<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934.
For the quarterly period ended JUNE 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934.
For the period from to
COMMISSION FILE NUMBER
000-11573
MARINE TRANSPORT CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-2625280
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
1200 HARBOR BOULEVARD, C-901, WEEHAWKEN, NJ 07087-0901
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code 201-330-0200
Former Name: OMI Corp.
Former Address: 90 Park Avenue
New York, NY 10016
Former Fiscal Year: Not applicable
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF AUGUST 14, 1998 :
Common Stock, par value $0.50 per share, 5,892,605 shares
1
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MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
INDEX
PART I: FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Statements of 4
Operations for the three months and six months
ended June 30, 1998 and 1997
Condensed Consolidated Balance Sheets- 5
June 30, 1998 and December 31, 1997
Condensed Consolidated Statements of Changes in 6
Stockholders' Equity for the year ended
December 31, 1997 and the six months ended
June 30, 1998
Condensed Consolidated Statements of Cash Flows for the six 7
months ended June 30, 1998 and 1997
Notes to Condensed Consolidated Financial 8
Statements
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 12
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II: OTHER INFORMATION 19
SIGNATURES 25
2
<PAGE> 3
PART 1: ITEM 1: FINANCIAL INFORMATION
SUMMARY OF CERTAIN TRANSACTIONS AFFECTING THE COMPANY
Marine Transport Corporation ("MTC" or "the Company"), formerly OMI Corp., was
established in its present form through a series of transactions, culminating
June 18, 1998, through which OMI Corp. split up and distributed to its
shareholders a subsidiary containing its international businesses (the
"Distribution") and then acquired Marine Transport Lines, Inc. in a
stock-for-stock exchange (the "Acquisition"). OMI Corp. then changed its name to
Marine Transport Corporation.
Upon completion of the Distribution, the assets, liabilities and equity related
to OMI Corp.'s international businesses were removed from the Company's balance
sheet at their recorded values. For periods prior to the Distribution, the
historical financial statements of the Company reflect the financial position
and results of operations of OMI Corp. as reported for such periods. For periods
subsequent to the Distribution and Acquisition, the Company's financial
statements include the assets, liabilities, equity and operations of OMI Corp.'s
domestic business and reflect the acquisition of Marine Transport Lines, Inc.
under the purchase method of accounting. The comparisons of financial position
and results of operations should be read with consideration of the above
transactions and presentations. Users of these financial statements should be
aware that future results of operations will significantly differ from the
historical results of operations because of the changes in the Company which
occurred as a result of the transactions described.
Notes 1 and 2 to the Condensed Consolidated Financial Statements of Marine
Transport Corporation and Subsidiaries more fully describe the Distribution and
Acquisition transactions and the impact of these transactions on the
consolidated financial statements.
3
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MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE SIX
MONTHS MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1998 1997 1998 1997
----------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Voyage $ 50,692 $ 53,913 $ 112,762 $ 111,387
Other 3,689 3,070 4,156 3,287
----------------------------------------------------------
Total revenues 54,381 56,983 116,918 114,674
----------------------------------------------------------
Operating expenses:
Vessel and voyage 31,643 31,256 60,151 63,250
Operating leases 16,793 12,012 35,503 23,350
Depreciation and amortization 6,844 7,150 14,334 14,435
General and administrative 5,128 3,915 9,745 7,567
----------------------------------------------------------
Total operating expenses 60,408 54,333 119,733 108,602
----------------------------------------------------------
Operating income (6,027) 2,650 (2,815) 6,072
Other income (expense):
Gain (loss) on disposal of assets (13) 13 537 906
Interest expense (1,821) (2,323) (3,219) (5,606)
Equity in income of affiliates 831 2,577 1,873 3,684
----------------------------------------------------------
Net other income (expense) (1,003) 267 (809) (1,016)
----------------------------------------------------------
Income (loss) before income taxes
and cumulative effect of
change in accounting principle (7,030) 2,917 (3,624) 5,056
Provision (benefit) for income taxes,
including reversal of deferred
income taxes of $38.9 million
in the 1998 periods resulting
from the Distribution (see Note 5) (40,046) 507 (38,885) 1,106
----------------------------------------------------------
Income before cumulative effect of
change in accounting principle 33,016 2,410 35,261 3,950
Cumulative effect of change in
accounting principle, net of tax
provision of $7,429 13,797
----------------------------------------------------------
Net income $ 33,016 $ 2,410 $ 35,261 $ 17,747
==========================================================
Basic earnings per common share:
Income before cumulative effect of
change in accounting principle $ 7.18 $ 0.56 $ 7.91 $ 0.92
Net income $ 7.18 $ 0.56 $ 7.91 $ 4.14
Diluted earnings per common share:
Income before cumulative effect of
change in accounting principle $ 7.06 $ 0.55 $ 7.77 $ 0.90
Net income $ 7.06 $ 0.55 $ 7.77 $ 4.06
</TABLE>
See notes to condensed consolidated financial statements.
4
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MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997 (1)
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash, including cash equivalents
in 1997-$25,900 $ 10,157 $ 32,489
Receivables 12,130 20,181
Prepaid expenses and other current assets 4,839 18,732
--------- ---------
Total current assets 27,126 71,402
Capital construction fund 4,063 10,969
Vessels and other property, at cost 103,977 518,709
Construction in progress -- 56,032
Less accumulated depreciation (63,553) (204,516)
--------- ---------
Vessels, construction in progress
and other property-net 40,424 370,225
Vessel dry-docking costs 2,582 1,818
Investments in and advances to/from
affiliate 2,750 28,155
Note receivable 9,000 9,000
Other assets and deferred charges 21,053 27,018
--------- ---------
TOTAL ASSETS $ 106,998 $ 518,587
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,046 $ 6,314
Accrued liabilities 8,373 22,931
Current portion of long-term debt 2,424 16,575
--------- ---------
Total current liabilities 17,843 45,820
Advance time charter revenues and other
liabilities 1,013 3,114
Deferred gain on sale and leaseback
of vessels 20,963 36,108
Deferred income taxes payable 20,504 64,264
Long-term debt 28,393 146,341
Minority interest in subsidiary -- 1,917
Stockholders' equity 18,282 221,023
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 106,998 $ 518,587
========= =========
</TABLE>
(1) The condensed balance sheet as of December 31, 1997 has been derived from
the audited financial statements as of that date.
