein.
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ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701. Company to Furnish Trustee Names and Addresses of
Holders.
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 5 days after each
Regular Record Date, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders as of such Regular
Record Date, and
(b) at such other times as the Trustee may request in
writing, within 30 days after the receipt by the Company of any such
request, a list of similar form and content as of a date not more than
15 days prior to the time such list is furnished.
excluding from any such list names and addresses received by the Trustee in its
capacity as Bond Registrar.
Section 702. Preservation of Information; Communications to
Holders.
(a) The Trustee shall preserve, in as current a form
as is reasonably practicable, the names and addresses of Holders
contained in the most recent list furnished to the Trustee as provided
in Section 701 or received by the Trustee in its capacity as Bond
Registrar. The Trustee may destroy any list furnished to it as provided
in Section 701 upon receipt of a new list so furnished.
(b) Holders may communicate as provided in Section
312(b) of the Trust Indenture Act with other Holders with respect to
their rights under this Indenture or under the Bonds.
(c) Every Holder of Bonds, by receiving and holding
the same, agrees with the Company and the Trustee that neither the
Company nor the Trustee shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the
Holders in accordance with Section 702(b), regardless of the source
from which such information was derived, and that the Trustee shall not
be held accountable by reason of mailing any material pursuant to a
request made under Section 702(b).
Section 703. Reports by Trustee.
(a) Within 60 days after each May 15, the Trustee
shall, to the extent that any of the events described in Section 313(a)
of the Trust Indenture Act occurred within the previous twelve months,
but not otherwise, mail to each Holder a brief report dated as of such
date that complies with Section 313(a) of the Trust Indenture Act. The
Trustee also shall comply with Sections 313(b) and (c) of the Trust
Indenture Act.
(b) A copy of each such report shall, at the time of
such transmission to Holders, be filed by the Trustee with each stock
exchange upon which the Bonds are listed and also with the Commission.
The Company will notify the Trustee when the Bonds are listed on any
stock exchange.
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Section 704. Reports by Company.
The Company will
(1) file with the Trustee, within 15 days after the
Company is required to file the same with the Commission, copies of the
annual reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the Commission may
from time to time by rules and regulations prescribe) which the Company
may be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934; or, if the
Company is not required to file information, documents or reports
pursuant to either of said Sections, then it will file with the Trustee
and the Commission, in accordance with rules and regulations prescribed
from time to time by the Commission, such of the supplementary and
periodic information, documents and reports which may be required
pursuant to Section 13 of the Securities Exchange Act of 1934 in
respect of a security listed and registered on a national securities
exchange, as that term is used in the Securities Exchange Act of 1934,
as may be prescribed from time to time in such rules and regulations;
(2) file with the Trustee and the Commission, in
accordance with rules and regulations prescribed from time to time by
the Commission, such additional information, documents and reports with
respect to compliance by the Company with the conditions and covenants
of this Indenture as may be required from time to time by such rules
and regulations; and
(3) transmit by mail to all Holders, in the manner
and to the extent provided in Section 703(c) with respect to reports
pursuant to Section 703(a), within 30 days after the filing thereof
with the Trustee, such summaries of any information, documents and
reports required to be filed by the Company pursuant to paragraphs (1)
and (2) of this Section as may be required by rules and regulations
prescribed from time to time by the Commission.
ARTICLE VIII
CONSOLIDATION, MERGER AND SALE
Section 801. Company May Consolidate, etc., Only on Certain Terms.
Nothing contained in this Indenture or in the Bonds shall be deemed to
prevent the consolidation or merger of the Company with or into any other
Person, or the merger into the Company of any other Person, or the sale or
transfer by the Company of all or substantially all of its property and assets;
provided, however, (a) that any such consolidation, merger, sale or transfer
shall be upon such terms as shall fully preserve and in no respect impair the
lien or security of this Indenture or any of the rights or powers of the Trustee
or the Holders of the Bonds; (b) that, in case of any such consolidation or
merger, the Person resulting from such consolidation or any corporation other
than the Company into which such merger shall be made shall succeed to and be
substituted for the Company with the same effect as if it has been named herein
as the party of the first part hereto and shall become liable and be bound for,
and shall expressly assume, by an indenture supplemental hereto, in form
satisfactory to the Trustee, executed and delivered to the Trustee, the due and
punctual payment of the principal of and premium, if any, and interest on the
Bonds according to their tenor and the performance and observance of each and
every covenant and condition of this Indenture on the part of the Company to be
performed or observed; (c) that, as a condition of any such sale or transfer of
all or substantially all of the property and assets of the Company, the Person
to which such property and assets shall be sold shall (i) expressly assume, as a
part of the purchase price thereof, the due and punctual payment of the
principal of and premium, if any, and interest on the Bonds according to their
tenor and the performance and observance of each and every covenant and
condition of this Indenture on the part of the Company to be performed or
observed and (ii) simultaneously with the delivery to it of the conveyances or
instruments of sale or transfer of such property and assets, execute and deliver
to the Trustee an indenture supplemental hereto, in form satisfactory to the
Trustee, whereby such purchasing
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corporation or transferee shall so assume the due and punctual payment of the
principal of and premium, if any, and interest on the Bonds according to their
tenor and the performance and observance of each and every covenant and
condition of this Indenture on the part of the Company to be performed or
observed, to the same extent that the Company is bound and liable; and (d) that,
immediately after giving effect to such transaction, no Event of Default or
event which after notice or lapse of time or both would become an Event of
Default, shall have occurred or be continuing.
The Company will not consolidate with any other Person or merge into
any other Person, or sell or otherwise transfer all or substantially all of its
property and assets except upon the terms and conditions set forth in this
Article. Upon any consolidation or merger, or any sale or transfer of the
property and assets of the Company as, or substantially as, an entirety in
accordance with the provisions of this Article, the Person formed by such
consolidation or into which the Company shall have been merged or to which such
sale or other transfer shall have been made shall succeed to and be substituted
for the Company with the same effect as if it had been named herein as a party
hereto, and thereafter from time to time such Person may exercise each and every
right and power of the Company under this Indenture and under the Assignment, in
the name of the Company or in its own name; and any act or proceeding by any
provision of this Indenture required or permitted to be done by any board or
officer of the Company may be done with like force and effect by the like board
or officer of any corporation that shall at the time be the successor of the
Company hereunder.
The Trustee may conclusively rely and shall be protected in relying
upon an Opinion of Counsel that any such consolidation, merger, sale or transfer
and any such assumption of payment and performance complies with the provisions
of this Article.
ARTICLE IX
AUTHENTICATION AND DELIVERY OF BONDS
Section 901. Authentication and Delivery of Bonds.
Upon the execution and delivery of this Indenture, or from time to time
thereafter, Bonds up to the aggregate original principal amount of $75,000,000
may be executed by the Company and delivered to the Trustee for authentication
upon original issue, and shall thereupon be authenticated and delivered by the
Trustee upon Company Order dated the date of the delivery thereof, upon receipt
by and deposit with the Trustee of the documents referred to in Subsections (a),
(b), (e), (f) and (g) below and the satisfaction of the requirements set forth
in Subsections (c), (d) and (e) below:
(a) A Board Resolution requesting the authentication
by the Trustee of the Bonds then applied for.
(b) An Officers' Certificate dated the date of the
Company Order referred to above and which (i) contains the statements
required by Section 102, (ii) requests the authentication and delivery
under this Section of Bonds and specifies the aggregate principal
amount of such Bonds so to be authenticated and delivered and (iii)
states that neither a default nor an Event of Default has occurred and
is then continuing or would result from the authentication and delivery
of such Bonds.
(c) The Bonds so to be authenticated and delivered by
the Trustee, which Bonds shall have been duly executed by the Company
as provided herein and shall correspond to the description thereof set
forth in the Officers' Certificate required by Subsection (b) above.
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(d) Prior to or contemporaneously with the
authentication and delivery of the Bonds pursuant to this Section, the
Company shall subject to the lien of this Indenture all Vessels listed
on Schedule A.
(e) Cash in the amount required by Section 902, if
any, shall be deposited with the Trustee prior to or contemporaneously
with the authentication and delivery of the initial issue of Bonds
pursuant to this Section, together with an Officers' Certificate dated
the date of the Company Order referred to above and which (i) contains
the statements required by Section 102 and (ii) sets forth the
calculations on the basis of which the amount of such cash, if any, was
determined or on the basis of which it was determined that no cash need
be so deposited.
(f) An Opinion of Counsel, dated the date of the
Officers' Certificate required by Subsection (b) above and addressed to
the Trustee, containing the statements required by Section 102 and to
the effect that:
(i) the authentication and delivery of the
Bonds requested have been duly authorized by all
necessary corporate action on the part of the
Company, that all of the requirements of this
Indenture for the due authentication and delivery of
said Bonds have been duly complied with and that said
Bonds, when executed by the Company and authenticated
and delivered by the Trustee upon the Company Order
referred to above will be the legal, valid and
binding obligations of the Company, entitled to all
the benefits and security of this Indenture and the
lien hereof to the same extent as and on a parity
with, as to all of the trust estate, all Bonds
thereafter to be issued and outstanding;
(ii) the Vessels listed in Schedule A have
been duly documented under the laws of the United
States in the name of the Company;
(iii) this Indenture (a) has been duly
authorized, executed and delivered by the Company,
(b) constitutes the valid and binding obligation of
the Company enforceable in accordance with its terms,
(c) has been duly filed and recorded at the National
Vessel Documentation Center and (d) constitutes a
first preferred mortgage lien on each such Vessel
under the terms of Chapter 313;
(iv) the requirements, if any, of any
mortgage recording tax law or other tax law
applicable to the authorization, issuance,
authentication, sale or delivery of the Bonds
referred to in Subsection (c) of this Section have
been duly complied with, or that there are no such
requirements; and
(v) all consents, approvals and
authorizations of, and all filings and recordings
with, any governmental body, agency, commission or
instrumentality required in connection with the
authorization, issuance, authentication, sale or
delivery of the Bonds referred to in Subsection (c)
of this Section 901 or required in connection with
the creation of the lien intended to be created by
this Indenture and with the mortgaging of the Vessels
listed in Schedule A have been duly made or obtained,
or that no such consent, approval, authorization,
filing or recording is required.
Section 902. Deposit of Certain Sums.
Prior to or contemporaneously with the issue of Bonds pursuant to
Section 901, the Company shall deposit with the Trustee a sum in cash equal to
the amount, if any, by which the aggregate principal amount of the Bonds then
being issued and of the Bonds then outstanding exceeds the lesser of (i) the
aggregate of the Original
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Release Prices of the Vessels then subject to the lien of this Indenture or (ii)
75% of the aggregate fair value to the Company of the Vessels then subject to
the lien of this Indenture determined (with respect to each Vessel) as of the
date such Vessel shall have been subjected to the lien of this Indenture.
ARTICLE X
SUNDRY PROVISIONS
Section 1001. Possession and Use of Vessels.
So long as no Event of Default shall have occurred and be continuing,
the Trustee shall permit the Company, and the Company (or others to the extent
permitted by the Charter) shall be entitled, to retain actual possession and use
of the Vessels and the Company shall have the right, from time to time, in its
discretion, and without obligation to the Trustee or obtaining a release thereof
by the Trustee, to dispose of, free from the lien of this Indenture, any
machinery, tools, tackle, apparel, fittings or equipment or any other
appurtenances of any Vessel that are no longer useful, necessary, profitable or
advantageous in the operation of such Vessel, first or within a reasonable time
thereafter replacing the same by new machinery, tools, tackle, apparel, fittings
or equipment or other appurtenances of substantially equal value to the Company,
which shall forthwith become subject to the lien of this Indenture as a
preferred mortgage thereon.
Section 1002. Opinions of Counsel as to Filing and Recording of
Indenture and Supplemental Indentures.
Promptly after the execution and delivery of each supplemental
indenture, the Company will furnish to the Trustee an Opinion of Counsel stating
that in the opinion of such counsel the supplemental indenture has been properly
filed and recorded so as to make effective the lien intended to be created
thereby, and reciting the details of the action taken or stating that in the
opinion of such counsel no such action is necessary to make such lien effective.
At least annually after the execution and delivery of the Indenture,
the Company will furnish to the Trustee an Opinion of Counsel either stating
that in the opinion of such counsel such action has been taken with respect to
the recording, filing, re-recording, and refiling of the Indenture as is
necessary to maintain the lien of the Indenture, and reciting the details of
such action, or stating that in the opinion of such counsel no such action is
necessary to maintain such lien.
Section 1003. No Recourse Against Officers, Directors, etc.
No recourse for the payment of the principal of (or premium, if any) or
the interest on any Bond or for any claim based thereon or otherwise in respect
thereof, and no recourse under or upon any obligation, covenant or agreement of
this Indenture, or any supplemental indenture, or of any Bond, or for any claim
based thereon or otherwise in respect thereof, or because of the creation of any
indebtedness represented thereby, shall be had against any incorporator,
stockholder, officer or director, as such, past, present or future, of the
Company or of any predecessor or successor corporation, either directly or
through the Company or any such predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law or equity, or by the
enforcement of any assessment or penalty or otherwise; it being expressly
understood that this Indenture and any supplemental indenture and the Bonds and
all other obligations hereunder are solely corporate obligations, and that no
such personal liability whatever shall attach to, or is or shall be incurred by,
the incorporators, stockholders, officers or directors, as such, of the Company,
or of any predecessor or successor corporation, or any of them, because of the
creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or in any of
the bonds or implied therefrom; and that any and all such personal liability of
every such incorporator, stockholder, officer or director, as such, is hereby
expressly waived
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and released by every holder as a condition of, and as a consideration for, the
execution of this Indenture and the issue of such Bonds.
Section 1004. Amount of Obligations Secured.
For the purpose of 46 U.S.C. Section 31321(b)(3) and performance of the
covenants contained in this Indenture, the amount of the direct or contingent
obligations that are or may be secured by this Indenture, excluding interest,
premium (if any), expenses and fees is $75,000,000. The discharge amount is the
same as the total amount.
Section 1005. Detention of Vessels.
In the event that any Vessel shall be arrested or detained by a marshal
or other officer of any court of law, equity, or admiralty jurisdiction or by
any Government or other authority, and shall not be released from arrest or
detention within the time prescribed by the provisions of Section 1313, the
Company hereby authorizes and empowers the Trustee, by its duly appointed
representative, in the name of the Company or of its successors or assigns, to
apply for, claim, and receive or take possession of such Vessel or Vessels with
all rights and powers the Company, its successors or assigns, might have,
possess, and exercise in any such event. The power hereby granted shall be
irrevocable and may be exercised not only by said representative of the Trustee
but also by an appointee or appointees of such representative with full power of
substitution, to the same extent as if such appointee or appointees had been
named as one of the attorneys above named by express designation. The Company
also authorizes and empowers any Person duly acting under the provisions of
Article Five to appear, in the name of the Company, its successors or assigns,
in any court where a suit may be pending against the Company or against any of
the Vessels, because of or on account of any alleged lien against such Vessel
and from which it has not been released, and to take such action as they or any
of them may deem proper for the defense of such suit and for the release of such
Vessel. All expenditures and liabilities made or incurred by them or any of them
in the premises, without negligence or bad faith, shall be a debt due from the
Company to the Trustee, and shall be secured by the lien of this Indenture,
prior to the Bonds.
ARTICLE XI
RELEASE OF VESSELS; DISPOSITION OF DEPOSITED MONEYS
Section 1101. Releases; Substitutions of Vessels; Instruments to Be
Delivered to Trustee.