See notes to condensed consolidated financial statements.
5
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MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
Unearned
Common Compensation Retained
Stock Capital Restricted (Deficit)
Shares(1) Amount(1) Surplus(1) Stock Earnings
--------- --------- ---------- ----- --------
<S> <C> <C> <C> <C> <C>
Balance as of January 1, 1997 4,269 $ 2,135 $ 203,462 $ (1,039) $ (1,848)
Comprehensive income:
Net income 10,827
Net change in valuation account
Comprehensive income
Retirement of partner's equity
interest in joint venture 777
Retirement of minority stockholders'
equity interest in subsidiary (549)
Exercise of stock options 33 17 1,979
Issuance of restricted stock awards 5 2 436 (438)
Amortization of unearned compensation 372
--------------------------------------------------------------------------------
Balance at December 31, 1997 4,307 2,154 206,105 (1,105) 8,979
Comprehensive income:
Net income 35,261
Net change in valuation account
Comprehensive income
Exercise of stock options 5 2 210
Retirement of minority stockholders'
equity interest in subsidiary (681)
Amortization of unearned
compensation 1,105
Issuance of common stock 1,926 963 10,287
Spin-off of foreign subsidiaries (190,952) (54,046)
--------------------------------------------------------------------------------
Balance at June 30, 1998 6,238 $ 3,119 $ 24,969 $ -- $(9,806)
================================================================================
</TABLE>
<TABLE>
<CAPTION>
Accum.Other
Compre- Compre- Total
hensive hensive Shareholders'
Income Income Equity
------ ------ ------
<S> <C> <C> <C>
Balance as of January 1, 1997 $ 4,868 $ 207,578
Comprehensive income:
Net income $ 10,827 10,827
Net change in valuation account 22 22 22
--------
Comprehensive income $ 10,849
========
Retirement of partner's equity
interest in joint venture 777
Retirement of minority stockholders'
equity interest in subsidiary (549)
Exercise of stock options 1,996
Issuance of restricted stock awards -- --
Amortization of unearned compensation 372
-----------------------------------------
Balance at December 31, 1997 4,890 221,023
Comprehensive income:
Net income $ 35,261 35,261
Net change in valuation account (4,890) (4,890) (4,890)
--------
Comprehensive income $ 30,371
========
Exercise of stock options 212
Retirement of minority stockholders'
equity interest in subsidiary (681)
Amortization of unearned
compensation 1,105
Issuance of common stock 11,250
Spin-off of foreign subsidiaries (244,998)
-----------------------------------------
Balance at June 30, 1998 $ -- $ 18,282
=========================================
</TABLE>
(1) Restated to give retroactive effect to 1 for 10 reverse stock split.
See notes to condensed consolidated financial statements
6
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MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS
ENDED JUNE 30,
1998 1997
--------- ---------
<S> <C> <C>
NET CASH USED BY OPERATING ACTIVITIES $ (5,201) $ (2,247)
CASH FLOWS (USED) PROVIDED BY INVESTING ACTIVITIES:
Additions to vessels and other property (53,969) (26,398)
Cash distributed as part of spin off of UBC's net assets (12,600)
Proceeds from Capital Construction Fund 7,090
Payments for the retirement of minority
stockholders' interest (1,917) (2,456)
Purchase of MTL net of cash acquired (4,519)
Proceeds and interest received and reinvested in the
Capital Construction Fund (184) (323)
--------- ---------
Net cash (used) provided by investing activities (66,099) (29,177)
--------- ---------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 72,637 188,058
Payments on long-term debt (34,698) (170,649)
Issuance of common stock 11,250
Payments for debt issue costs (221) (579)
Net proceeds from issuance of common stock 791
--------- ---------
Net cash provided (used) by financing activities 48,968 17,621
--------- ---------
Net decrease in cash and cash equivalents (22,332) (13,803)
Cash and cash equivalents at beginning of period 32,489 47,877
--------- ---------
Cash and cash equivalents at end of period $ 10,157 $ 34,074
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
7
<PAGE> 8
MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Marine Transport Corporation ("MTC" or the "Company") (formerly OMI Corp.) is a
U.S. based company that owns and charters a fleet of ocean-going vessels which
it operates in domestic and international markets. The Company also manages
vessels for other shipowners.
On June 17, 1998, the Company distributed to its shareholders, in a tax-free
distribution (the "Distribution"), all of the shares of its wholly owned
subsidiary Universal Bulk Carriers, Inc. ("UBC"). UBC operated what was the
Company's foreign shipping businesses, and continues to operate those businesses
as OMI Corporation ("New OMI") under the Company's former management. Concurrent
with the Distribution, the Company acquired all of the outstanding common stock
of Marine Transport Lines, Inc. ("MTL"), a U.S. based company that owns,
operates and manages U.S. and foreign flag vessels, in exchange for newly issued
shares of the Company's common stock (the "Acquisition"). The Company is managed
by certain officers formerly of MTL and certain former directors of MTL and
additional new directors. The Company trades under the symbol "MTLX" and is
listed on the NASDAQ National Market.
Unless otherwise indicated, amounts reflected in the accompanying financial
statements include the results of UBC through June 17, 1998, and the results of
MTL subsequent to June 17, 1998. Immediately following the Distribution and
Acquisition, the Company consummated a one-for-ten reverse stock split. All
share and per share amounts have been retroactively restated to reflect the
reverse stock split.
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore, do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. However, in the opinion of the
management of the Company, all adjustments (comprising only normal recurring
accruals) necessary for a fair presentation of operating results have been
included in the statements. Certain accounts have been reclassified in the 1997
financial statements to conform to their 1998 presentation. Reference is made to
OMI Corp.'s Form 10K for the year ended December 31, 1997 and the Form S-1 filed
on May 15, 1998 for additional information.
NOTE 2 - ACQUISITION AND DISTRIBUTION
As consideration for the acquisition of MTL described above, the Company issued
approximately 1,926,000 shares (as adjusted for a one-for-ten reverse stock
split), including 127,453 to be held in escrow pending resolution of certain
post-closing adjustments, in exchange for all of the outstanding shares of MTL.