At any time after the Company shall have subjected to the lien of this
Indenture the Vessels described in Schedule A, the Company shall have the right
from time to time to sell or dispose of any of the Vessels, and the Trustee
shall release any Vessel so sold or disposed of from the lien of the Indenture,
but only upon receipt by the Trustee of the following:
(a) An Application of the Company requesting such
release and describing each Vessel so to be released (hereinafter in
this Section called "the specified Vessel");
(b) An Officers' Certificate to the effect that (i)
the Company has sold or disposed of, or has contracted to sell or
dispose of, the specified Vessel and desires to release the same from
the lien of the Indenture, (ii) such sale or disposition is desirable
in the conduct of the business of the Company and the specified Vessel
is no longer useful or necessary in the conduct of the business of the
Company, (iii) the Release Price of the specified Vessel is a stated
amount, computed as therein set forth, which amount has been computed
in accordance with the terms of this Indenture, (iv) such sale or other
disposition does not constitute, and is not being made in connection
with, the sale or other disposition of all or substantially all the
Vessels owned by the Company, (v) the Company is not in default in the
performance of any of the covenants on its part to be performed under
this Indenture and no default or
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Event of Default has occurred and is continuing, and (vi) in the
opinion of the signers, the proposed release will not impair the
security provided by this Indenture in contravention thereof;
(c) (i) If solely cash is being deposited with the
Trustee in connection with such release, cash in an amount equal to the
Release Price of the specified Vessel; (ii) if, contemporaneously with
the release of the specified Vessel, one or more vessels are being
subjected to the lien of this Indenture as security for the Bonds, the
documents referred to in Subsections (b), (c), (d) and (e) of Section
1105, with appropriate changes to reflect the substitution of vessels
provided hereby rather than the payment of Deposited Moneys, provided,
however, that the Original Release Price (assigned as provided in
Subsection (b) of Section 1109) for all vessels so subject shall be at
least equal to the Release Price of all specified Vessels being so
released; or (iii) if, contemporaneously with the release of the
specified Vessel, cash is being deposited plus one or more vessels are
being subjected to the lien of this Indenture as security for the
bonds, the documents and changes referred to in Subsection (c) (ii),
above, provided, however, that the sum of (m) the total, for all
vessels being so subjected, of the Original Release Price, plus (n) the
amount of cash being deposited with the Trustee shall be at least equal
to the sum of (x) the total, for all specified Vessels being so
released, of the Release Price of each thereof plus (y) the amount of
cash contemporaneously being paid over to the Company or upon its
written order out of Deposited Moneys as provided in Section 1105;
(d) An Opinion of Counsel to the effect that (i) the
documents which have been or are therewith delivered to the Trustee
conform to the requirements of this Indenture and (ii) the specified
Vessel may properly be released from the lien of the Indenture pursuant
to the provisions of this Section; and
(e) An Appraiser's Certificate dated not more than 30
days prior to the date of delivery to the Trustee of the Application of
the Company required by Subsection (a) above and which (i) conforms to
the requirements of Section 103, (ii) contains the statements required
by Section 102, (iii) states the fair value of each such Vessel at the
date of such Appraiser's Certificate and (iv) states that the proposed
release will not impair the security provided by this Indenture in
contravention of the provisions hereof.
Notwithstanding the foregoing provisions of this Section, the Trustee
shall release from the lien of this Indenture any Vessel which has become an
actual, constructive or agreed total loss at any time or from time to time, upon
receipt by the Trustee of (i) the documents described in Subsections (a), (d)
and, where required, (e) of this Section, (ii) an Officers' Certificate to the
same effect as clauses (iii), (v) and (vi) of the document described in
Subsection (b) of this Section, and (iii) subject to the provisions of the last
paragraph of Section 1105, payment of the insurance payment with respect to the
specified Vessel; provided, however, that until September 25, 2003 to the extent
that such insurance payment exceeds the Release Price of such Vessel, such
excess amount shall be paid over by the Trustee to or upon the written direction
of the Company, and the balance of such payment shall be held as Deposited
Moneys, except that, if to the knowledge of the Trustee, no default or Event of
Default shall have occurred and be continuing, the Trustee shall pay over to or
upon written direction of the Company, on October 10 each year, the part of the
balance of such payment which represents the excess over the Release Price of
such Vessel on such date. On September 24, 2003, the Trustee shall pay over to
or upon written direction of the Company the amount of Deposited Moneys then
held by the Trustee under the provisions of this paragraph up to an amount equal
to 5% of the aggregate principal amount of Bonds then outstanding.
No purchaser in good faith of any Vessel purporting to have been
released under this Section shall be bound to ascertain the authority of the
Trustee to execute the release, or to inquire as to any facts required by the
provisions of this Section for the exercise of such authority, or to see to the
application of any purchase money for any purpose of this Indenture.
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Section 1102. Releases after Event of Default with Consent.
The Company, while in possession of the Vessels, may effect the release
of any Vessel from the lien of the Indenture in accordance with the provisions
of Section 1101, notwithstanding that a default or Event of Default shall have
occurred and shall not have been remedied, if in each case the Trustee and the
Holders of 25% in principal amount of the Bonds at the time outstanding shall in
writing expressly authorize or consent to such release, in which event the
Officers' Certificate required by Subsection (b) of Section 1101 need not
contain the statement required by clause (v) thereof, but in lieu thereof shall
refer to such authorization or consent of the Holders.
Section 1103. Release at Request of a Receiver or Trustee.
In case the Vessels shall be in the possession of a receiver or trustee
lawfully appointed, the powers in Section 1101 conferred upon the Company with
respect to the sale or other disposition and release thereof may, to the extent
permitted by applicable law, be exercised by such receiver or trustee (subject
in the cases specified in Section 1102 to authorization or consent of the
Holders as provided therein), in which case a written request signed by said
receiver or trustee shall be deemed the equivalent of the Application of the
Company required by Subsection (a) of Section 1101 and a certificate signed by
such receiver or trustee shall be deemed the equivalent of the Officers'
Certificate required by Subsection (b) of Section 1101. If the Trustee shall be
in possession of the Vessels under any provisions of this Indenture, then such
powers may be exercised by the Trustee in its discretion.
Section 1104. Deposited Moneys.
All moneys received by the Trustee upon the release of any Vessel from
the lien of this Indenture, all moneys received by the Trustee as proceeds of
insurance upon any Vessel, all moneys, if any, received by the Trustee pursuant
to Section 902, and all moneys, if any, received by the Trustee the disposition
of which is not elsewhere in this Indenture otherwise specifically provided for
(all the above described moneys being in this Indenture sometimes called
"Deposited Moneys"), shall be held by the Trustee as further and additional
security for the Bonds. Unless an Event of Default shall have occurred and shall
not have been remedied, all or any part of the Deposited Moneys, at the request
and election of the Company, except as otherwise specifically provided in this
Indenture, may be withdrawn from or applied by the Trustee from time to time, as
provided in Section 1105. The withdrawal of any such moneys pursuant to the
provisions of this Indenture shall not effect a discharge of any obligation of
the Company under the Bonds or this Indenture, except to the extent that moneys
so withdrawn are applied to the payment and discharge of obligations of the
Company under the Bonds or this Indenture.
Section 1105. Withdrawal of Deposited Moneys; Instruments to Be
Delivered to Trustee.
Deposited Moneys at any time held by the Trustee shall be paid over to
or upon the direction of the Company by the Trustee upon receipt by the Trustee
of the following:
(a) An Application of the Company requesting the
Trustee to pay over to or as directed by the Company a specified amount
of Deposited Moneys;
(b) An Officers' Certificate to the effect that (i)
the Company has acquired, or contemporaneously with the requested
payment of the Deposited Moneys will acquire, a Vessel or Vessels, (ii)
the name (if any) and type, home port, official number, gross tonnage
and net tonnage of each such Vessel are as specified, (iii) the Company
owns and is possessed of each such Vessel, or contemporaneously with
the requested payment of the Deposited Moneys will own and be possessed
of the same, (iv) each such Vessel is, or contemporaneously with the
requested payment of the Deposited Moneys will be, free and clear of
all liens, charges and encumbrances whatsoever known to the signers,
except liens for wages of the master and crew which have not yet become
payable, liens for supplies for
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which payment is not yet due, and liens or demands arising out of
injuries or alleged injuries to seamen which in the opinion of the
signers are fully covered by insurance, (v) each such Vessel is, or
contemporaneously with the requested payment of the Deposited Moneys
will be, duly documented under and pursuant to the laws of the United
States, (vi) each such Vessel is in good condition and repair, ordinary
wear and tear excepted, seaworthy and in good working order, (vii)
insurance on each such Vessel has been effected or arranged for in full
compliance with the requirements of Section 1314, (viii) the Original
Release Price and Release Percentage assigned to each such Vessel are
as specified, (ix) each such Vessel is required for, or will be
advantageous in connection with, the conduct of the business of the
Company, and (x) the Company is not in default in the performance of
any of the covenants on its part to be performed under this Indenture
and no default or Event of Default has occurred and is continuing;
(c) An Appraiser's Certificate dated not more than 30
days prior to the date of delivery to the Trustee of the Application of
the Company required by Subsection (a) above and which (i) conforms to
the requirements of Section 103, (ii) contains the statements required
by Section 102 and (iii) is to the effect that the fair value of each
Vessel described in the Officers' Certificate required by Subsection
(b) above at the date of such Appraiser's Certificate is as specified;
(d) One or more indentures supplemental hereto
subjecting to the lien of this Indenture, prior to or contemporaneously
with the requested payment of Deposited Moneys, the Vessels described
in the Officers' Certificate required by Subsection (b) above as
additional and further security for the Bonds, and such one or more
instruments supplemental to the Charter as shall be appropriate to
subject each such Vessel to the Charter and such other instruments as
shall be appropriate to assign the Charter to the Trustee; and
(e) An Opinion of Counsel dated the date of the
Officers' Certificate required by Subsection (b) above, containing the
statements required by Section 102 and to the effect that:
(i) all of the requirements of this
Indenture for the due payment of the Deposited Moneys
requested have been duly complied with;
(ii) the Vessels described in the Officers'
Certificate required by Subsection (b) above have
been duly documented under the laws of the United
States in the name of the Company;
(iii) this Indenture, including any one or
more supplemental indentures subjecting to the lien
of this Indenture the Vessels described in the
Officers' Certificate required by Subsection (b)
above, (a) has been duly authorized, executed and
delivered by the Company, (b) constitutes the valid
and binding obligation of the Company enforceable in
accordance with its terms, (c) has been filed and
duly recorded at the United States Coast Guard
National Vessel Documentation Center and (d)
constitutes a first preferred mortgage lien on each
such Vessel under the terms of Chapter 313;
(iv) all consents, approvals authorizations
of, and all filings and recordings with any
governmental body, agency, commission or
instrumentality required in connection with
subjecting to the lien of this Indenture the Vessels
described in the Officers' Certificate required by
Subsection (b) above have been duly made or obtained,
or that no such consent, approval, authorization
filing or recording is required; and
(v) the Charter, including any one or more
supplemental instruments thereto subjecting thereto
any of the Vessels described in the Officers'
Certificate required by Subsection (b) above, has
been duly authorized, executed and delivered by the
respective parties thereto and constitutes the valid
and binding obligation of the respective parties
thereto in accordance with its terms and the Charter
has been assigned to the Trustee.
Upon delivery to the Trustee of the Application, certificates, opinion
and other instruments required to be delivered as aforesaid, and if to the
knowledge of the Trustee no Event of Default shall have occurred and be
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continuing, the Trustee shall pay over to the Company or upon its written order
out of Deposited Moneys an amount equal to the Original Release Price assigned
to each such Vessel or equal to 75% of the fair value of each such Vessel
(certified as provided in Subsection (c) above, if so required by such
Subsection).
Notwithstanding the foregoing provisions of this Section, if, to the
knowledge of the Trustee, no Event of Default shall have occurred and be
continuing, any insurance payment made to the Trustee on or after September 25,
2003 pursuant to Subsection (j) of Section 1314 for an actual, constructive or
agreed total loss (i) shall, to the extent that the Release Price of the Vessel
to which such insurance payment relates, when taken together with the aggregate
Release Prices of Vessels to which any such insurance payments theretofore, but
on or after September 25, 2003, made relate, does not exceed an aggregate amount
equal to the difference, if any, between (a) 5% of the aggregate principal
amount of Bonds outstanding at the time of such payment and (b) the amount, if
any, paid by the Trustee on September 24, 2003, to or upon the written direction
of the Company pursuant to the last sentence of the penultimate paragraph of
Section 1101 (the amount of such difference equal to said percentage being
herein called the "refundable amount"), be paid over by the Trustee to or upon
the written direction of the Company and (ii) if the refundable amount has
theretofore been, or is then being, paid over to the Company by the Trustee,
shall, to the extent that such insurance payment or any part thereof exceeds the
applicable Release Price of the Vessel to which said payment relates, computed
on the date of such loss, be paid over by the Trustee to or upon the written
direction of the Company, and the balance of such payment shall be held by the
Trustee as Deposited Moneys, and on September 25 in each year thereafter, if to
the knowledge of the Trustee, no Event of Default shall have occurred and be
continuing, the Trustee shall pay over to or upon the written direction of the
Company, on such September 25 in each year, the part of the balance of such
payment which represents the excess over the Release Price of such Vessel on
such date; provided, however, that if any insurance payment be made to the
Trustee pursuant to Subsection (j) of Section 1314 for an actual, constructive
or agreed total loss resulting from the simultaneous loss of two or more
Vessels, and if (x) the aggregate Release Prices of such Vessels plus (y) the
aggregate Release Price of Vessels, which did not exceed the refundable amount,
to which insurance payments theretofore made relate, shall exceed the refundable
amount, then such insurance payment shall, to the extent of the refundable
amount not theretofore paid over by the Trustee, be paid over by the Trustee to
or upon the written direction of the Company, and any balance of such insurance
payment shall then be allocated to the Vessels lost in proportion of their
respective Release Prices and be disposed of as provided in (ii) above.
Section 1106. Investment of Deposited Moneys and Other Funds by
Trustee.
Deposited Moneys at any time held by the Trustee shall, at the request
of the Company, evidenced by an Application of the Company, be invested or
reinvested by the Trustee in such Investment Securities, as may be listed in
said Application, or shall be applied to the purchase of Bonds, and until an
Event of Default shall, to the knowledge of the Trustee, have occurred and be
continuing, any net income on such Investment Securities which may be received
by the Trustee shall be forthwith paid to the Company. Such Investment
Securities and Bonds shall be held by the Trustee subject to the same provisions
hereof as the funds used to purchase the same, but upon a like request of the
Company, the Trustee shall sell all or any designated part of the Investment
Securities and the proceeds of such sale shall be held by the Trustee subject to
the same provisions hereof as the funds used to purchase the Investment
Securities so sold. If such sale shall produce a net sum less than the cost of
the Investment Securities so sold, the Company covenants that it will pay
promptly to the Trustee such amount of cash as with the net proceeds from such
sale will equal the cost of the Investment Securities so sold, and if such sale
shall produce a net sum greater than the cost of the Investment Securities, the
Trustee shall promptly pay to the Company an amount in cash equal to such
excess, unless an Event of Default shall, to the knowledge of the Trustee, have
occurred and be continuing. Subject to the foregoing provisions of this Section,
the Trustee shall not be under any obligation to pay interest to the Company on
Deposited Moneys except such, if any, as during the period it may generally
allow on similar funds or as it may agree to pay, and, unless an Event of
Default shall, to the knowledge of the Trustee, have occurred and be continuing,
any interest so allowed by the Trustee shall be paid over to the Company.