The acquisition was valued at approximately $11,250,000 representing the
Company's estimate of the fair value of MTL at the date the transaction was
announced, and has been accounted for as a purchase.
The pro forma unaudited results of operations for the six months ended June 30,
1998 and June 30, 1997, assuming consummation of the Acquisition and
Distribution as of January 1, 1997 are as follows:
8
<PAGE> 9
<TABLE>
<CAPTION>
Six Months Ended June 30
1998 1997
--------------------------
<S> <C> <C>
Revenues $ 59,341 $ 71,209
Vessel, voyage and lease expense 52,233 63,567
General and administrative expense 13,793 13,546
(Loss) before gain on sale of vessels
income taxes, minority interest and
cumulative effect of change in
accounting principle (6,148) (5,904)
Loss before cumulative effect of change
in accounting principle (4,608) (6,805)
Net loss (4,608) (3,071)
Basic and diluted earnings per common share:
Loss before cumulative effect of change
in accounting principle $ (0.74) $ (1.09)
Net loss (0.74) (0.49)
</TABLE>
As part of the Distribution, MTC is party to certain agreements with New OMI,
including the following:
Distribution Agreement - The Distribution Agreement provides for, with certain
exceptions, assumptions of liabilities and cross indemnities designed
principally to place financial responsibility for the domestic related
liabilities of OMI with MTC and the foreign related assets and liabilities of
OMI with New OMI. New OMI, however, assumed the obligations of the Company with
respect to the Company's 10.25 percent Senior Notes due November 1, 2003 in
exchange for a note in the amount of $6.8 million, which is equivalent in value
to the principal amount of the Senior Notes outstanding. The Distribution
Agreement also provides that each of MTC and New OMI will indemnify the other in
the event of certain liabilities arising under the Federal securities laws. Each
of MTC and New OMI will have sole responsibility for claims arising out of
respective activities after the Distribution.
The Distribution Agreement also provides that, except as otherwise set forth
therein or in any other agreement, all costs or expenses incurred on or prior to
the date of the Distribution in connection with the Distribution will be charged
to and paid by the party incurring such costs or expenses. Except as set forth
in the Distribution Agreement or any related agreement, each party shall bear
its own costs and expenses incurred after the date of the Distribution.
As part of the Distribution Agreement, New OMI has, subject to certain
exceptions, provided indemnity to MTC for all taxes attributable to the
Distribution and to certain corporate restructuring transactions preceding the
Distribution.
Tax Cooperation Agreement - Prior to the Distribution, MTC and New OMI entered
into a Tax Cooperation Agreement which sets forth each party's rights and
obligations with respect to federal, state, local and foreign taxes for periods
prior to and after the Distribution and related matters such as filing of tax
returns and conducting audits and other proceedings. In general, the Tax
Cooperation Agreement provides that New OMI will be liable for taxes and be
entitled to refunds for each period covered by any such return which are
attributable to New OMI and its subsidiaries. Though valid as between the
parties thereto, the Tax Cooperation Agreement is not binding on the IRS and
does not alter either party's tax liability to the IRS.
Acquisition Agreement - The Acquisition Agreement provides for an adjustment in
the purchase price of Marine Transport Lines, Inc. based on Working Capital
amounts as of the date of the Closing compared to certain pre-established
levels. The purchase price adjustment will be made by
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<PAGE> 10
increasing or decreasing the number of shares of the Company which were
exchanged for MTL's shares.
NOTE 3 - ACCOUNTING CHANGE FOR VESSEL DRYDOCKING COSTS
Effective January 1, 1997, the Company changed its method of accounting for
vessel drydocking costs from the accrual method to the deferral method. Vessel
drydocking costs had been accrued and charged to operating expenses over the
period between drydockings, which is generally a two to three year period. Under
the deferral method, vessel drydocking expenses are capitalized and amortized
over the period until the next scheduled drydocking. Management believes the
deferral method better matches costs with revenues, and minimizes any
significant changes in estimates associated with the accrual method. The
cumulative effect of this accounting change is shown separately in the
consolidated statement of operations and resulted in income of $13,797,000 (net
of income taxes of $7,429,000), or $3.16 per diluted share for the six months
ended June 30, 1997. The three months and six months ended June 30, 1997 was
previously presented using the accrual method of accounting and has been
restated to reflect this change.
NOTE 4 - EARNINGS PER COMMON SHARE
The computation of basic earnings per share is based on weighted average number
of common shares outstanding of 4,600,000 and 4,286,000 for the three months
ended June 30, 1998 and 1997, respectively, and 4,455,000 and 4,282,000 for the
six months ended June 30, 1998 and 1997, respectively. The computation of
diluted earnings per share, which assumes the exercise of all dilutive stock
options using the treasury method, is based on the weighted average number of
common shares outstanding of 4,675,000 and 4,374,000 for the three months ended
June 30, 1998 and 1997, respectively, and 4,537,000 and 4,370,000 for the six
months ended June 30, 1998 and 1997, respectively.
NOTE 5 - INCOME TAXES
As a result of the Distribution, the subsidiary holding the Company's foreign
shipping businesses became a decontrolled corporation for income tax purposes.
Accordingly, the Company will not be subject to income taxes applicable to the
future operations of these foreign businesses and the balance of deferred income
taxes of approximately $38,900,000 at the date of the Distribution related to
such operations was credited to income. This income tax credit accounts for
almost all of the Company's net income for the three month and six month periods
ended June 30, 1998 and will not recur in subsequent periods.
NOTE 6 - LONG-TERM DEBT AND CREDIT ARRANGEMENTS
At June 30, 1998 Long-Term Debt consisted of the following (in thousands):
<TABLE>
<S> <C>
MTL Term Loan $12,113
MTC Term Loan 8,887
MTL Revolving Credit 2,000
MTC Revolving Credit 1,000
Subordinated Debt due to OMI 6,444
Promissory Note due to OMI 374
-------
Total Debt 30,817
Less Current Portion 2,424
-------
Long-term Portion $28,393
=======
</TABLE>
All debt at June 30, 1998 was created concurrently with the Acquisition. Both
the term loans and revolving credit facilities of the Company and its
wholly-owned subsidiary MTL accrue interest at a floating rate that
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<PAGE> 11
is fixed for brief periods (30-,60-,90, or 180-day periods) at the Company's
discretion. The interest rate is comprised of LIBOR (which, depending on the
borrowing period chosen, was approximately 5.7% at June 30, 1998) plus an
incremental margin determined by the Company's ratio of Total Debt to EBITDA
(Earnings Before Interest, Taxes, Depreciation and Amortization). That
incremental margin can range from a maximum of 2.25% (3.0x Total Debt to EBITDA)
to a minimum of 1.25% (1.0x Total Debt to EBITDA). The Company pays commitment
fees quarterly on the unused and available portion of the revolving credit
facilities at an annual rate equal to the aggregate of forty percent of the
applicable incremental margin and one-quarter of one percent. At June 30, 1998
there were no unused and available portions of the revolving credit facilities.
The subordinated debt is payable in semi-annual installments of principal and
interest through November 1, 2003. The promissory note is payable in semi-annual
installments of principal and interest through May 1, 2003.
The term loans are payable in twenty quarterly installments beginning in
September 1998; the first four installments total $500,000 each; the next
fifteen installments total $906,250 each; and the final installment of
$5,406,250 is due June 18, 2003. The revolving credit facility of the Company's
wholly-owned subsidiary, MTL, reduces to $1,000,000 on June 18, 2001; the
remaining revolving credit facilities expire on June 18, 2003.
Among other things, the Company's debt obligations restrict the Company's
ability to pay or declare dividends and require the Company to maintain certain
financial ratios, minimum cash balances, minimum asset values, and to use
proceeds of vessel sales to reduce debt. In addition, the Company's vessels are
pledged as collateral to secure the borrowings under the term loan and revolving
credit facility agreements. As of June 30, 1998, the Company was in compliance
with all covenants of the term loan and revolving credit facility agreements,
as well as those of the subordinated debt and promissory note agreements.
In addition to the above, as of June 30, 1998 MTL had borrowed $3,250,000 from
its 50%-owned affiliate, Marine Car Carriers (MI), Inc. MCCI under two unsecured
promissory notes that bear interest at 8%, payable quarterly in arrears. The
notes are due on June 5, 1999.
NOTE 7 - OTHER MATTERS
Pursuant to a prior charter agreement between a subsidiary of MTL and a
subsidiary of a bank (the "Bank"), MTL has indemnified the Bank for certain
investment tax credits previously utilized by the Bank to the extent such
credits may be disallowed by the Internal Revenue Service. These investment tax
credits are the basis for a claim by the Internal Revenue Service ("IRS")
against the Bank amounting to approximately $5,000,000 as of June 30, 1998,
including interest and penalties. MTL and the Bank are contesting the IRS claim.
In May 1998, the IRS issued a Notice of Deficiency to the Bank. The tax
deficiency and interest, in a total amount of approximately $1.1 million, must
be paid to the IRS in order to contest this matter in a venue other than the Tax
Court. In accordance with the terms of the original charter agreement, the
Company plans to advance the $1.1 million to the Bank. The Bank and the Company
intend to continue to contest the IRS claim and to seek a refund for any amounts
paid, upon which the Bank will repay to the Company any amounts previously
advanced. Management does not believe it is probable that the Bank and the
Company will not prevail in this matter. However, in the event that the Company
and the Bank do not prevail, the charter agreement requires that the Bank credit
the Company for any amounts advanced against any ultimate indemnification
obligation.
NOTE 8 - SUBSEQUENT EVENTS
In August, 1998 the Company reached an agreement with the owner of two
chemical/product tankers to purchase the tankers for delivery between October
31, 1998 and January 15, 1999. The total purchase price of
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<PAGE> 12
approximately $22.8 million is substantially equivalent to outstanding Title XI
mortgage debt on the vessels which will be assumed by the Company. The debt is
due in installments over an eight year remaining term at an interest rate of
8.125%. The transaction is subject to the approval of the U.S. Maritime
Administration and other regulatory agencies, as well as the board of directors
of the present owner. The Company intends to charter the vessels to a 75%-owned
joint venture company for commercial operation. The Title XI mortgage debt will
be severally guaranteed by the owners of the joint venture.
On August 6, 1998 the Company purchased 350,000 shares of its Common Stock at
$2.0625 per share, or an aggregate amount of $721,875. After the purchase of
these shares, the Company has issued and outstanding 5,892,605 shares of Common
Stock.
In July 1998, the Company sold the vessel Savonetta which was acquired by the
Company in connection with the Acquisition. Proceeds from the sale, $576,000
after income taxes, were used to reduce long-term debt.
PART I: ITEM 2:
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Marine Transport Corporation ("MTC" or "the Company"), formerly OMI Corp., was
established in its present form through a series of transactions, culminating
June 18, 1998, through which OMI Corp. distributed to its shareholders a
subsidiary containing its international businesses (the "Distribution") and then
acquired Marine Transport Lines, Inc. in a stock-for-stock exchange (the
"Acquisition"). OMI Corp. then changed its name to Marine Transport Corporation.
Upon completion of the Distribution, the assets, liabilities and equity related
to OMI Corp.'s international businesses were removed from the Company's balance
sheet at their recorded values. For periods prior to the Distribution, the
historical financial statements of the Company reflect the financial position
and results of operations of OMI Corp. as reported for such periods. For periods
subsequent to the Distribution and Acquisition, the Company's financial
statements include the assets, liabilities, equity and operations of OMI Corp.'s
domestic business and reflect the acquisition of Marine Transport Lines, Inc.
under the purchase method of accounting. The comparisons of financial position
and results of operations should be read with consideration of the above
transactions and presentations. Users of these financial statements should be
aware that future results of operations will significantly differ from the
historical results of operations because of the changes in the Company which
occurred as a result of the transactions described.
Certain pro forma financial information has been presented to give effect to the
Acquisition and Distribution as if such events had occurred on January 1, 1998.