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Deposited Moneys at any time held by the Trustee need not be segregated
by it in any manner from any other moneys except to the extent required by
applicable law.
If the Trustee shall receive any charter hire under the provisions of
the Assignment or any other funds for the purpose of making specific interest
instalment payments or for the purpose of making specific payments required by
the Sinking Fund provided in this Indenture, or if the Trustee shall receive any
other funds hereunder which are required to be applied to the payment of all or
a part of the principal of the Bonds and the premium, if any, or interest
thereon more than 20 days prior to the date on which any such charter hire or
other funds are required to be applied by the Trustee, then such charter hire or
other funds shall be held, or, at the request of the Company evidenced by an
Application of the Company, shall be invested and reinvested in Investment
Securities having maturities of not more than one year from the date of
acquisition thereof which shall be held in accordance with and subject to the
provisions of the first paragraph of this Section until such time as such
charter hire or other funds are required to be applied by the Trustee for the
purpose for which such charter hire or other funds have been received, and the
provisions of this Section with respect to payment to the Company of interest
earned on the investment or reinvestment of Deposited Moneys, the obligation of
the Company to pay to the Trustee any loss realized on the sale of the
Investment Securities and the right of the Company to receive any gain realized
on any such sale shall apply with respect to the investment or reinvestment of
such charter hire or other funds.
Section 1107. Deposit of Deposited Moneys for Account of Trustee.
So long as no Event of Default shall have occurred and be continuing,
Deposited Moneys shall, at the request of the Company evidenced by an
Application of the Company, be deposited in trust for the account of the Trustee
in any bank or trust company or in more than one such bank or trust company, as
shall be designated in said Application; provided, however, that such bank or
trust company shall, at the date of such Application, be a member of The
Cincinnati, New York or Boston Clearing House Associations and have a combined
capital and surplus of at least $5,000,000; provided, further, however, that
such bank or trust company shall agree in writing with the Trustee to hold all
funds so deposited with it in trust for the benefit of the Trustee and the
Holders, but the funds so deposited need not be segregated from other funds
except to the extent required by applicable law. The Trustee shall not be liable
by reason of any failure of any bank or trust company in which any funds shall
be deposited pursuant to this Section to account in full for all funds so
deposited with it.
Section 1108. Application of Deposited Moneys on Default.
If an Event of Default shall have occurred and be continuing, Deposited
Moneys shall be applied only to the purposes specified in, and in accordance
with the provisions of, Section 511.
Section 1109. Original Release Price, Release Percentage and
Release Price.
With respect to each of the Vessels, and any vessel hereafter subjected
to the lien of this Indenture by a supplemental indenture, the Original Release
Price, the Release Percentage and the Release Price shall be determined as
follows:
(a) With respect to the Vessels described in Schedule
A hereto annexed, the Original Release Price and Release Percentage for
each such Vessel shall be as set forth herein.
(b) Subject to the provisions of Subsection (a) of
this Section, whenever any Vessel shall be subjected to the lien of
this Indenture by a supplemental indenture, the Company shall assign to
such Vessel:
(i) such Release Percentage as it may elect
(being a specified portion of the then indebtedness
stated as a percentage thereof); provided, however,
that such Release Percentage shall in no event (a)
operate to affect the Release Percentages assigned to
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Vessels then subject to the lien of this Indenture,
or (b) exceed the difference between 100% and the
aggregate of the Release Percentages assigned to all
Vessels then subject to the lien of this Indenture;
and
(ii) an Original Release Price computed by
multiplying the then indebtedness by the Release
Percentage so assigned.
Any Vessel released from the lien of the Indenture
with respect to which the proceeds received by the Trustee in
connection with its release then remain as Deposited Moneys under this
Indenture shall be deemed then subject to the lien of the Indenture for
the purposes of clause (b) of subparagraph (i) of this Subsection (b).
(c) If at any time the aggregate of the Release
Percentages assigned to all Vessels then subject to the lien of the
Indenture shall be less than 100%, each such Release Percentage shall
be proportionately increased so that the total of such Release
Percentages shall equal 100%. Any Vessel released from the lien of the
Indenture with respect to which the proceeds received by the Trustee in
connection with its release remain as Deposited Moneys under this
Indenture at such time shall be deemed then subject to the lien of the
Indenture for the purposes of the calculation and adjustment of Release
Percentages provided in this Subsection (c). Release Percentages
assigned as herein provided shall not otherwise be subject to change or
adjustment.
(d) The Release Price of any Vessel shall, as at any
particular time, be computed by multiplying the then indebtedness by
the Release Percentage assigned to such Vessel.
(e) The term "indebtedness" whenever used in this
Section shall mean the then unpaid principal amount of the Bonds
outstanding.
ARTICLE XII
SUPPLEMENTAL INDENTURES
Section 1201. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another corporation
to the Company, or successive successions, and the assumption by any
such successor of the covenants of the Company herein and in the Bonds
contained; or
(2) to add to the covenants of the Company, for the
benefit of the Holders, or to surrender any right or power herein
conferred upon the Company; or
(3) to correct or amplify the description of any
Vessels at any time subject to the lien of this Indenture, or better to
assure, convey and confirm unto the Trustee any Vessels subject to or
required to be subjected to the lien of this Indenture, or to transfer,
mortgage, assign and pledge to the Trustee, and to subject to the lien
of this Indenture, additional vessels or security; or
(4) to cure any ambiguity, to correct or supplement
any provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture which shall not be inconsistent
with the provisions of this
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Indenture, provided such action, as evidenced by a Board Resolution,
shall not adversely affect the interest of the Holders.
Section 1202. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the outstanding Bonds, by Act of said Holders delivered to
the Company and the Trustee, the Company, when authorized by a Board Resolution,
and the Trustee may enter into an indenture or indentures supplemental hereto
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of modifying in any
manner the rights of the Holders under this Indenture; provided, however, that
no such supplemental indenture shall, without the consent of the Holder of each
outstanding Bond affected thereby,
(1) change the Stated Maturity of the principal of,
or any instalment of interest on, any Bond, or reduce the principal
amount thereof or the interest thereon or any amount or premium payable
upon the redemption thereof, whether by operation of the Sinking Fund
or otherwise, or change the place of payment, or the coin or currency
in which any Bond or the interest thereon is payable or impair the
right to institute suit for the enforcement of any such payment on or
after the Stated Maturity thereof (or, in the case of redemption, on or
after the Redemption Date), or create any liens prior to the lien of
this Indenture or terminate or impair the lien of this Indenture, or
(2) reduce the percentage in principal amount of the
outstanding Bonds, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is
required for any waiver (of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences)
provided for in this Indenture, or
(3) modify any of the provisions of this Section or
Section 522, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Bond affected thereby.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Section 1203. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel complying with Section 103 and stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture. The
Trustee may, but shall not be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
Section 1204. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Bonds theretofore or thereafter authenticated and delivered hereunder shall
be bound thereby.
Section 1205. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
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Section 1206. Reference in Bonds to Supplemental Indentures.
Bonds authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Bonds so modified as to conform, in the opinion of the Trustee and the Board
of Directors, to any such supplemental indenture may be prepared and executed by
the Company and authenticated and delivered by the Trustee in exchange for
outstanding Bonds.
ARTICLE XIII
COVENANTS
Section 1301. Payment of Principal, Premium and Interest.
The Company will duly and punctually pay the principal of (and premium,
if any) and interest on the Bonds in accordance with the terms of the Bonds and
this Indenture.
Section 1302. Maintenance of Office of Agency.
The Company will maintain an office or agency in the Borough of
Manhattan, the City of New York, where Bonds may be presented or surrendered for
payment, where Bonds may be surrendered for registration of transfer or exchange
and where notices and demands to or upon the Company in respect of the Bonds and
this Indenture may be served. The Company initially appoints the Trustee as its
agent for said purposes. The Company will give prompt written notice to the
Trustee of any change in the location of any such office or agency. If at any
time the Company shall fail to maintain any such office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby appoints the Trustee its agent to receive all
such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where the Bonds may be presented or surrendered for any or
all of such purposes, and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in said
Borough of Manhattan, for said purposes.
Section 1303. Money for Bond Payments to Be Held in Trust.
Whenever the Company shall have one or more Paying Agents, it will,
prior to each due date of the principal of (and premium, if any) or interest on
any Bonds, deposit with a Paying Agent a sum sufficient to pay the principal
(and premium, if any) or interest so becoming due, such sum to be held in trust
for the benefit of the Persons entitled to such principal, premium or interest,
and (unless such Paying Agent is the Trustee) the Company will promptly notify
the Trustee of its action or failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will
(1) hold all sums held by it for the payment of the
principal of (and premium, if any) or interest on Bonds in trust for
the benefit of the Persons entitled thereto until such sums shall be
paid to such Persons or otherwise disposed of as herein provided;
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(2) give the Trustee notice of any default by the
Company (or any other obligor upon the Bonds) in the making of any
payment of principal (and premium, if any) or interest; and
(3) at any time during the continuance of any such
default, upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent or then held
by the Company in trust for the payment of the principal of (and premium, if
any) or interest on any Bond and remaining unclaimed for two years after such
principal (and premium, if any) or interest has become due and payable shall be
paid to the Company on Company Request, or (if then held by the Company) shall
be discharged from such trust; and the Holder of such Bond shall thereafter, as
an unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the Borough of
Manhattan, City of New York, notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
Section 1304. Statement as to Compliance.
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year, a written statement signed by the principal executive
officer, the principal financial officer or the principal accounting officer of
the Company (which need not comply with Section 102), stating, as to each signer
thereof, that
(1) a review of the activities of the Company during
such year and of performance under this Indenture has been made under
his supervision and
(2) to the best of his knowledge, based on such
review, the Company has fulfilled all its obligations under this
Indenture throughout such year, or, if there has been a default (other
than one which has been cured) in the fulfillment of any such
obligation, specifying each such default known to him and the nature
and status thereof.
Section 1305. Corporate Existence.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, rights (charter and statutory) and franchises; provided, however,
that the Company shall not be required to preserve any such right or franchise
if the Company shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
Section 1306. Intentionally Omitted.
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Section 1307. Sundry Covenants.
(a) The Company lawfully owns the Vessels and will
warrant and defend the title and possession thereto and to every part
thereof to the Trustee for the benefit of the Holders against the
claims and demands of all Persons whomsoever.
(b) The Company will not engage in any unlawful trade
or violate any law or carry any cargo that will expose any Vessel to
penalty, forfeiture or capture, will not do, or suffer or permit to be
done, anything which can or might injuriously affect the registration
or enrollment of any Vessel under the laws and regulations or the
United States, will keep each Vessel duly documented thereunder, and
will not change the flag of any Vessel.
(c) The Company will maintain and preserve, or cause
to be maintained and preserved, each Vessel in good running order and
repair, ordinary wear and tear excepted, and will cause all equipment
and parts thereof which become worn out, broken or damaged to be
repaired or replaced. Commencing in the year 1999, the Company will
furnish to the Trustee on or before February 25 of each year a
certificate of an Engineer or other expert (who may be in the employ of
the Company or a Subsidiary) satisfactory to the Trustee to the effect
that the Company, as of a date not more than 60 days preceding the date
of such certificate, was not in default in compliance with the
covenants in this Subsection. The Company covenants that each Vessel
will at all times comply with all applicable United States laws,
treaties and conventions, and rules and regulations issued thereunder,
the violation of which would have a material adverse effect on the
Company's operations or financial condition, or on the right, title
or interest of the Company in and to the Vessels, and will have on
board, when required thereby, valid certificates showing compliance
therewith. Nothing contained in this subsection shall prevent the
Company from laying up any Vessel which it deems advisable to lay up
temporarily or indefinitely.
(d) Intentionally omitted.
Section 1308. Maintenance of Lien as First Preferred Mortgage under
Chapter 313.
The Company will comply with the provisions of Chapter 313, in order to
establish and maintain the lien of this Indenture as a preferred mortgage
thereunder upon each Vessel and upon all additions, renewals, improvements and
replacements made in or to the same; and will do such other acts, and execute
and deliver such other deeds, conveyances, mortgages, transfers and assurances
as the Trustee shall reasonably require for the better assuring, conveying,
transferring, mortgaging, assigning and confirming each Vessel unto the Trustee
in order more effectively to subject the Vessels to the lien of this Indenture
as security for and for the benefit and protection of the Bonds.
Section 1309. Inspection of Vessels.
The Trustee or its representatives shall be entitled, at the expense of
the Company, but shall be under no obligation, to inspect each Vessel and its
cargo and marine documents at any reasonable time upon written notice to the
Company. At the request of the Trustee, the Company will deliver for inspection
copies of any and all contracts and documents relating to any Vessel.
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Section 1310. Prohibition Against Liens on Vessels, etc.
Neither the Company, the Charterer, the master of any Vessel nor any
other Person has or shall have any right, power or authority to create, incur or
permit to be placed or imposed or continued upon any Vessel or upon any hire,
freights, earnings, revenues, profits and income therefrom subject, or intended
to be subject, to the lien hereof, any lien whatsoever other than liens for
wages of the master and crew and salvage. The Company will place and retain on
board each tugboat and towboat subject to the lien of this Indenture a true copy
of the Charter relating thereto and a properly certified copy of this Indenture,
any indenture supplemental hereto relating to such Vessel and any amendment
hereto, and will cause the same to be exhibited, together with the document of
the Vessel, to the extent required by Chapter 313, to any and all Persons having
business with each such Vessel which might give rise to a lien thereon (other
than liens for wages of the master and crew or salvage) or to any sale,
conveyance, mortgage or lease thereof; and, in the case of each tugboat or
towboat, will cause to be kept prominently displayed in the Master's cabin and
the wheelhouse thereof, a notice in durable form as follows:
"Notice of Preferred Mortgage and Charter
This vessel is owned by Midland Enterprises Inc., is covered by an
Indenture of First Preferred Ship Mortgage to The Chase Manhattan Bank, Trustee,
under Chapter 313 of Title 46 of the United States Code, and is under charter to
Orgulf Transport Co. Under said mortgage and charter, neither owner, charterer,
master nor any other person has any right, power or authority to create, incur
or permit to be imposed upon this vessel, its hire, freights, earnings,
revenues, profits and income, any lien other than for wages of the master and
crew or salvage."
Section 1311. Liens or Encumbrances on Vessels Not Permitted;
Discharge Thereof.
The Company will not permit to continue any lien, encumbrance or charge
upon any Vessel or upon any hire, freights, earnings, revenues, profits and
income therefrom subject, or intended to be subject, to the lien hereof, other
than liens thereon permitted by Sections 1310 and 1312, and in due course, and
in any event within 30 days after the same becomes due and payable, will pay or
cause to be discharged or make adequate provision for the satisfaction or
discharge of all claims or demands which if unpaid might constitute or create a
lien, encumbrance or charge on any Vessel or the hire, freights, earnings,
revenues, profits and income therefrom, or will cause such Vessel to be released
and discharged from any such lien, encumbrance or charge therefor.
Section 1312. Prohibitions Against Liens or Encumbrances by Company
and Barge Line Subsidiaries on their Properties;
Exceptions.
The Company will not, and will not permit any Barge Line Subsidiary to,
at any time directly or indirectly create, assume or permit to exist any
mortgage, pledge, lien or encumbrance upon any of its property, real or
personal, whether now owned or hereafter acquired, except the following:
(a) This Indenture and any other mortgage, indenture,
pledge, lien, assignment or encumbrance given as security for the
Bonds;
(b) The Charter (including subcharters permitted
thereunder) and any assignment of charter hire thereunder to the
Trustee or any assignment of such charter hire to any other Person or
Persons; provided, however, any such assignment to other than the
Trustee shall be fully subject and subordinate to the rights of the
Trustee under any such assignment to the Trustee;
(c) Mortgages, pledges, liens or encumbrances on
vessels acquired or constructed by the Company or any Barge Line
Subsidiary, such mortgages, pledges, liens and encumbrances being
hereinafter in this subsection called "such liens"; subject, however,
to the following conditions:
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(i) No such liens shall spread to any
property now or hereafter subject to the lien hereof
or required so to be;
(ii) The principal amount of any
indebtedness secured by such liens shall not when
incurred exceed the sum of (x) 80% of the Fair Value
of the vessels subjected thereto, plus (y) 100% of
any amount in cash deposited by the Company or any
Barge Line Subsidiary as additional security for such
indebtedness, whether deposited with or for the
account of the lender or otherwise and whether held
in cash or invested in Investment Securities, after
deducting all sums previously withdrawn from the
amount so deposited;
(iii) The Fair Value of a vessel under
construction shall, whether or not title to such
vessel or the completed portion thereof shall have
passed to the Company or any Barge Line Subsidiary,
be deemed to be that portion of the contract price
thereof paid prior to or concurrently with the time
at which the determination of such Fair Value is
required to be made; and
(iv) All mortgages, pledges, liens and
encumbrances which are created or assumed to secure
the same indebtedness may be deemed to constitute a
single security device securing such indebtedness for
purposes of determining whether such mortgages,
pledges, liens and encumbrances are such liens
permitted hereunder to be so created or assumed;
(d) Mortgages, pledges, liens or encumbrances
described in Sub-sections (a), (b), (c) and (g) of this Section on
vessels which are subjected to any such lien to obtain the release from
such lien or from other liens securing the same indebtedness of (i) any
vessel subject to such lien which has become an actual, constructive,
or agreed total loss or (ii) funds subjected to such lien or other
liens securing the same indebtedness as a result of any such loss or as
a result of an event of the kind specified in Section 1315 with respect
to a vessel subject to such lien;
(e) Liens of taxes or assessments or governmental
charges or levies not then due and delinquent or the validity or amount
of which is being contested in good faith and against which an adequate
reserve has been established; pledges or deposits to secure public or
statutory obligations or to secure performance in connection with bids
or contracts; materialmen's, mechanic's, carrier's, workmen's,
repairmen's or other like liens, or deposits to obtain the release of
such liens; deposits to secure surety, stay, appeal or customs bonds;
liens created by or resulting from any litigation or legal proceeding
which is currently being contested in good faith by appropriate
proceedings; zoning restrictions, easements, rights or way or other
restrictions on the use of real property or minor irregularities in the
title thereto; and any other liens and encumbrances similar to those
described in this Subsection, the existence of which do not, in the
opinion of the Board of Directors of the Company or of any Barge Line
Subsidiary, as the case may be, materially impair the use by the
Company or the Barge Line Subsidiary of the affected property in the
operation of the business of the Company or the Barge Line Subsidiary
or the value of such property for the purposes of such business or
businesses;
(f) Subject to Section 1319(c) in the case of a Barge
Line Subsidiary, any mortgage, pledge, lien or encumbrance upon the
stock of any Subsidiary or upon property (other than vessels) owned by
the Company or by a Subsidiary created or assumed upon or in connection
with the acquisition of such property by the Company or such Subsidiary
or to secure indebtedness of the Company or a Subsidiary for money
borrowed;
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(g) Existing Leases and the Existing Mortgage and the
charter parties and assignments of charter hire referred to therein and
any and all other instruments or agreements referred to in or permitted
by any of them; and
(h) Charter parties and subcharters and assignments
of charter hire thereunder of any vessel at the time not subject to
this Indenture or the Existing Mortgage, including without limitation
any lease, charter or subcharter (including any sale-leaseback
transaction) which may be capitalized in accordance with generally
accepted accounting principles (excluding, however, any lease, charter
or subcharter under which the Company or the Barge Line Subsidiary has
or will have the right to have ownership of the vessel transferred to
it at termination without payment of additional consideration or has an
option which would be considered a bargain purchase option under
generally accepted accounting principles or the term of which is
substantially equal to the estimated economic life of the underlying
asset as determined in accordance with generally accepted accounting
principles);
provided, however, that nothing contained herein shall be construed to permit
the existence of any mortgage, pledge, lien or encumbrance upon any Vessel in
contravention of the provisions of Sections 1310, 1311 and 1316.
Section 1313. Notice to Trustee of and Release of Vessels from
Libels or Liens Against Vessels, etc.
If a libel shall be filed or lien asserted against any Vessel or if any
Vessel shall be otherwise attached, levied upon or taken into custody or
sequestered by virtue of any legal proceeding in any court or tribunal, the
Company will promptly notify the Trustee and will, within 20 days thereafter,
cause the affected Vessel to be released and all liens thereon to be discharged
and will promptly notify the Trustee thereof; provided, however, that if the
Company or the Charterer of any Vessel shall invoke the benefit of the
provisions of 46 U.S.C. ss.ss. 181 through 186, inclusive, and all acts
amendatory thereof and supplementary thereto providing for the limitation of the
liability of shipowners, then and in that event the release and discharge of the
affected Vessel shall be effected within 20 days from the date of the order of
the District Court for the payment into the Registry of said Court, or for the
giving of a stipulation for the payment into the Registry of said Court, of the
amount of the value of the petitioner's interest, as appraised, in said Vessel
and its pending freight, if any; and provided, further, that in any such
proceeding to limit liability the Vessel shall not be surrendered or offered to
be surrendered to a trustee as provided in said statutes without the prior
written consent of the Trustee.
Section 1314. Insurance.
The Company agrees that so long as any of the Bonds shall be
outstanding:
(a) The Company will cause insurance to be carried
and maintained with respect to the Vessels with responsible
underwriters, insurance companies or funds selected by the Company
against all such risks, with such coverage, in such form, and in such
amounts as, in the opinion of marine insurance brokers selected by the
Company, is customarily maintained with respect to similar vessels by
companies having similar operations. Each policy shall provide for at
least 10 days' prior written notice by such underwriters, insurance
companies or funds, as the case may be, to the Trustee in the event of
termination thereof by reason of non-payment of premiums, commissions,
assessments, club calls or advances or in accordance with any expressed
rights of cancellation they may have.
(b) In no event shall either hull insurance or
protection and indemnity insurance with respect to the Vessels be in an
amount less than one hundred and fifteen percent (115%) of (i) the
aggregate principal amount of the Bonds at the time outstanding less
(ii) the amount of all Deposited Moneys then held by the Trustee
pursuant to Section 1104 or for the account of the Trustee pursuant to
Section 1107. Such insurance shall, so far as practicable, be
distributed among each of the Vessels in approximate proportion to
their respective Release Percentages and may provide for policy
franchise or deductible average (i) with respect to hull insurance as
is customarily maintained with respect to similar
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vessels by companies having similar operations, not to exceed
$1,000,000 with respect to all Vessels covered by the Charter for loss
or damage arising from one occurrence and (ii) with respect to
protection and indemnity insurance as is customarily maintained with
respect to similar vessels by companies having similar operations.
(c) Charterer, at its expense, shall maintain
coverage under the Standard Water Quality Insurance Syndicate, or
comparable policy form providing statutory coverage under the
Comprehensive Environmental Response Compensation and Liability Act,
as amended, and coverage under the Oil Pollution Act of 1990 with
a limit of at least five million dollars ($5,000,000) per occurrence.
(d) In no event shall employer's liability insurance
be less than $100,000 per person and $300,000 per accident nor
workmen's compensation insurance be less than may be required under all
applicable Federal and state laws.
(e) The Company shall cause each of the Vessels to be
insured against war risks under such form of policy as may be in
general use by underwriters of such insurance at the time (or under or
through contracts made with any government), if reasonably available,
during any voyage that any such Vessel may make in any waters where
war-like operations (other than peacetime military maneuvers or
activities) are being conducted.
(f) The policies, binders, covernotes or certificates
evidencing insurance maintained in compliance with this Section shall,
at the request of the Trustee, be delivered to the Trustee for
safekeeping and inspection by the Holders or the Company on demand.
(g) Contemporaneously with the delivery of this
Indenture and from time to time upon request and in any event on or
before June 1 of each year, commencing with the year 1999, the Company
shall furnish to the Trustee a certificate of marine insurance brokers
selected by the Company which shall include (i) a schedule of the
insurance maintained with respect to the Vessels by the Company or by
the Charterer, (ii) a statement that in the opinion of said brokers the
insurance so maintained is with acceptable underwriters, insurance
companies or funds and is against such risks, with such coverage, in
such form, and in such amounts as is customarily maintained with
respect to similar vessels by companies having similar operations, and
(iii) a statement that there was no failure to observe or comply with
any of the covenants contained in Subsections (a), (b), (c), (d), (e)
and (i) of this Section as of a date not more than 30 days preceding
the date of such certificate.
(h) The Company will not do or suffer or permit to be
done any act whereby any insurance required to be maintained by this
Section is or may be impaired, suspended or defeated and will not
suffer or permit any of the Vessels to engage in any voyage or to carry
any cargo not permitted to be carried under the policies of insurance
then in effect without first covering the Vessel or Vessels for such
voyage with insurance in nature, amount and terms approved by marine
insurance brokers selected by the Company.
(i) All insurance whatsoever carried with respect to
the Vessels (except workmen's compensation insurance and liability
insurance other than protection and indemnity insurance and collision
liability insurance), whether in compliance with the terms of this
Indenture or as additional protection for the Company, by its terms
shall be payable, and claims thereunder shall be paid, to the extent
permitted by applicable law, to the Trustee as its interest may appear;
provided, however, that except during the continuance of an Event of
Default of which the Trustee shall have knowledge and the underwriters
shall have received written notice (1) in the case of any partial loss
(except a loss covered either by protection and indemnity insurance or
by collision liability insurance) for which the insurance carrier shall
be required to pay an amount not exceeding $250,000 in aggregate
amount, the underwriters may pay directly for repairs, salvage or other
charges or, if the Company and the Charterer or subcharterer shall have
furnished evidence that either has in fact paid for the full repair of
the damage or secured complete discharge of its liability for salvage
or other charges insured against, then the underwriters may
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reimburse the Company and such Charterer or subcharterer therefor, as
their interests may appear; (2) in the case of any partial loss (except
a loss covered either by protection and indemnity insurance or by
collision liability insurance) for which the insurance carrier shall be
required to pay an amount exceeding $250,000 in aggregate amount, other
than an actual, constructive or agreed total loss, the Trustee shall
consent that the underwriters may pay directly for repairs, salvage or
other charges or, if the Company and the Charterer or subcharterer
shall have furnished evidence that it has in fact paid for the full
repair of the damage or secured complete discharge of its liability for
salvage or other charges insured against, shall consent that the
underwriters reimburse the Company and such Charterer or subcharterer
therefor, as their interests may appear; and (3) in the case of any
loss covered by protection and indemnity insurance or by collision
liability insurance, underwriters may pay directly to the Company and
the Charterer or subcharterer to reimburse it for any loss, damage or
expense incurred and in fact paid by it or, if the Company or such
Charterer or subcharterer shall not have in fact paid such loss,
damage or expense, then such claims may be paid directly to the party
to whom any such liability has been incurred.
(j) Payments for actual, constructive or agreed total
loss shall be made to the Trustee, and shall be applied, subject to
Subsection (k) of this Section, as provided in Article Eleven.
(k) If to the knowledge of the Trustee an Event of
Default or an event which, with notice or lapse of time or both, would
constitute an Event of Default, has occurred and is continuing, any and
all moneys received by the Trustee on account of insured losses of
every kind shall be held by the Trustee and applied in the manner
provided in Section 511 hereof; provided, however, that the Trustee
may, in its discretion, apply or consent that the brokers or adjusters
may apply the proceeds of insurance, except payments as and for an
actual, constructive or agreed total loss, to the satisfaction and
discharge of the liability or to the repair of the damage in respect of
which such proceeds were paid.
(l) In the event that any Vessel be seized under
process, the Trustee is authorized, if the Company shall in writing so
request, to agree in writing with any Person executing as surety a bond
releasing the Vessel from such process to hold for the benefit of such
surety any insurance moneys received by the Trustee as a result of the
event upon which such process was issued as security for
indemnification of such surety against liability upon said bond.
Section 1315. Lien Attaches to Claim for Compensation or Award in
Event of Requisition.
Subject to the provisions of the Charter entitling the Charterer to
receive the compensation, purchase price, reimbursement or award hereafter
referred to in this Section, in the event that title or ownership of any Vessel
shall be requisitioned, purchased or taken by any Government of any country or
any agent thereof, the lien of this Indenture shall be deemed to attach to the
claim for compensation, and the compensation, purchase price, reimbursement or
award shall be payable to the Trustee; and the Company shall promptly execute
and deliver such documents, if any, and shall promptly do and perform such acts,
if any, as in the opinion of the Trustee may be necessary or useful to
facilitate or expedite the collection by the Trustee of such compensation,
purchase price, reimbursement or award.
Section 1316. Payment of Taxes, Assessments, etc.
The Company will pay and discharge or cause to be paid and discharged,
when due and payable, all taxes, assessments, governmental charges, fines and
penalties lawfully imposed on any Vessel or upon any freights, profits, hire or
other income therefrom and all lawful claims which if unpaid might become a lien
or charge upon the Vessels or any of them; provided, however, that the Company
may contest the validity or amount of any of the foregoing if an adequate
reserve for the payment therefor is established by the Company and if the
interest or rights of the Trustee shall in no way be prejudiced or impaired
thereby. Nothing contained in this Section shall modify or alter the obligations
of the Company under Section 1313.
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Section 1317. Intentionally Omitted.
Section 1318. Intentionally Omitted.
Section 1319. Limitations on Disposition of Capital Stock of Barge
Line Subsidiaries; Limitation on Indebtedness of
Barge Line Subsidiaries, etc.
(a) The Company will not (i) sell, transfer or
otherwise dispose of any shares of capital stock of any Barge Line
Subsidiary (except as permitted under Section 1312) or any indebtedness
of any Barge Line Subsidiary, (ii) permit any Barge Line Subsidiary to
issue or sell any shares of stock of any class of such Barge Line
Subsidiary to any Person other than the Company, except for the purpose
of qualifying directors, or (iii) permit any Barge Line Subsidiary to
consolidate or merge with or into any other corporation except the
Company or another Barge Line Subsidiary or to sell, lease or otherwise
dispose of its properties as an entirety or substantially as an
entirety except to the Company or another Barge Line Subsidiary;
provided, however, that any such transactions may be effected by the
Company and/or any Barge Line Subsidiary with one or more corporations
engaged in the barge line business if upon the completion of any such
transaction each corporation which shall operate any part of the
business of the Barge Line Subsidiary affected by such transaction
shall be a Subsidiary of the Company; and provided also that the stock
or properties of any Barge Line Subsidiary may be disposed of as an
entirety for a consideration deemed fair to the Company by the Board of
Directors, subject to compliance with the provisions of this Indenture
to the extent applicable.
(b) The Company may take such action as it shall deem
appropriate for the purpose of incorporating any Barge Line Subsidiary
under the laws of another state.
(c) The Company will not permit any Barge Line
Subsidiary to create, assume or incur, or become or be liable in
respect of any Funded Debt in excess of $1,000,000, other than (i)
indebtedness to the Company or to a Subsidiary of the Company or (ii)
indebtedness secured by mortgages, pledges, liens or encumbrances of
the character permitted by Subsection (c) of Section 1312.
Section 1320. Performance of Charter Agreements; Termination and
Amendment Thereof.