The pro forma information does not purport to represent what the operations
actually would have been or to project operating results for any projected
period. The pro forma financial information is based on certain assumptions the
Company believes are reasonable. See Note 2 to the Condensed Consolidated
Financial Statements.
The information below and elsewhere in this document contains certain
forward-looking statements which reflect the current view of the Company with
respect to future events and financial performance. Wherever used, the words
"expect", "plan", "anticipate" and similar expressions identify forward-looking
statements. Such statements are based on management's current expectations and
are subject to a number of uncertainties and risks that could cause actual
results to differ materially from those described in the forward-looking
statements. The Company does not publicly update its forward-looking statements
even if experience or
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<PAGE> 13
future changes make it clear that any projected results expressed or implied
therein will not be realized.
The following presentation of management's discussion and analysis of Marine
Transport Corporation's financial condition and results of operations should be
read in connection with the condensed consolidated financial statements,
accompanying notes thereto and other financial information appearing elsewhere
in this document, as well as the Form S-1 filed on May 15, 1998 which fully
describes the Acquisition and Distribution, and the documents incorporated by
reference thereto.
General
Marine Transport Corporation, formerly OMI Corp., is a U.S. based supplier of
marine transportation services. Prior to the Acquisition and Distribution, its
major businesses were providing seaborne transportation services for crude oil
and refined petroleum products in two distinct international market segments:
Suezmax tankers and Handymax product tankers. These businesses were separated
from the Company and were distributed to the shareholders of the Company in the
Distribution. In addition, the Company provided lightering services in the Gulf
of Mexico and provided ship management services to the U.S. government for its
Ready Reserve Fleet. Following the Distribution and Acquisition, the major
businesses of the Company are: marine transportation of chemicals, petroleum
products and crude oil for U.S. based industrial customers; lightering services
for crude oil customers in the Gulf of Mexico; and ship management services for
third-party ship owners and the U.S. government.
The Company's results of operations for the periods prior to the Acquisition and
Distribution, which were effective on June 17,1998, include the operations of
the major businesses conducted by the Company prior to that date. The following
discussion of financial condition and results of operations is organized
accordingly.
Market Overview
The charter rates that the Company obtained for its Suezmax crude oil and
Handymax product carrier vessels were determined in a highly competitive market.
The industry is cyclical, experiencing significant swings in profitability and
asset values resulting from changes in the supply of and demand for vessels. The
product carrier market is the segment of the tanker market that transports
refined petroleum products such as gasoline, jet fuel, kerosene, naphtha and gas
oil. Freight rates in this market were relatively strong from 1995 through the
first quarter of 1997 showing substantial seasonal improvement in the winter
months. Product tanker rates reached a very high level early in 1997 but receded
gradually after that as a result of reduced oil product imports in the Pacific
region due to refinery capacity additions in the area and lower oil consumption
because of the financial crisis in southeast Asia and Korea, lower heating oil
consumption in the Northern Hemisphere due to the mild weather this past winter,
higher through put in industrialized countries, and higher product tanker fleet
growth relative to product tanker ton mile demand. Rates declined to a low level
in the first quarter of this year to levels not seen since 1992. Average freight
rates for handysize product tankers in the first half of 1998 were substantially
lower than the rates prevailing in the same period a year ago.
The Company's Suezmax tanker fleet was one of the largest independent fleets in
the world. The Company targeted this market segment due to the flexibility of
the Suezmax tankers to engage in long haul and short-haul trades, the growth
potential in the crude oil market and the fleet age distribution (more than 40%
of the fleet is 20 or more years old).
The improvement in tanker freight rates, which began in 1995, continued in 1998
for VLCC and Suezmax tankers. The rate gains in the last few
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years have been the result of growth in world oil demand which together with a
modest increase in the supply of tankers have created a better tanker
supply/demand balance. Average freight rates in the first half of 1998 were
higher for VLCC and Suezmax tankers but substantially lower for Aframax vessels
compared to the rates prevailing in the same period a year ago. The Company
operated all but one of its Suezmax tankers, including three chartered-in
vessels, in the spot market.
Furthermore, in order to increase the Company's market share in the Suezmax
trades in the Atlantic Basin, the Company and a Norwegian shipping company (the
owner of one of the world's largest and more modern Suezmax fleets) combined
Suezmax tanker fleets for commercial purposes and created Alliance Chartering
LLC ("Alliance"). Alliance marketed 28 Suezmax tankers (including the TANANA
which is being held for sale), comprising about 17% of the total Suezmaxes
trading in the Atlantic basin.
The above comments refer to the major parts of the Company's business prior to
the Acquisition and Distribution. Following the Acquisition and Distribution,
the market for the Company's major businesses can be described as follows:
Energy and Chemical Transportation: MTC provides an industrial shipping
philosophy to serving the chemical and petroleum liquid bulk market for large
commercial customers. In a number of cases, the Company has entered into
long term contracts of affreightment providing for base amounts of cargo to be
shipped on an annual schedule of voyages on its vessels. Three vessels operate
under long-term contracts to third party customers who pay all direct costs of
operating the vessels. Spot market movements are used to fill out cargo capacity
on vessels not used for contract tonnage. Contracts are renewed periodically
(contract terms range from one to five years) and rate fluctuations due to a
changing market environment are generally not as large as experienced in the
spot market for chemical and petroleum tankers. Most of the Company's commercial
vessels operate in the protected U.S. Jones Act market.
Lightering Services: MTC provides lightering services in the Gulf of Mexico
through its subsidiary MTL Petrolink. The Company time charters in four
international flag Aframax tankers, and frequently charters in on a spot basis
other vessels to augment its services. MTL Petrolink provides assist vessels,
equipment and personnel to discharge large crude oil vessels offshore and
deliver cargo to ports in the U.S. Gulf. MTL Petrolink also provides vessel
repair services.
Ship Management: MTC provides ship management services to industrial ship owners
who use vessels in parts of their own businesses, and to the U.S. government
for its Ready Reserve Fleet. Ship management includes technical operation and
maintenance, crewing, regulatory compliance and other aspects of ship operation.
MTC manages one of the largest U.S. based fleets. Management contracts range in
length from one to five years in remaining term.