The Company will promptly perform all the duties and obligations
required by the Charter to be performed by it and will promptly notify the
Trustee of any claim by the Charterer of non-performance by the Company
thereunder. Except as hereinafter provided in this Section, the Company will not
terminate the Charter, consent to any modification or amendment thereof, waive
or release any obligation of the Charterer, or consent to any act or omission by
the Charterer which would, without such consent, constitute a default
thereunder, or fail promptly and diligently to exercise each and every right
which it may have under the Charter. The Company may terminate the Charter and
may consent to any modification or amendment thereof if such termination,
modification or amendment does no more than (1) eliminate from the operation of
the Charter one or more Vessels released from the lien of this Indenture in
accordance with the provisions of Article Eleven hereof and (2) in connection
with any such elimination, either (a) provide for the chartering under the
Charter of an additional vessel or vessels which shall contemporaneously
therewith be subjected to the lien of this Indenture and for an adjustment in
the charter hire payable to the Company under such Charter so that the aggregate
charter hire payable under the Charter shall remain the same or (b) reduce the
aggregate charter hire payable to the Company under the Charter by an amount
which bears the same ratio to such aggregate charter hire as the aggregate
Release Prices of the Vessels so released bears to the aggregate Release Prices
of all Vessels subject to the lien of this Indenture; provided, however, that
after giving effect to any such reduction, the amount of charter hire payable on
each payment date under the Charter shall not be less than an amount equal to
any installments of interest and Sinking Fund payments on the Bonds which may
then be overdue, all interest which will become due on the Bonds on the next
succeeding Interest Payment Date, the Sinking Fund payment, if any, which shall
become due with respect to the Bonds on such next succeeding Interest Payment
Date, and any and all obligations
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of the Company under the Bonds or the Indenture which may then be due and
unpaid. The Company will promptly deliver to the Trustee a copy of each demand,
notice, communication or other document (except those received in the regular
course of business) delivered to it in any way relating to the Charter.
Section 1321. Charter Hire Received by Company Payable over to
Trustee; Charter Subordinate to Indenture.
The execution, delivery or performance of the Charter or any assignment
of charter hire thereunder shall not be or be deemed to be a violation of, or a
default in the observance or performance by the Company of, any covenant or
condition contained herein. All moneys and claims for moneys due and to become
due from the Charterer under the Charter shall be payable in accordance with the
provisions of any such assignment, and if the Company should receive any part of
the charter hire under the Charter payable to the Trustee it will remit the same
to the Trustee in the form received, with due indorsement when necessary.
The Charter, and any subcharter of any Vessel, shall be in all respects
subject and subordinate to the lien hereof. So long as the Charterer shall not
be in default under any of the terms and provisions of the Charter, the
Charterer shall be entitled to the possession and use of the Vessels under the
terms of the Charter and to exercise all rights granted thereby.
Section 1322. Prohibition Against Permitting Set-offs on Behalf of
Charterer to Arise.
The Company will not permit or suffer to exist any advances or other
charges which may be interposed by way of set-off by the Charterer under the
Charter, and in the event that any such advances shall be made by the Charterer
to the Company, the Company shall promptly repay the same to the Charterer.
Section 1323. Waiver of Certain Covenants.
Any provision in this Indenture to the contrary notwithstanding, the
Company may omit in any particular instance to comply with any covenant or
condition set forth in Sections 1304 through 1322, inclusive, if before or after
the time for such compliance the Holders of at least a majority in principal
amount of the Bonds at the time outstanding shall, by Act of such Holders,
either waive such compliance in such instance or generally waive compliance with
such covenant or condition, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee in respect of any such covenant or condition shall remain in full
effect.
ARTICLE XIV
REDEMPTION OF BONDS
Section 1401. Right of Redemption.
The Bonds may be redeemed otherwise than through the operation of the
Sinking Fund provided for in Article Fifteen at the election of the Company, as
a whole or from time to time in part, at any time, at the Redemption Prices
specified in the form of Bond hereinbefore set forth for redemption otherwise
than through the operation of the Sinking Fund, together with accrued interest
to the Redemption Date.
Section 1402. Applicability of Article.
Redemption of Bonds at the election of the Company or otherwise, as
permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
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<PAGE>
Section 1403. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Bonds shall be evidenced by a
Board Resolution. In the case of any redemption at the election of the Company
of less than all of the Bonds, the Company shall, at least 45 days prior to the
Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such Redemption Date and of
the principal amount of Bonds to be redeemed.
Section 1404. Selection by Trustee of Bonds to Be Redeemed.
If less than all the Bonds are to be redeemed, the particular Bonds to
be redeemed shall be selected not more than 60 days prior to the Redemption Date
by the Trustee, from the Outstanding Bonds not previously called for redemption,
by lot or such other method as the Trustee shall deem fair and appropriate and
which may provide for the selection for redemption of portions (equal to $1,000
or any integral multiple thereof) of the principal of Bonds of a denomination
larger than $1,000.
The Trustee shall promptly notify the Company in writing of the Bonds
selected for redemption and, in the case of any Bond selected for partial
redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Bonds shall relate, in
the case of any Bonds redeemed or to be redeemed only in part, to the portion of
the principal of such Bond which has been or is to be redeemed.
Section 1405. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Bonds to be redeemed, at his address appearing in the
Bond Register. Failure of any Holder of Bonds to receive such notice, or any
defect therein, shall not affect the validity of such redemption.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all Outstanding Bonds are to be
redeemed, the identification (and, in the case of partial redemption,
the principal amount) of the particular Bond to be redeemed,
(4) that on the Redemption Date the Redemption Price
will become due and payable upon each such Bond, and that interest
thereon shall cease to accrue on and after said date,
(5) the place or places where such Bonds are to be
surrendered for payment of the Redemption Price, and
(6) that the redemption is for the Sinking Fund, if
such is the case.
Notice of redemption of Bonds to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name of and at the expense of the Company.
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<PAGE>
Section 1406. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1303) an amount of
money sufficient to pay the Redemption Price of, and accrued interest on, all
the Bonds or portions thereof which are to be redeemed on that date.
Section 1407. Bonds Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Bonds so to be
redeemed shall, on the Redemption Date, become due and payable at the Redemption
Price therein specified and from and after such date (unless the Company shall
default in the payment of the Redemption Price or accrued interest) such Bonds
shall cease to bear interest. Upon surrender of any such Bond for redemption in
accordance with said notice such Bond shall be paid by the Company at the
Redemption Price, together with accrued and unpaid interest to the Redemption
Date; provided, however, that installments of interest whose Stated Maturity is
on the Redemption Date shall be payable (but without interest thereon, unless
the Company shall default in the payment thereof) to the Holders of such Bonds,
or one or more Predecessor Bonds, registered as such on the relevant Record
Dates according to their terms and the provisions of Section 307.
If any Bond called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
bear interest from the Redemption Date at the rate borne by the Bond.
Section 1408. Bonds Redeemed in Part.
Any Bond which is to be redeemed only in part shall be surrendered
(with, if the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or his attorney duly authorized in
writing) and the Company shall execute and the Trustee shall authenticate and
deliver to the Holder of such Bond without service charge, a new Bond or Bonds,
of any authorized denomination as requested by such Holder in aggregate
principal amount equal to and in exchange for the unredeemed portion of the
principal of the Bond so surrendered.
ARTICLE XV
SINKING FUND
Section 1501. Sinking Fund Payments.
As and for a Sinking Fund for the retirement of the Bonds, the Company
will, until all Bonds are paid or payment thereof provided for, deposit in
accordance with Section 1406, prior to September 25, in each year commencing
with the year 2003 an amount in cash sufficient to redeem on such September 25,
$4,687,500 principal amount of Bonds in the years 2003 through 2018 at the
Redemption Price specified in the form of Bond hereinbefore set forth for
redemption through the operation of the Sinking Fund, less the amount of any
credit against such payment received by the Company under Section 1502. Each
such Sinking Fund payment shall be applied to the redemption of Bonds on such
September 25 as herein provided. The cash amount of any Sinking Fund payment is
subject to reduction as provided in Section 1502. Each Sinking Fund payment
shall be applied to the redemption of Bonds on such September 25 as herein
provided.
Section 1502. Satisfaction of Sinking Fund Payments with Bonds.
The Company (1) may deliver Bonds, (2) may apply as a credit Bonds
acquired with Deposited Moneys at the request of the Company pursuant to Section
1106, and (3) may apply as a credit Bonds redeemed at the
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election of the Company pursuant to Section 1401 in satisfaction of all or any
part of any Sinking Fund payment required to be made pursuant to Section 1501,
provided that such Bonds have not been previously so credited. Each such Bond
shall be received or credited for such purpose by the Trustee at the then
current Redemption Price specified in the form of Bond hereinbefore set forth
for redemption through the operation of the Sinking Fund and the amount of such
Sinking Fund payment shall be reduced accordingly.
Section 1503. Redemption of Bonds for Sinking Fund.
On or before January 1, in each year, commencing with the year 2003 to
and including the year 2018, the Company will deliver to the Trustee an
Officers' Certificate specifying the portions of the next ensuing Sinking Fund
payment which are to be satisfied by payment of cash, by delivery of Bonds or by
crediting Bonds, and will also deliver to the Trustee the Bonds to be so
delivered. Such Officers' Certificate shall also state that the Bonds forming
the basis of any such credit do not include any Bonds which have been previously
credited against any Sinking Fund payment. The Trustee shall, upon the receipt
of such Officers' Certificate, select the Bonds to be redeemed upon the next
ensuing September 25 in the manner specified in Section 1404 and cause notice of
the redemption thereof to be given in the name of and at the expense of the
Company in the manner provided in Section 1405. Such notice having been duly
given, the redemption of such Bonds shall be made upon the terms and in the
manner stated in Sections 1407 and 1408.
* * * * *
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
MIDLAND ENTERPRISES INC.
By____________________________
THE CHASE MANHATTAN BANK
By____________________________
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<PAGE>
ss.:
At on this day of , 1998, before
me appeared and , to me personally
known, who, being by me duly sworn did say that he is , of
Midland Enterprises Inc., and that the said instrument was signed and sealed by
him on behalf of said Corporation by authority of its Board of Directors, and
the said acknowledged said instrument to be the free act and deed of said
Corporation.
------------------------------
Notary Public
MY COMMISSION EXPIRES
(NOTARIAL SEAL)
ss.:
At on this day of , 1998, before
me appeared and , to me personally
known, who, being by me duly sworn did say that (s)he is , of
The Chase Manhattan Bank, and that the said instrument was signed and sealed by
her/him on behalf of said Bank by authority of its Board of Directors and the
said
acknowledged said instrument to be the free act and deed of
said Bank.
------------------------------
Notary Public
MY COMMISSION EXPIRES
(NOTARIAL SEAL)
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<PAGE>
SCHEDULE A
[Vessels covered by this Indenture]
Dry Cargo Barges (with covers)
Dry Cargo Barges (without covers)
Towboats -- River
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Exhibit 4.3
- --------------------------------------------------------------------------------
MIDLAND ENTERPRISES INC.,
Owner
AND
ORGULF TRANSPORT CO.,
Charterer
------------------------------------
Charter Agreement
------------------------------------
Dated as of _______, 1998
CERTAIN MONEYS DUE AND TO BECOME DUE UNDER THIS
CHARTER AGREEMENT HAVE BEEN ASSIGNED TO THE CHASE
MANHATTAN BANK, AS TRUSTEE UNDER AN INDENTURE OF FIRST
PREFERRED SHIP MORTGAGE DATED AS OF _________, 1998.
- --------------------------------------------------------------------------------
<PAGE>
CHARTER AGREEMENT dated as of __________, 1998 (herein called the
"Charter") between MIDLAND ENTERPRISES INC., a corporation duly organized and
existing under and by virtue of the laws of the State of Delaware (hereinafter
called "Owner"), and ORGULF TRANSPORT CO., a corporation duly organized and
existing under and by virtue of the laws of the State of Delaware (hereinafter
called "Charterer"),
WITNESSETH:
WHEREAS, Charterer desires to charter the vessels described in Exhibit A
annexed hereto, all of which are hereinafter collectively called "Vessels" and
each of which is individually called "Vessel";
NOW, THEREFORE, in consideration of the premises and of the charter hire to
be paid and the covenants hereinafter mentioned to be kept and performed by
Charterer, Owner hereby lets and demises and Charterer hereby charters the
Vessels upon the following terms and conditions, namely:
1. Owner will make delivery hereunder of the Vessels to Charterer, all in
seaworthy condition, at such places as Owner and Charterer may agree upon on the
date of execution hereof unless delivery shall be delayed beyond such date
through causes beyond the control of Owner. Upon the delivery of each Vessel,
Charterer shall execute and deliver to Owner, in triplicate, a Delivery
Certificate in substantially the form annexed hereto as Exhibit B.
Notwithstanding the failure of Charterer to execute and deliver such a Delivery
Certificate, each Vessel, from and after the delivery thereof, shall for all
purposes be deemed to be in the possession of Charterer and subject to all of
the terms and conditions of this Charter.
2. The charter period for each Vessel chartered hereunder shall begin on
the date hereof. The charter period for all Vessels shall terminate on September
25, 2018.
3. Charterer shall, at its own expense and by its own procurement, man,
victual, navigate, operate, supply, fuel, maintain and repair each Vessel
subject to this Charter and shall pay all other charges and expenses of every
kind and nature whatsoever incident to the use and operation of the Vessels.
Charterer shall at its own expense provide such equipment, outfit, tools, spare
and replacement parts, etc., as may be required for the use and operation of the
Vessels.
4. The charter hire under this Charter shall be $ in each year, $ payable
by Charterer on or before March 25 of each of the years 1998 through 2017, and $
payable by Charterer on or before September 25 of each of the years 1999 through
2018 at the office of Owner, 300 Pike Street, Cincinnati, Ohio, or at such other
place or places as Owner shall hereinafter designate in writing to Charterer.
<PAGE>
5. No payments to be made by Charterer under this Charter shall, as to
Owner or any assignee of Owner, be subject to any right of set-off, counterclaim
or defense and Charterer shall, as to the Owner or any such assignee, have no
right to terminate this Charter or be released, relieved or discharged from the
obligation or liability to make all payments due hereunder for any reason
whatsoever, including, without limitation, the following: any breach of any
representation or warranty of, or any act or omission of, Owner under this
Charter or any other agreement at any time existing between Owner and Charterer;
any claims as a result of any other business dealings by Owner or by Charterer;
any reorganization, arrangement, insolvency, readjustment of debt, bankruptcy,
dissolution or liquidation proceedings involving Owner, any change, alteration,
modification, extension, indulgence or other act or omission in respect of any
indebtedness or obligation of the Owner, or any sale, exchange, release or
surrender of, or other dealing in, any security for such indebtedness or
obligation, whether or not Charterer shall have any notice or knowledge thereof,
or otherwise.
6. Charterer agrees that during the continuance of this Charter, in
addition to paying the charter hire herein provided, Charterer will, when due
and payable from time to time, (a) pay and discharge all taxes, assessments and
other governmental charges levied or assessed upon the interest of Charterer in
the Vessels subject to this Charter or upon the use or operation thereof or on
the earnings arising therefrom, (b) pay all fines and penalties lawfully imposed
on any of the Vessels, (c) pay or reimburse Owner for all taxes, assessments and
other governmental charges levied or assessed against Owner on account of its
ownership of the Vessels or on account of the use or operation thereof or on
account of the earnings arising therefrom (exclusive, however, of any such taxes
on the income to Owner from the charter hire herein provided for) and (d) pay
all lawful claims (except those arising under the Indenture defined below) which
if unpaid might become a lien or charge upon the Vessels or any of them;
provided, however, that Charterer may contest the validity or amount of any such
tax, assessment, governmental charge, fine, penalty or claim if an adequate
reserve for the payment thereof is established and if the Owner's interests or
rights in or under this Charter shall in no way be prejudiced or impaired
thereby. Nothing contained in this Section shall permit any libel, attachment or
other seizure of any of the Vessels under process or color of legal authority to
remain undissolved or undischarged or to modify or alter in any respect
whatsoever the obligations of Charterer hereunder.
7. Charterer will not engage in any unlawful trade or violate any law or
carry any cargo that will expose the Vessels or any of them to penalty,
forfeiture or capture.
8. Charterer acknowledges that each of the Vessels chartered and to be
chartered hereunder is or will be mortgaged under an Indenture of First
Preferred Ship Mortgage to be dated as of ________, 1998 made by Owner to The
Chase Manhattan Bank, as Trustee (said Indenture of First Preferred Ship
Mortgage and any amendments or supplements thereto being herein called the
"Indenture" and The Chase Manhattan Bank, as Trustee, being hereinafter called
the "Trustee"). Charterer will carry or cause to be carried on board each
towboat and tugboat which may be chartered hereunder a true copy of this Charter
and a properly certified
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<PAGE>
copy of the Indenture, and will cause the same to be exhibited, together with
the documents of such Vessel, to the extent required by Chapter 313 of Title 46
of the United States Code, as amended, (hereinafter called "Chapter 313"), to
any and all persons having business with each such Vessel which might give rise
to a lien thereon (other than liens for wages of the master and crew or salvage)
or to any sale, conveyance, mortgage or lease thereof.
Charterer will, in the case of each such towboat and tugboat, place and
keep prominently displaced in the Master's cabin and the wheelhouse thereof a
notice in durable form as follows:
"Notice of Preferred Mortgage
and Charter
This vessel is owned by Midland Enterprises Inc., is covered by an
Indenture of First Preferred Ship Mortgage to The Chase Manhattan Bank,
Trustee, under Chapter 313 of Title 46 of the United States Code, and is
under charter to ORGULF TRANSPORT CO. Under said mortgage and charter,
neither owner, charterer, master nor any other person has any right, power
or authority to create, incur or permit to be imposed upon this vessel, its
hire, freights, earnings, revenues, profits and income, any lien other than
for wages of the master and crew or salvage."
If a Vessel shall be released from the lien of the Indenture in accordance
with its terms, such Vessel shall, contemporaneously with such release and
without any further action by Owner and Charterer, be released from and no
longer subject to the provisions of this Charter.
9. (a) Neither Charterer, the Master of any of the Vessels, nor any other
person has or shall have any right, power or authority to create, incur or
permit to be placed or imposed or continued upon any of the Vessels, its hire,
freights, earnings, revenues, profits and income, any lien whatsoever other than
liens for wages of the master and crew and salvage, the lien of the Indenture,
and liens permitted by the terms and provisions of the Indenture.
(b) Charterer will not suffer or permit to continue any lien, encumbrance
or charge (other than the lien of the Indenture and liens permitted by the terms
and provisions thereof) on any of the Vessels, its hire, freights, earnings,
revenues, profits and income, and Charterer agrees to indemnify and save Owner
harmless against any claim, including, without limitation, fines and penalties
arising from violation of the laws of the United States of America or of any
State thereof and any claim or suit on account of any accident in connection
with the use or operation of any Vessel while subject to this Charter resulting
in damage to property or injury to any person, notwithstanding that Charterer
carries insurance in accordance with the provisions of this Charter. Charterer
will in due course and in any event within thirty (30) days after the same shall
become due and payable pay or cause to be discharged or make adequate provision
for the satisfaction or discharge of all claims or demands (except those arising
under the Indenture) which if unpaid might in equity, in admiralty or at law, or
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<PAGE>
pursuant to any statute, constitute or create a lien, encumbrance or charge on
any of the Vessels or on its hire, freights, earnings, revenues, profits and
income, or will cause the Vessels and the hire, freights, earnings, revenues,
profits and income therefrom to be released and discharged from any lien,
encumbrance or charge therefor.
10. Charterer will, at its own expense, at all times maintain and preserve,
or cause to be maintained and preserved, each of the Vessels in good running
order and repair, ordinary wear and tear excepted, and will cause all equipment
and parts thereof which become worn out, broken or damaged to be repaired or
replaced. Commencing in the year 1999, Charterer will furnish to Owner in
triplicate on or before February 25 of each year a certificate of an engineer or
other expert (who may be in the employ of Charterer) selected by Charterer and
satisfactory to Owner to the effect that Charterer, as of a date not more than
sixty (60) days preceding the date of such certificate, was not in default in
compliance with the covenants contained in this Section. Each of the Vessels
shall, and Charterer covenants that each of them will, at all times comply with
all applicable United States laws, treaties and conventions, and rules and
regulations issued thereunder, the violation of which would have a material
adverse effect on the operations or financial condition of the Charterer or on
the right, title or interest of Owner in and to the Vessels, and shall have on
board, when required thereby, valid certificates showing compliance therewith.
Nothing contained in this Section shall prevent Charterer from laying up any
Vessel which, in the opinion of the officer of Charterer in charge of
operations, it is advisable to lay up temporarily or indefinitely, but such
action shall not abate or postpone the charter hire payable hereunder with
respect to any such Vessel. In addition to the foregoing certificates, Charterer
will furnish to Owner in triplicate such reports with respect to the use,
operation, maintenance and repair of the Vessels and other matters relating
thereto as Owner shall from time to time reasonably request.
All parts, equipment and appliances purchased by Charterer and installed
upon the Vessels and all replacements made upon the Vessels by Charterer shall
be considered accessories to the Vessels and title thereto shall be immediately
vested in Owner, without cost or expense to Owner.
11. Owner or the Trustee shall be entitled, at the expense of Charterer, to
inspect each of the Vessels and its cargo and marine documents, or to cause its
duly authorized representatives to inspect the same, at any reasonable time or
times upon written notice to Charterer. At the request of Owner, Charterer will
deliver for inspection copies of any and all contracts and documents relating to
any of the Vessels, whether on board such Vessel or not.
12. So long as any Vessel shall remain subject to the provisions of this
Charter:
(a) Charterer, at its own expense, will cause insurance to be carried
and maintained with respect to the Vessels with responsible underwriters,
insurance companies or funds selected by Owner against all such risks, with
such coverage, in such form, and in such amounts as, in the opinion of
marine insurance brokers selected by Owner, is customarily maintained with
respect to similar vessels by companies having similar operations. Each
policy shall provide for at least 15 days' prior written
-4-
<PAGE>
notice by such underwriters, insurance companies or funds, as the case may
be, to the Trustee in the event of termination thereof by reason of
nonpayment of premiums, commissions, assessments, club calls or advances
or in accordance with any expressed rights of cancellation they may have.
(b) Hull insurance and protection and indemnity insurance shall be
carried at least in such amount as shall be specified by Owner. Such
insurance shall be distributed among the Vessels in such manner as may from
time to time be specified by Owner and may provide for policy franchise or
deductible average (i) with respect to hull insurance as is customarily
maintained with respect to similar vessels by companies having similar
operations, not to exceed $1,000,000 with respect to all Vessels for loss
or damage arising from one occurrence and (ii) with respect to protection
and indemnity insurance as is customarily maintained with respect to
similar vessels by companies having similar operations.
(c) Charterer at its expense shall maintain coverage under the
standard Water Quality Insurance Syndicate, or comparable, policy form
providing statutory coverage under the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, and coverage under
the Oil Pollution Act of 1990 with a limit of at least five million dollars
($5,000,000) per occurrence.
(d) In no event shall employer's liability insurance be less than
$100,000 per person and $300,000 per accident nor workmen's compensation
insurance by less than may be required under all applicable Federal and
state laws.
(e) Charterer at its own expense shall keep each of the Vessels
insured against war risks under such form of policy as may be in general
use by underwriters of such insurance at the time (or under or through
contracts made with any government), if reasonably available, during any
voyage that any such Vessel may make in any waters where war-like
operations (other than peacetime military maneuvers or activities) are
being conducted.
(f) The policies, binders, covernotes or certificates evidencing
insurance maintained in compliance with this Section and receipts for
payment of the premiums thereon shall be delivered to Owner.
(g) Charterer shall furnish to Owner, from time to time upon request
and in any event on or before June 1 of each year, commencing with the year
1999, a certificate of marine insurance brokers selected by Owner which
shall include (i) a schedule of the insurance maintained by Charterer, (ii)
a statement that in the opinion of said brokers the insurance so maintained
is with acceptable underwriters, insurance companies or funds and is
against such risks, with such coverage, in such form, and in such amounts
as is customarily maintained with respect to similar vessels by companies
having
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<PAGE>
similar operations, and (iii) a statement that there was no failure to
observe or comply with any of the covenants contained in subsections (a),
(b), (c), (d), (e) and (i) of this Section as of a date not more than
thirty (30) days preceding the date of such certificate.
(h) Charterer will not do or suffer or permit to be done any act
whereby any insurance is or may be impaired, suspended or defeated and will
not suffer or permit any of the Vessels to engage in any voyage or to carry
any cargo not permitted to be carried under the policies of insurance then
in effect without first covering the Vessel or Vessels for such voyage with
insurance in nature, amount and terms approved by marine insurance brokers
selected by the Owner.
(i) All insurance whatsoever carried with respect to the Vessels
(except workmen's compensation insurance and liability insurance other than
protection and indemnity insurance and collision liability insurance),
whether in compliance with the terms hereof or as additional protection for
the Charterer, by its terms shall be payable, and claims thereunder shall
be paid, to the extent permitted by applicable law, to the Owner or its
designee; provided, however, that, except during the continuance of an
Event of Default (as defined in Section 19 hereof) of which the Owner shall
have acquired knowledge and the underwriters shall have received written
notice, (1) in the case of any partial loss (except a loss covered either
by protection and indemnity insurance or by collision liability insurance)
for which the insurance carrier shall be required to pay an amount not
exceeding $250,000 in aggregate amount, the underwriters may pay directly
for repairs, salvage or other charges or, if the Charterer or any
subcharterer shall have furnished evidence that it has in fact paid for the
full repair of the damage or secured complete discharge of its liability
for salvage or other charges insured against, then the underwriters may
reimburse the Charterer and any such subcharterer therefor, as their
interests may appear; (2) in the case of any partial loss (except a loss
covered either by protection and indemnity insurance or by collision
liability insurance) for which the insurance carrier shall be required to
pay an amount exceeding $250,000 in aggregate amount, other than an actual,
constructive or agreed total loss, the Owner shall consent that the
underwriters may pay directly for repairs, salvage or other charges or, if
the Charterer or any subcharterer shall have furnished evidence that it has
in fact paid for the full repair of the damage or secured complete
discharge of its liability for salvage or other charges insured against,
shall consent that the underwriters reimburse the Charterer and any such
subcharterer therefor, as their interests may appear; and (3) in the case
of any loss covered by protection and indemnity insurance or by collision
liability insurance, the underwriters may pay directly to the Charterer or
any subcharterer to reimburse it for any loss, damage or expense incurred
and in fact paid by it or, if the Charterer or any sub-charterer shall not
have in fact paid such loss, damage or expense, then such claims may be
paid directly to the party to whom any such liability has been incurred.
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<PAGE>
(j) In the event of the actual, constructive or agreed total loss of
any Vessel during the term of this Charter, Charterer's obligation to pay
hire shall continue as provided by Section 4 hereof, but Charterer shall
thereupon become entitled to insurance proceeds paid over to Owner by the
Trustee pursuant to the Indenture to the extent necessary to reimburse
Charterer for the payment of hire hereunder with respect to such Vessel,
computed in accordance with a schedule previously delivered to Charterer,
until such time as Owner shall replace such Vessel if Owner shall elect so
to do, but Owner shall have no further liability to Charterer with respect
to any such loss. Owner undertakes to do all things necessary and
appropriate to effectuate the collection of such insurance proceeds.
(k) If to the knowledge of Owner an Event of Default or an event
which, with the lapse of time or the giving of notice or both, would
constitute an Event of Default, has happened and is continuing, any and all
moneys received by Owner and/or its designee or designees on account of
insurance losses of every kind shall be held by such party and applied in
the same manner as if paid by the Charterer pursuant to Section 4 hereof;
provided, however, that Owner may, in its discretion, apply or consent that
the brokers or adjusters may apply the proceeds of insurance, except
payments as and for an actual, constructive or agreed total loss, to the
satisfaction and discharge of the liability or to the repair of the damage
in respect of which the insurance loss was paid.
(l) In the event that any Vessel shall be seized under process, Owner
is authorized, if Charterer shall in writing so request, to agree in
writing with any person, firm or corporation executing as surety a bond
releasing the Vessel from such process to hold for the benefit of such
surety any insurance moneys received by Owner as a result of the event upon
which such process was issued, as security for indemnification of such
surety against liability upon said bond.
13. Charterer will furnish Owner in triplicate within ninety (90) days
after the end of each fiscal year of Charterer a balance sheet and statements of
earnings, cash flows and stockholder's equity of Charterer for such fiscal year.
14. Charterer shall throughout the period of this Charter maintain the
documentation of the Vessels under the laws of the United States at Charterer's
expense. Charterer shall not permit the Vessels to be put, placed or operated
under a foreign flag or documentation and will not do or suffer or permit
anything to be done which can or might injuriously affect the registration or
enrollment of the Vessels under the laws or regulations of the United States.
Charterer is and shall remain throughout the period of this Charter a citizen of
the United States within the meaning of Section 2 of the Shipping Act, 1916, as
amended.
15. Owner may, without consent of Charterer, assign, mortgage under Chapter
313 or otherwise, transfer or convey all or any part of its interest in any one
or more of the Vessels or
-7-
<PAGE>
all or any of its rights under this Charter, but Charterer shall be under no
obligation to any assignee, mortgagee or transferee of Owner until written
notice thereof from Owner.
This Charter shall be always subject and subordinate to the Indenture. So
long as no Event of Default has occurred and is continuing, Charterer shall be
entitled to the possession and use of the Vessels in accordance with the terms
of this Charter.
Charterer shall have the right to enter into any bareboat or demise
subcharter of any Vessel for a term not to exceed five years. Any such
subcharter must, by its terms, be always subject and subordinate to the
Indenture and this Charter. In all cases Charterer's obligations to pay hire
with respect to all the Vessels shall continue as provided by Section 4 hereof.
16. All salvage shall be prorated 25% to Owner and 75% to Charterer after
deducting Owner's and Charterer's expenses and crew's proportion.
17. (a) In the event that title to any Vessel is requisitioned or seized by
any governmental authority during the term of this Charter, Charterer's
obligation to pay hire with respect to the Vessels shall continue as provided by
Section 4 hereof. So long as no Event of Default has occurred and is continuing,
Charterer shall be entitled to any award by way of just compensation or
otherwise for such requisition or seizure received by Owner from any
requisitioning or seizing authority to the extent necessary to reimburse it for
the payment of hire above-mentioned until such time as Owner shall replace such
Vessel if Owner shall elect so to do, but Owner shall have no further liability
to Charterer with respect to any such requisition or seizure of title. Owner
undertakes to do all things necessary and appropriate to effectuate the
collection of such just compensation from such requisitioning or seizing
authority.