Results of Operations
The Company's vessels operate, or have operated in prior years, on time,
bareboat or voyage ("spot") charters. Each type of charter denotes a method by
which revenues are recorded and expenses are allocated. Under a time charter,
revenue is measured based on a daily or monthly rate and the charterer assumes
certain voyage expenses, such as fuel and port charges. Under a bareboat
charter, the charterer assumes all voyage and operating expenses; therefore, the
revenue rate is likely to be lower than a time charter. Under a voyage charter,
revenue is calculated based on the amount of cargo carried, most expenses are
for the shipowner's account and the length of the charter is one voyage. Revenue
may be higher in the spot market, as the owner is responsible for most of the
costs of the voyage. Other factors affecting net voyage revenues for voyage
charters are waiting time between cargoes, port costs, and
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<PAGE> 15
bunker prices.
Vessel expenses included in net voyage revenue discussed above include operating
expenses such as crew payroll/benefits/travel, stores, maintenance and repairs,
drydock, insurance and miscellaneous. These expenses are a function of the fleet
size, utilization levels for certain expenses and requirements under laws, by
charterers and Company standards. Insurance expense varies with the overall
insurance market conditions as well as the insured's loss record, level of
insurance and desired coverage.
Net income for the six months ended June 30, 1998 was $ 35.3 million compared to
$17.8 million for the six months ended June 30, 1997. Included in the 1998
income is a benefit of $38.9 million for federal income taxes. In connection
with the Distribution, the subsidiary holding OMI Corp.'s international business
became a decontrolled corporation for income tax purposes and deferred income
taxes, which had previously been recorded, were reversed. Similar adjustments
are not expected to occur in the future. Included in the 1997 income of $17.7
million is $13.8 million, net of income taxes, from the cumulative effect of a
change in accounting principle.
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO JUNE 30, 1997
Voyage revenues decreased by $3.2 million for the three months and increased by
$1.4 million for the six months ended June 30, 1998 compared to same periods in
1997. Market conditions in the product tanker trades led to approximately $4
million declines in revenues in each of the first two quarters of 1998. An
increase of four vessels in the Suezmax fleet for the 1998 periods compared to
the 1997 periods increased revenues by approximately $3 million and $15 million
for the three month and six month periods ended June 30, 1998 compared to the
same periods in 1997. During the first six months of 1997 three vessels were
redelivered to the Company from a time charter to the U.S. government and were
substantially unemployed for the remainder of the 1997 year and almost all of
the six month period ended June 30, 1998. The layup of these vessels during the
first six months of 1998 resulted in a decrease in revenues of approximately
$6.0 million compared to the six month period ended June 30, 1997.
Other revenues for all periods presented represents revenues from ship
management services.
Vessel and voyage operating expenses decreased by approximately $3.1 million for
the six months ended June 30, 1998 as compared to the same period in 1997,
primarily as a result of the layup of the vessels previously on time charter to
the U.S. government. These vessels operated and incurred vessel expenses for a
total of 209 days during the first six months of 1997, but for only 30 days for
the first six months of 1998.
Operating income for MTL Petrolink decreased slightly from comparable periods of
the prior year.
Operating lease expenses increased by $12.2 million and $4.8 million for the six
month and three month periods ended June 30, 1998 compared to the same periods
in 1997 because of the Company's decision to charter in four Suezmax tankers
during the 1998 periods.
General and administrative expense increased substantially for the 1998 periods
as compared to the comparable periods in 1997. Expenses relating to the
Distribution and Acquisition, as well as salary and benefits expenses for former
OMI Corp. employees were the primary reasons for the increase.
Interest expense decreased by $0.5 million for the three months and by $2.4
million for the six months ended June 30, 1998 compared to the same
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<PAGE> 16
periods of 1997. This decrease results from more interest capitalized on the
Suezmax new building program in the 1998 periods, as well as lower interest
rates and lower outstanding debt balances during 1998 as compared to the prior
year.
Decreases in equity in operations of affiliates in 1998 compared to 1997 reflect
lower operating earnings in those affiliate operations that are impacted by the
same market conditions discussed above.
The income tax benefit for the six month and three month periods ended June 30,
1998 represents principally the reversal of deferred taxes at the distribution
date for the Company's foreign subsidiaries which became decontrolled
corporations through the Distribution; income taxes are no longer payable on the
deferred taxable income of those companies and the deferred taxes were reversed.
The income tax provisions for the six month period ended June 30, 1997 differed
from statutory rates because taxes were not accrued on some of the earnings of
the Company's investments in joint ventures as management considered those
earnings to be invested for an indefinite period.
IMPACT OF DISTRIBUTION AND ACQUISITION ON OPERATING RESULTS FOR PERIODS
PRESENTED
Although the Distribution and the Acquisition significantly changed the
structure, operating businesses and management of the Company, the transactions
occurred on a date close to the end of the reporting period so the impact of
these transactions was not material to reported operating results.
BALANCE SHEET
MTC's balance sheet as of June 30, 1998 reflects both the Distribution and
Acquisition transactions whereas the balance sheet as of December 31, 1997
reflects the historical balance sheet of OMI Corp. prior to such transactions.
The June 30, 1998 balances reflect the Domestic Assets, Domestic Liabilities (as
such terms are defined in the Acquisition and Distribution Agreements) and
equity balances of OMI Corp., as well as the assets and liabilities of Marine
Transport Lines, Inc. recorded on the purchase method of accounting.
LIQUIDITY AND CAPITAL RESOURCES
Cash balances of $10.2 million as of June 30, 1998 include cash drawn from the
Company's revolving credit line of $3 million, as well as $3.25 million borrowed
from a joint venture company at market rates and terms. Concurrent with the
Acquisition and Distribution, the Company restructured various loan agreements,
including those of Marine Transport Lines, Inc.. At June 30, 1998, the Company
had total borrowings under these agreements of approximately $31 million which
represented its total borrowing capacity under the loan agreements at that date.
Other forms of cash available for operations and investment by the Company
include additional cash balances of approximately $4.5 million in the joint
venture company as well as $4 million included in the Capital Construction Fund.
Both of these amounts are before applicable income taxes payable on amounts
withdrawn from their current use.