(b) In the event that the use of any Vessel is requisitioned or seized by
any governmental authority during the term of this Charter, Charterer's
obligation to pay hire with respect to the Vessels shall continue as provided in
Section 4 hereof. So long as no Event of Default has occurred and is continuing,
Charterer shall be entitled to any amounts paid to Owner or to Charterer by such
governmental authority on account of such requisition or seizure of use and
Owner agrees that in such event such amounts shall be paid to Charterer
immediately upon receipt by Owner of any such payment from any governmental
authority.
18. It is agreed that Owner may avail itself of the rights created by the
provisions of 46 U.S.C. ss.ss. 181 through 186, inclusive, in any and all
circumstances whatsoever. Owner shall have a lien upon all cargoes and all
subfreights for any amounts due under this Charter to the extent of Charterer's
lien thereon, if any.
19. If, during the continuance of this Charter, one or more of the
following events (herein sometimes called "Events of Default") shall occur:
-8-
<PAGE>
A. Charterer shall fail to pay any installment of charter hire
pursuant to Section 4 hereof and such failure shall continue for a period
of five days after the last day on which the same shall have been due and
payable pursuant to said Section 4;
B. Charterer shall fail to observe or perform any covenant, condition
or agreement contained in Section 12 or 14 hereof on its part to be
performed and such failure shall continue for ten (10) days after written
notice thereof from Owner to Charterer specifying the failure and demanding
the same be remedied;
C. Charterer shall fail to observe or perform any other covenant,
condition or agreement contained herein on its part to be performed and
such failure shall continue for thirty (30) days after written notice
thereof from Owner to Charterer specifying the failure and demanding the
same be remedied;
D. A decree or order of a court having jurisdiction in the premises
shall have been entered adjudging Charterer a bankrupt, or insolvent, or
approving a petition seeking reorganization, arrangement, readjustment of
its debts or for other relief under any bankruptcy or similar law, Federal
or state, or appointing a trustee or receiver of Charterer or of a
substantial part of its property, and such decree or order shall have
remained in effect undischarged and unstayed for thirty (30) days; or
E. Charterer shall institute proceedings to be adjudicated a voluntary
bankrupt, or shall consent to the appointment of a trustee or receiver of
Charterer or of a substantial part of its property, or shall file a
petition seeking reorganization, arrangement, readjustment of its debts or
for other relief under any bankruptcy or similar law, Federal or state, or
shall file an answer admitting the material allegations of such a petition,
or shall file a petition to take advantage of any debtor's act, or shall
make an assignment for the benefit of creditors, or be unable, or admit in
writing its inability, to pay its debts as they mature, or shall take any
corporate action in furtherance of any of the aforesaid purposes;
then, in any such case, Owner, at is option, may
(a) proceed by appropriate court action or actions, either at law, in
equity or in admiralty, to enforce performance by Charterer of the
applicable covenants of this Charter or to recover damages for the breach
thereof; or
(b) by notice in writing to Charterer terminate this Charter,
whereupon all rights of Charterer to or in the use of the Vessels shall
absolutely cease and determine, but Charterer shall remain liable as
hereinafter provided; and thereupon Owner may by its agents retake the
Vessels wherever found, whether under way or in any port, harbor or other
place, without prior demand and without legal process, and for that purpose
may enter upon any dock, pier or other premises where the Vessels may be
and take
-9-
<PAGE>
possession of any one or more of the Vessels and thenceforth hold, possess
and enjoy the same free from any right of Charterer, or its successors or
assigns, to use the Vessels for any purposes whatsoever; but Owner shall,
notwithstanding such retaking of the Vessels, have a right to recover from
Charterer any and all amounts which under the terms of this Charter may be
then due or which may have accrued to the date of such termination and also
to recover forthwith from Charterer (i) as damages for loss of the bargain,
and not as a penalty, a sum, with respect to each Vessel subject to this
Charter immediately prior to the termination hereof, which represents the
excess, if any, of the then present worth, at the time of such termination,
of the aggregate charter hire for such Vessel which would otherwise have
accrued hereunder from the date of such termination to the end of the
period of this Charter, over the then present worth of the fair charter
hire value of such Vessel for such period of time, such present worth to be
computed in each case on the basis of a 6% per annum discount, compounded
monthly from the respective dates upon which charter hire would have been
payable hereunder had this Charter not been terminated, and (ii) any
damages in addition thereto which Owner shall have sustained by reason of
the breach of any covenant or covenants of this Charter other than for the
payment of charter hire.
The remedies in this Charter provided in favor of Owner shall not be deemed
exclusive, but shall be cumulative, and shall be in addition to all other
remedies in its favor existing at law or in equity or in admiralty. Charterer
hereby waives any mandatory requirements of law, now or hereafter in effect,
which might limit or modify any of the remedies herein provided, to the extent
that such waiver is permitted by law.
20. Within ninety (90) days prior to the redelivery of any Vessel upon the
termination of this Charter, such Vessel shall be drydocked and a joint survey
shall be made by Charterer and Owner to determine the condition and fitness of
said Vessel and her machinery and equipment. The cost of such drydocking and
survey shall be paid by Charterer. All repairs required as shown by such survey
to be necessary to restore the Vessel to the condition of seaworthiness as when
delivered hereunder, except for ordinary wear and tear, and all repairs of
damage occurring after such survey shall be made by Charterer at Charterer's
expense and on Charterer's time prior to redelivery. If the Vessel shall sustain
damage below the water line after such survey, the Charterer shall, if requested
by the Owner, re-drydock the Vessel for a joint survey of such damage, the
Charterer to pay the cost of such re-drydocking and survey.
21. Upon the expiration of the period for the charter of each Vessel
hereunder, Charterer shall forthwith redeliver possession of such Vessel to
Owner at a terminal mutually agreed upon between the parties at the time of
redelivery.
22. This Charter shall be governed by and construed in accordance with the
maritime laws of the United States and, to the extent applicable, the law of the
State of New York. Any dispute in respect of this Charter or the performance
hereof shall be referred to three arbitrators at Cincinnati, Ohio, one to be
appointed by Owner, one by Charterer and the third by the two so chosen. If the
two arbitrators appointed by the parties
-10-
<PAGE>
fail to agree on the third within twenty (20) days after the designation of the
first arbitrator, the third shall be chosen as follows: The party initiating the
arbitration shall request the American Arbitration Association to prepare a list
of five admiralty lawyers qualified and available to act as arbitrator, and a
copy of such list shall be submitted to each party. Within seven days after
receipt of such list each party shall have the right to strike two names
therefrom and return the list to the Association. Failure to return the list
within eight days after its receipt shall be deemed to be an acceptance of the
entire list. The Association shall choose the third arbitrator from the names
not stricken from the list by the parties. A written statement of the issues to
be arbitrated shall be signed by the parties and submitted to the arbitrators
before any evidence is offered or, if the parties fail to agree upon such
statement, the arbitrators shall, after discussion with the parties, define in
writing the issues in controversy before hearing evidence on the merits. Unless
otherwise agreed by the parties, any such arbitration shall take place in
Cincinnati, Ohio under the Rules of the American Arbitration Association then in
effect. The arbitrators shall not have power to add to or subtract from or
otherwise change the provisions of this Charter. They, or any two of them
actually participating in the arbitration proceedings, shall render their award
in writing, sending a signed copy to each party. Such award shall be final, and
may if necessary be made a rule of court, and a judgment, decree or order may be
entered thereon in any court of competent jurisdiction.
23. Any notice required or permitted to be given by either party to the
other party shall be deemed to have been given when deposited in the United
States of America mails, registered or certified, postage prepaid, addressed as
follows:
If to Owner: Midland Enterprises Inc.
300 Pike Street
Cincinnati, Ohio 45202
Copy to: Eastern Enterprises
9 Riverside Road
Weston, Massachusetts 02193
If to Charterer: Orgulf Transport Co.
300 Pike Street
Cincinnati, Ohio 45202
If to the Trustee: The Chase Manhattan Bank
450 West 33rd Street, 5th Floor
New York, New York 10001
Copy to: Pryor Cashman Sherman & Flynn LLP
410 Park Avenue
New York, New York 10022
Attn: Eric Hellige
or addressed to either party at such other address or addresses as such party
shall hereafter furnish to the other party in writing.
24. Charterer may, without the consent of the Owner or the Trustee, assign
all of its interests, rights and obligations under this Charter to a Barge Line
Subsidiary (as defined in the Indenture) of the Owner upon written notice to the
Owner and the Trustee of such assignment, which notice shall include a copy of
the agreement under which the assignee assumes all of the Charterer's
obligations hereunder.
25. This Charter shall be executed in three counterparts for the parties
and each such counterpart shall for all purposes be deemed to be an original.
Two of said counterparts shall be endorsed "This is one of Owner's two original
copies" and shall be delivered to the Owner, and the remaining one counterpart
shall be endorsed "This is Charterer's original copy" and
-11-
<PAGE>
shall be delivered to Charterer. Under no circumstances shall there be executed,
at any time, any copies hereof in addition to such three counterparts.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Charter to be duly
executed as of the day and year first above written.
MIDLAND ENTERPRISES INC., Owner
By_____________________________
ORGULF TRANSPORT CO., Charterer
By_____________________________
CERTAIN MONEYS DUE AND TO BECOME DUE UNDER THIS CHARTER
AGREEMENT HAVE BEEN ASSIGNED TO THE CHASE MANHATTAN BANK, AS
TRUSTEE UNDER AN INDENTURE OF FIRST PREFERRED SHIP MORTGAGE
DATED AS OF _____________, 1998.
-13-
<PAGE>
State of )
ss:
County of )
On this day of , 1998, before me personally appeared, to me personally
known, who being by me duly sworn, says that he is the of MIDLAND ENTERPRISES
INC., that said instrument was signed on behalf of said corporation by authority
of its Board of Directors, and he acknowledged that the execution of the
foregoing instrument was the free act and deed of said corporation.
______________________________
Notary Public
My Commission Expires:______________
------------------------------------
State of )
ss:
County of )
On this day of , 1998, before me personally appeared ,
to me personally known, who being by me duly sworn, says that he is the
of ORGULF TRANSPORT CO., that said instrument was signed on behalf of said
corporation by authority of its Board of Directors, and he acknowledged that the
execution of the foregoing instrument was the free act and deed of said
corporation.
______________________________
Notary Public
My Commission Expires:______________
-14-
<PAGE>
EXHIBIT A
Vessels Subject to this Charter
-15-
<PAGE>
EXHIBIT B
Delivery Certificate
Pursuant to Charter Agreement
Dated as of _________, 1998 between
MIDLAND ENTERPRISES INC., OWNER
and
ORGULF TRANSPORT CO., CHARTERER
The undersigned, Charterer under the above-described Charter Agreement,
acknowledges delivery of the following described vessel(s), on the date hereof,
and agrees that the same is/are in its possession subject and pursuant to all of
the terms, covenants and conditions of said agreement, to wit:
ORGULF TRANSPORT CO.
By___________________________
Dated:
-16-
Exhibit 4.4
MIDLAND ENTERPRISES INC.
TO
THE CHASE MANHATTAN BANK,
As Trustee
---------------------
Assignment
---------------------
Dated as of __, 1998
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, Midland Enterprises Inc., a Delaware corporation (the
"Company"), as and for additional collateral security for the due and punctual
payment of the principal of and interest and premium, if any, on the ___% First
Preferred Ship Mortgage Bonds of the Company, due September 25, 2018 (the
"Bonds") and the due performance and observance by the Company of all the
covenants and agreements contained in the Bonds and in the Indenture of First
Preferred Ship Mortgage dated as of __________, 1998 (the "Indenture") by the
Company to The Chase Manhattan Bank, as Trustee (the "Trustee"), hereby grants,
assigns, transfers and sets over unto The Chase Manhattan Bank, as such Trustee,
all the right, title and interest of the Company in and to (i) all moneys and
claims for moneys due and to become due under the Charter (as hereinafter
defined) to the extent of the amounts hereinafter set forth in paragraph 1
hereof, and (ii) all claims for damages arising out of the breach of, and all
rights to terminate, the Charter. That certain Charter Agreement dated as of
_________, 1998 to be made by the Company, as owner, to Orgulf Transport Co. as
charterer (the "Charterer"), covering the vessels chartered and to be chartered
thereunder, and any and all amendments, addenda and supplements thereto, is
herein called the "Charter".
1. On each date for the payment of charter hire under the Charter, the
Charterer shall pay over therefrom directly to the Trustee an amount which shall
equal any installments of interest and Sinking Fund payments (as defined in the
Indenture) on the Bonds which may then be overdue, all interest which will
become due on the Bonds on the next succeeding interest payment date, the
Sinking Fund payment, if any, which shall become due with respect to the Bonds
on such next succeeding interest payment date, and any and all obligations of
the Company under the Bonds or the Indenture which may then be due and unpaid
(all moneys so to be paid over to the Trustee being hereinafter called "Assigned
Moneys").
2. Assigned Moneys received by the Trustee hereunder shall be applied by
the Trustee to the payment of interest on the Bonds, to sinking fund payments
required to be made on Sinking Fund payment dates and to the discharge of any
other obligations of the Company under the Bonds or the Indenture which may from
time to time be unpaid, all as the same shall become due and payable (whether at
the stated maturity, by acceleration, or otherwise) in accordance with the terms
and provisions thereof.
3. The Company hereby constitutes and appoints the Trustee its true and
lawful attorney-in-fact, with full and irrevocable power and authority, in the
place and stead of the Company and in the name of the Company or in the name of
the Trustee or otherwise, from time to time, in the discretion of the Trustee,
for the purpose of carrying out the terms hereof, to take any and all action and
to execute any and all instruments which may be necessary to accomplish the
purpose hereof, and, without limiting the generality of the foregoing, the
Company hereby gives the Trustee the power and right, on behalf of the Company,
without notice to or assent by the Company, to ask, demand, collect, receive and
give acquittances and
<PAGE>
receipts for the Assigned Moneys or any other moneys arising out of claims or
other rights assigned hereby, to take possession of and endorse and collect any
checks, drafts, notes, trade acceptances or other instruments for the payment of
money received on account of the Assigned Moneys or any other moneys arising out
of claims or other rights assigned hereby, and to file any claim, to take any
other action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Trustee for the purpose of collecting the Assigned Moneys or
any other moneys arising out of claims or other rights assigned hereby wherever
payable under any of the provisions of the Charter and to direct any party to
the Charter or any other party liable for payment thereof to make payment
directly to the Trustee of the Assigned Moneys or any other moneys arising out
of claims or other rights assigned hereby at any time payable pursuant to the
provisions of the Charter. The Trustee may, at any time, without any notice to
or assent of the Company, renew and/or extend the time of payment of, modify,
compound, compromise, settle or adjust, the Assigned Moneys or any claims or
other rights assigned hereby or other moneys arising out of said claims or
rights, without in any way releasing or impairing this Assignment or the rights
of the Trustee hereunder.
4. The Company hereby covenants and agrees:
(a) Duly to perform and observe all of the terms and provisions of the
Charter on the part of the Company to be performed and observed;
(b) At its own expense, but, during the continuance of an Event of
Default (as defined in the Indenture) subject to the direction and control
of the Trustee, to take such action as shall be required or, during the
continuance of an Event of Default, may be requested by the Trustee, for
the collection of Assigned Moneys or any other moneys arising out of
claims or other rights assigned hereby, and forthwith to pay over and
deliver to the Trustee any payment, or instrument representing the
payment, of any Assigned Moneys or any other moneys arising out of claims
or other rights assigned hereby, which shall be issued in respect thereof,
in the identical form in which received, except for endorsement by the
Company, and until so paid over and delivered, to hold the same in trust
for the Trustee and not to commingle the same with any funds of the
Company;
(c) Forthwith upon the execution hereof (i) to make and maintain on
its books of account and ledgers and upon such other of its records as may
contain information regarding Assigned Moneys or any claims or other rights
assigned hereby, appropriate notations imparting notice of the assignment
thereof, and (ii) to make and maintain on all original counterparts of the
Charter and of any amendments, addenda or supplements thereto a notation
reading substantially as follows:
"Certain moneys due and to become due under this Charter Agreement have
been assigned to The Chase Manhattan Bank, as Trustee under an Indenture of
First Preferred Ship Mortgage dated as of ____________, 1998."
-2-
<PAGE>
(d) That it will not, without first obtaining the prior written
consent of the Trustee, compound, compromise, settle or adjust any moneys
due or to become due under, or any claims for moneys arising out of, the
Charter or renew or extend the time of payment thereof;
(e) That it will not, without first obtaining the prior written
consent of the Trustee, consent to any modification or amendment of or
extension of the terms of the Charter, terminate the Charter, waive or
release any obligation of the Charterer thereunder or consent or agree to
any act or omission to act on the part of the Charterer which, without
consent or agreement, would constitute a default under the Charter or fail
promptly and diligently to exercise each and every right which it may have
under the Charter; provided, however, that the Company may terminate the
Charter and may consent to any modification or amendment thereof without
the prior written consent of the Trustee if such termination, modification
or amendment is expressly permitted by the Indenture;
(f) That it will reimburse the Trustee, immediately upon demand, for
all court costs, attorneys' fees and other expenses which may be expended
or incurred by the Trustee to obtain payment of the Assigned Moneys or of
any other moneys arising out of claims or other rights assigned hereby;
(g) That it will execute and deliver to the Trustee on demand any
instruments or documents and do any and all acts as may be required or
deemed by the Trustee necessary to carry into effect the provisions of this
Assignment and to facilitate the collection of Assigned Moneys or any other
moneys arising out of claims or other rights assigned hereby; and
(h) That all records with respect to the Charter and Assigned Moneys
are and will be at all times exclusively kept and maintained at the
Company's principal place of business.
5. It is expressly agreed that the Company shall remain liable under the
Charter to observe and perform all the conditions and obligations therein
provided to be observed and performed by it, and the Trustee shall have no
obligation or liability under the Charter by reason of or arising out of this
Assignment, nor shall the Trustee be required or obligated in any manner to
observe or perform any of the conditions or obligations of the Company under or
pursuant to the Charter or to make any payment, or to make any inquiry as to the
nature or sufficiency of any payment received by it, or to present or file any
claim, or to take any other action to collect or enforce the payment of any
amounts which may have been assigned to it or to which it may be entitled
hereunder at any time or times. The Company will promptly deliver to the Trustee
a copy of each demand, notice, communication, or other document (except those
received in the regular course of business) delivered to it in any way relating
to the Charter.
-3-
<PAGE>
6. The Company represents and warrants that, but for the provisions of this
Assignment and the Indenture, it has not transferred, assigned, pledged or
encumbered in any manner, in whole or in part, the Charter or the Assigned
Moneys or any claims or other rights assigned hereby and the Company hereby
covenants and agrees with the Trustee that it will not, so long as this
Assignment shall remain in effect, transfer, assign, pledge or encumber in any
manner whatsoever the Assigned Moneys or any claims or other rights assigned
hereby other than to or in favor of the Trustee.
7. The Company shall, and hereby authorizes the Trustee, in its discretion
and without notice to the Company, to, give notice of this Assignment to any and
all parties obligated to pay Assigned Moneys or any other moneys arising out of
claims or other rights assigned hereby and to notify such party or parties to
pay Assigned Moneys or such other moneys directly to the Trustee. Prior to the
occurrence and continuance of an Event of Default, the Trustee shall not be
obligated to take any action pursuant to this Section 7.
8. The Company represents and warrants that, only three counterparts of the
Charter were executed for the parties. On one such counterpart of the Charter
there was endorsed "This is Charterer's original copy" and on the remaining two
counterparts of the Charter there was endorsed "This is one of Owner's two
original copies". The Charterer's counterpart of the Charter and the Company's
counterparts of the Charter are being delivered by the Company to the Trustee
pursuant to this Assignment. The Company further represents and warrants that it
will not execute any other copies of the Charter in addition to the aforesaid
counterparts of the Charter.
9. Upon the payment in full of the principal of, and premium, if any, and
interest on the Bonds, and upon the satisfaction of all obligations of the
Company under the Indenture, this Assignment shall terminate and the Trustee
shall execute and deliver to the Company, at the Company's expense, such
instrument or instruments as the Company may reasonably request to evidence the
termination of the Trustee's rights hereunder.
10. Each reference herein to the Trustee and the Company shall be deemed to
include their respective successors and assigns.
11. No failure or delay on the part of the Trustee in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege hereunder prevent
any other or further exercise thereof, or the exercise of any other right, power
or privilege. The rights and remedies herein expressly specified are cumulative
and not exclusive of any rights or remedies which the Trustee would otherwise
have.
12. The duties and obligations of the Trustee under this Assignment shall
be governed by the standards set out in Article VI of the Indenture.
-4-
<PAGE>
13. This Assignment shall be governed by and construed in accordance with
the law of the State of New York.
-5-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Assignment to be duly
executed as of this ___ day of _________, 1998.
MIDLAND ENTERPRISES INC.
By:____________________________
Title:
STATE OF )
COUNTY OF ) ss:
On this __ day of ______, 1998, before me personally appeared ____, to me
personally known, who being by me duly sworn, says that he is the _____ of
Midland Enterprises Inc., that said instrument was signed on behalf of said
corporation by authority of its Board of Directors, and he acknowledged that the
execution of the foregoing instrument was the free act and deed of said
corporation.
--------------------------------
Notary Public
My Commission Expires:___________
-6-
<PAGE>
CONSENT AND AGREEMENT
The undersigned as the Charterer under the Charter Agreement dated as of
____________, 1998, referred to in the foregoing Assignment, hereby acknowledges
notice of and consents to the foregoing Assignment and agrees (1) that it will
make payment of all Assigned Moneys and all other moneys arising out of claims
or other rights purported to be assigned thereby, directly to The Chase
Manhattan Bank, as Trustee, at its office at 450 W. 33rd Street 15th Floor, New
York, New York 10001, until receipt of written notice from The Chase Manhattan
Bank, that all its rights under said Assignment have terminated; (2) that any
such payment shall be final and the undersigned will not seek to recover from
The Chase Manhattan Bank, for any reason whatever any moneys paid to it pursuant
to said Assignment; (3) that it has received written notice of the amount due
from Midland Enterprises Inc. to The Chase Manhattan Bank, and of the identity
of the transactions from which the Assigned Moneys arose and will arise; (4)
that it had no right of counterclaim or defense when it received the aforesaid
notice; and (5) that it waives as against The Chase Manhattan Bank, any
counterclaim or defense arising from a breach of any warranty not discovered
until after said notice was received.
Dated: 1998
ORGULF TRANSPORT CO.
By:____________________________
Title:
STATE OF )
COUNTY OF ) ss:
On this __ day of ______, 1998, before me personally appeared ____, to me
personally known, who being by me duly sworn, says that he is the _____ of
Orgulf Transport Co., that said instrument was signed on behalf of said
corporation by authority of its Board of Directors, and he acknowledged that the
execution of the foregoing instrument was the free act and deed of said
corporation.
--------------------------------
Notary Public
My Commission Expires:___________
-7-
[Ropes & Gray letterhead]
August 10, 1998
Midland Enterprises Inc.
300 Pike Street
Cincinnati, Ohio 45202
Ladies and Gentlemen:
This opinion is furnished to you in connection with a registration
statement (the "Registration Statement") on Form S-3 filed with the Securities
and Exchange Commission under the Securities Act of 1933, as amended, for the
registration of $75,000,000 principal amount of __% First Preferred Ship
Mortgage Bonds due 2018 (the "Bonds") of Midland Enterprises Inc. (the
"Company"). The Bonds are to be sold pursuant to an Underwriting Agreement to be
entered into between the Company and Donaldson, Lufkin & Jenrette Securities
Corporation, as the Underwriter (the "Underwriting Agreement"). The Bonds are to
be issued pursuant to the provisions of a First Preferred Ship Mortgage to be
dated as of _____, 1998 (the "Indenture"), between the Company and The Chase
Manhattan Bank, as Trustee (the "Trustee").
We have acted as counsel for the Company in connection with the proposed
issue and sale of the Bonds and the preparation of the Registration Statement.
For purposes of this opinion, we have examined and relied upon the information
set forth in the Registration Statement and such other documents and records as
we have deemed necessary.
Based upon the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized and validly existing under
the laws of the State of Delaware with corporate power and authority to enter
into the Indenture and to issue and sell the Bonds.
2. When the Indenture has been duly executed and delivered in accordance
with the authorizing resolutions of the directors of the Company, the Bonds will
have been duly authorized by the Company and, upon the execution and filing with
the Trustee of the proper
<PAGE>
Midland Enterprises Inc. -2- August 10, 1998
papers, the Bonds will be issuable under the terms of the Indenture; upon the
Registration Statement becoming effective and the Indenture being qualified
under the Trust Indenture Act of 1939, no further authorization, consent or
approval by any regulatory authority will be required for the valid issuance and
sale of the Bonds (except under applicable admiralty or maritime law or under
the so-called "blue sky" or securities laws of the several states, as to which
we express no opinion); and thereafter, upon the execution, authentication and
delivery of the Bonds in accordance with the Indenture against payment therefor
as provided in the Underwriting Agreement, the Bonds will be valid and legally
binding obligations of the Company and will be entitled to the benefits of the
Indenture, except that enforcement of the rights and remedies created by the
Bonds is subject to bankruptcy, reorganization, insolvency or similar laws of
general application affecting the rights and remedies of creditors and that the
availability of the remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceeding therefor may
be brought, and except that we express no opinion as to the creation under the
Indenture of a first preferred mortgage lien on the vessels referred to in
Schedule A to the Indenture under Chapter 313 of Title 46 of the United States
Code, as amended, or as to any other admiralty or maritime laws.
We hereby consent to the filing of this opinion as part of the Registration
Statement and to the use of our name therein and in the related prospectus under
the caption "Validity of the Bonds".
It is understood that this opinion is to be used only in connection with
the offer and sale of the Bonds while the Registration Statement is in effect.
Very truly yours,
/s/ Ropes & Gray
Ropes & Gray
EXHIBIT 12
MIDLAND ENTERPRISES INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Years Ended Six months ended
December 31 June 30
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1998 1997
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS:
- --------
Pretax Income From
Continuing Operations................... 25,087 48,163 48,141 24,872 24,396 9,607 9,585
ADD:
Interest on Indebtedness................ 13,530 14,043 14,624 15,406 15,879 5,346 6,819
Other Interest and Amort
of Debt Expense........................ 227 672 551 576 360 86 95
Portions of Rents Representative
of the Interest Factor............... 1,024 1,548 1,438 1,460 1,186 487 512
-----------------------------------------------------------------------
Income As Adjusted..................... 39,868 64,426 64,754 42,314 41,821 15,526 17,011
=======================================================================
FIXED CHARGES:
- -------------
Interest of Indebtedness............... 13,530 14,043 14,624 15,406 15,879 5,346 6,819
Other Interest and Amort
of Debt Expense........................ 227 672 551 576 360 86 95
Portions of Rents Representative
of the Interest Factor............... 1,024 1,548 1,438 1,460 1,186 487 512
Capitalized Interest................... 0 0 0 (39) (581) 0 0
-----------------------------------------------------------------------
Fixed Charges.......................... 14,781 16,263 16,613 17,403 16,844 5,919 7,426
======================================================================
Ratio of Earnings to
Fixed Charges.......................... 2.70 3.96 3.90 2.43 2.48 2.62 2.29
======================================================================
</TABLE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
Registration Statement.
ARTHUR ANDERSEN & CO.
Cincinnati, Ohio,
August 5, 1998
EXHIBIT 23.3
CONSENT OF THOMPSON COBURN
We hereby consent to the reference to our name under the caption "Validity
of Bonds" in the Prospectus included in this Registration Statement.
THOMPSON COBURN
August 10, 1998
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2)______
------------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
New York 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 Park Avenue
New York, New York 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
---------------------------------------------------------
MIDLAND ENTERPRISES, INC.
(Exact name of obligor as specified in its charter)
Delware 04-2284434
(State or other jurisdiction of I.R.S. employer
incorporation or organization) identification No.)
300 Pike Street
Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip Code)
---------------------------------------------------------
Debt Securities
(Title of the indenture securities)
<PAGE>
- --------------------------------------------------------------------------------
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
New York State Banking Department, State House, Albany, New York 12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551.
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
-2-
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of Eligibility.
1. A copy of the Articles of Association of the Trustee as now in effect,
including the Organization Certificate and the Certificates of Amendment dated
February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being contained
in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act (see
Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 31st day of July, 1998.
THE CHASE MANHATTAN BANK
By /s/ Glenn G. McKeever
--------------------------
/s/ Vice President
-3-
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business March 31, 1998, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts in Millions
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ................... $ 12,037
Interest-bearing balances ............................................ 4,054
Securities: ............................................................
Held to maturity securities ............................................ 2,340
Available for sale securities .......................................... 50,134
Federal funds sold and securities purchased under
agreements to resell ................................................ 24,982
Loans and lease financing receivables:
Loans and leases, net of unearned income $127,959
Less: Allowance for loan and lease losses 2,797
Less: Allocated transfer risk reserve ... 0
--------
Loans and leases, net of unearned income,
allownce, and reserve. ............................................... 125,161
Trading Assets ......................................................... 61,820
Premises and fixed assets (including capitalized leases) ............... 2,961
Other real estate owned ................................................ 347
Investments in unconsolidated subsidiaries and associated companies .... 242
Customers' liability to this bank on acceptances outstanding ........... 1,380
Intangible assets ...................................................... 1,549
Other assets ........................................................... 11,727
--------
TOTAL ASSETS ........................................................... $298,734
========
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits
In domestic offices .................................................. $ 96,682
Noninterest-bearing ........................ $38,074
Interest-bearing ........................... 58,608
-------
In foreign offices, Edge and Agreement,
subsidiaries and IBF's ............................................... 72,630
Noninterest-bearing ........................ $ 3,289
Interest-bearing ........................... 69,341
Federal funds purchased and sold under agreements
to repurchase .......................................................... 42,735
Demand notes issued to the U.S. Treasury ............................... 872
Trading liabilities .................................................... 45,545
Other borrowed money (includes mortagage indebtedness
and obligations under capitalized leases):
With a remaining maturity of one year or less ........................ 4,454
With a remaining maturity of more than one year
through three years ................................................ 231
With a remaining maturity of more than three years ................... 106
Bank's liability on acceptances executed and outstanding ............... 1,380
Subordinated notes and debentures ...................................... 5,708
Other liabilities ...................................................... 11,295
TOTAL LIABILITIES ...................................................... 281,638
--------
EQUITY CAPITAL
Perpetual preferred stock and related surplus .......................... 0
Common stock ........................................................... 1,211
Surplus (excludes all surplus related to preferred stock) .............. 10,291
Undivided profits and capital reserves ................................. 5,579
Net unrealized holding gains (losses)
on available-for-sale securities ....................................... (1)
Cumulative foreign currency translation adjustments .................... 16
TOTAL EQUITY CAPITAL ................................................... 17,096
--------
TOTAL LIABILITIES AND EQUITY CAPITAL ................................... $298,734
========
</TABLE>
I, Joseph L. Sclafani, E.V.P. & Controller of the above named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR. )
-5-