Periodic maintenance requirements require vessels to be out of service for
prolonged periods of time for drydocking and repair. For a substantial amount of
the months of July and August, 1998 the vessel Marine Columbia will be out of
service and off hire, and will require repairs amounting to approximately $1
million. Additionally, one of the Company's layed up tankers, the Courier, will
require repairs and modifications of over $1 million prior to starting a two
year charter to a major oil company in October, 1998. Approximately $1.1 million
will be advanced under the indemnity agreement described in Note 7 to the
condensed consolidated financial statements. Cash balances and available credit
lines are expected to be sufficient to meet the Company's normal
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<PAGE> 17
operating requirements, including the payments described.
OTHER OPERATING MATTERS
The Company sold its vessel Savonetta in July, 1998, and used the after tax
proceeds of $576,000 to reduce long term debt.
In July, 1998 MTC was awarded ship management contracts for four container
vessels operated for First Ocean Bulk Carriers and Lykes Lines.
In August, 1998 the Company completed negotiations with the owner of two
chemical/petroleum products vessels for the purchase of the vessels by the
Company by assumption of the outstanding mortgage debt on the vessels in the
aggregate amount of approximately $22.8 million.
In June, 1998 the Company was awarded contracts to manage ten vessels to replace
seventeen vessels currently managed under contracts with the U.S. Maritime
Administration which were due to expire in June, 1998. The Maritime
Administration subsequently rescinded awards to all awardees, and is
resoliciting proposals for management of its fleet. Expiring contracts were
extended until October 31, 1998. The Company will resubmit proposals to the
Maritime Administration for new awards, but cannot anticipate the outcome.
PRO FORMA FINANCIAL INFORMATION
Pro forma financial information included in the notes to the unaudited condensed
financial statements for the six month periods ended June 30, 1997 and 1998
present certain historical financial information as if the Acquisition and
Distribution occurred on January 1, 1997. Although this pro forma financial
information is based on reasonable assumptions applied to past financial events,
management has taken certain actions subsequent to the Acquisition which it
expects will improve the future operating results. These actions include:
reduction of salary and employment expenses, decrease in office rental
commitments and decreases in other administrative expenses which will reduce
total general and administrative expenses by approximately $8 million on
an annualized basis as compared to that amount allocated to OMI's Domestic
Business on a historical basis; employment of the layed up vessel Courier on a
two year charter at profitable rates, and implementation of plans for other
layed up vessels to profitably employ these vessels; and, expansion of the
Company's ship management business.
Voyage revenues decreased by $11.9 million on a pro forma basis for the six
months ended June 30, 1998 as compared to the six months ended June 30, 1997
because of the aforementioned redelivery of three product ships from the
charterer and the resulting layup period, and also as a result of two vessels
which traded domestically in 1997, but were transferred to the international
subsidiary in 1998. Commensurate declines in vessel and voyage expenses were
also experienced.
AGREEMENTS
As part of the Distribution, the Company is party to certain agreements with OMI
Corporation (New OMI), its former subsidiary. Certain provisions of these
agreements are summarized in Note 2 of the Condensed Consolidated Financial
Statements included herein and the agreements are included in the Company's Form
S-1 dated May 15, 1998.
EFFECTS OF INFLATION
The Company does not consider inflation to be a significant risk to the cost of
doing business in the foreseeable future. Inflation has a moderate impact on
operating expenses, drydocking expenditures and corporate overhead.
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YEAR 2000
The Company is taking steps to ensure its critical computer systems will be Year
2000 compliant. The Company plans to install new management and accounting
systems in its corporate offices prior to the start of year 2000, and has
identified potential shipboard problems and is implementing solutions. However,
the readiness of all of the Company's customers and suppliers may vary.
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PART II: OTHER INFORMATION
Item 1 Legal Proceedings
1. By letter dated May 23, 1995, from The Fuji Bank, Limited ("Fuji"), Marine
Car Carriers, Inc. ("MCC"), an indirect subsidiary of Marine Transport
Corporation, was advised of an assessment by the Internal Revenue Service (the
"IRS") against Fuji based upon its utilization of the investment tax credit for
MARINE RELIANCE, a vessel formerly: (a) owned by a subsidiary of Fuji named Fuji
Marine Corporation ("Fuji Marine"); and (b) bareboat chartered by MCC. Fuji has
advised MCC that the potential liability from the IRS assessment is, with the
inclusion of interest (which continues to accrue), approximately $5,000,000 as
of June 30, 1998. In accordance with the bareboat charter between MCC and Fuji
Marine, MCC is required to indemnify Fuji for any amounts it may be required to
pay the IRS on the basis of the assessment. In conjunction with Fuji, MCC is
contesting the assessment by the IRS and on August 1, 1995, a written protest
(the "Protest") was filed on behalf of Fuji in response to the IRS assessment.
Under a guaranty issued by Marine Transport Lines, Inc. ("MTL"), a direct
subsidiary of Marine Transport Corporation, in favor of Fuji, MTL is liable for
any amounts which may be payable by MCC to Fuji on the basis of the assessment
made by the IRS. By letter dated June 29, 1998, counsel to Fuji advised MCC
that: (a) the IRS has, through a so called "90 day letter", formally disallowed
Fuji's use of the investment tax credit for MARINE RELIANCE; and (b) MCC will be
required to advance approximately $1,100,000 to Fuji in order to require Fuji to
continue to contest the assessment by the IRS. It is not currently known in
which court Fuji will litigate this matter.
2. As of August 15, 1998, Marine Transport Corporation ("MTC") (formerly named
OMI Corp.) and/or its subsidiary Marine Transport Lines, Inc. ("MTL" and
together with MTC and a number of present or former affiliates or subsidiaries
of MTC or MTL, the "Companies") have been named as defendants in over 8,900
personal injury lawsuits filed in: (a) federal courts in Ohio (8,827 cases),
Michigan (97 cases), and the U.S. Virgin Islands (39 cases); and (b) state
courts in Texas (6 cases), Washington (4 cases), Virginia (3 cases) and
Louisiana (1 case). The cases have been filed on behalf of current, retired or
deceased seamen who allege that they suffered unspecified asbestos-related
injuries or diseases as a result of occupational exposure to fibers emitted from
asbestos-containing products in the course of employment aboard vessels owned or
operated by the Companies and other vessel owners. Damages are sought in
unspecified amounts in each case.
The cases filed in federal courts, which comprise the vast majority of the
suits pending against the Companies, are subject to administration for all
pretrial purposes by the United States District Court for the Eastern District
of Pennsylvania (United States District Judge Charles R. Weiner) pursuant to
orders of the Judicial Panel on Multidistrict Litigation issued commencing in
1991. By order of Judge Weiner, the federal cases have been administratively
dismissed, with the court retaining jurisdiction and the cases subject to later
reinstatement upon submission of proof of the existence of an asbestos-related
disease. Little, if any, activity has occurred since 1991 in the cases filed in
federal courts, although additional cases continue to be filed.
While the Companies' potential liability arising from these cases is, in many
instances, covered by insurance, there are numerous proceedings which, for a
number of reasons, including lost or incomplete records and certain deductibles,
expose the Companies to potential liability which is not covered by insurance.
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Item 2. Changes in Securities.
Pursuant to the terms of the Acquisition Agreement, dated as of
September 15, 1997, among the Company, Universal Bulk Carriers, Inc., Marine
Transport Lines, Inc. ("MTL") and the stockholders of MTL (the "Acquisition
Agreement"), on June 17, 1998 and June 18, 1998, in consideration for the
acquisition by the Company of all of the outstanding capital stock of MTL, the
Company issued 1,784,554 shares of its common stock to the former stockholders
of MTL in a private placement under Section 4(2) of the Securities Act of 1933,
as amended (the "Securities Act"). Also pursuant to the Acquisition Agreement,
on June 18, 1998, the Company also issued in a private placement under Section
4(2) of the Securities Act (i) 127,453 shares of its common stock to an escrow
agent, which shares will be held in escrow pending certain post-closing
adjustments to be accomplished as part of the MTL acquisition and (ii) 17,684
shares of its common stock to a financial advisor for services rendered to MTL.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held its annual meeting of stockholders on June 15, 1998.
At the meeting, the following matters were voted upon with the result indicated:
Proposal 1 Approval and adoption of the Acquisition Agreement, dated as of
September 15, 1998 (the "Acquisition Agreement") by and among the Company,
Universal Bulk Carriers, Inc., Marine Transport Lines, Inc., ("MTL") and the
stockholders of MTL, pursuant to which the Company will acquire all of the
outstanding MTL common stock (the "Acquisition").
The results of the voting were as follows:
FOR 28,904,384 AGAINST 48,755 ABSTAIN 40,821
Proposal 2 Approval of an amendment, effective only following the distribution
of the stock of OMI Corporation to the Company's stockholders (the
"Distribution") and the Acquisition, to the
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Company's Amended and Restated Certificate of Incorporation changing the name of
the Company to Marine Transport Corporation.
The results of the voting were as follows:
FOR 28,901,599 AGAINST 450,260 ABSTAIN 42,099
Proposal 3 Approval of an amendment, effective only following the Distribution
and the Acquisition, to the Company's Amended and Restated Certificate of
Incorporation whereby the number of directors constituting the Board of
Directors shall be not less than five nor more than 15.
The results of the voting were as follows:
FOR 28,449,537 AGAINST 511,084 ABSTAIN 33,339
Proposal 4 The election, effective only following the Distribution and the
Acquisition, of the following directors to the Company's Board of Directors:
Stanley B. Rich Class I Director, term to expire 1999
Mark L. Filanowski Class I Director, term to expire 1999
Jonathan Blank Class I Director, term to expire 1999
Paul B. Gridley Class II Director, term to expire 2000
Michael Klebanoff Class II Director, term to expire 2000
William M. Kearns, Jr. Class II Director, term to expire 2000
Jerome Shelby Class III Director, term to expire 2001
Richard T. du Moulin Class III Director, term to expire 2001
Elaine L. Chao Class III Director, term to expire 2001
The results of the voting were as follows:
FOR AGAINST
Stanley B. Rich 28,789,705 204,255
Mark L. Filanowski 28,789,823 204,137
Jonathan Blank 27,934,447 1,059,513
Paul B. Gridley 28,775,183 218,201
Michael Klebanoff 28,782,759 211,201
William M. Kearns, Jr. 28,778,115 215,845
Jerome Shelby 28,780,583 213,377
Richard T. du Moulin 28,769,322 224,638
Elaine L. Chao 28,783,211 210,749
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Proposal 5 Approval of an amendment, effective only following the Distribution
and the Acquisition, to the Company's Amended and Restated Certificate of
Incorporation to effect a one-for-ten reverse stock split of the shares of the
Company's common stock.
The results of the voting were as follows:
FOR 28,809,082 AGAINST 132,837 ABSTAIN 52,041
Proposal 6 Approval of an amendment, effective only following the Distribution
and the Acquisition, to the Company's Amended and Restated Certificate of
Incorporation to reduce the total number of shares of stock which the Company
shall have authority to issue from 80,000,000 shares of common stock and
5,000,000 shares of preferred stock to 15,000,000 shares of common stock and
750,000 shares of preferred stock
The results of the voting were as follows:
FOR 28,814,918 AGAINST 114,998 ABSTAIN 64,044
Proposal 7 Approval, effective only following the Distribution and the
Acquisition, of the OMI Corp. 1998 Stock Option Plan for Non-Employee Directors.
The results of the voting were as follows:
FOR 28,454,928 AGAINST 479,048 ABSTAIN 59,984
Proposal 8 Approval, effective only following the Distribution and the
Acquisition, of the OMI Corp. 1998 Incentive Equity Plan for Non-Employee
Directors.
The results of the voting were as follows:
FOR 27,173,883 AGAINST 1,761,251 ABSTAIN 58,826
Proposal 9 Appointment, effective only following the Distribution and the
Acquisition, of Ernst & Young LLP as the auditors of the Company.
The results of the voting were as follows:
FOR 28,901,133 AGAINST 45,212 ABSTAIN 47,615
Proposal 10 Election of Craig H. Stevenson, Jr. and Jack Goldstein as Class III
directors of the Company for a three-year term, each to hold office until his
successor shall be elected and qualified pursuant to Proposal 4.
The results of the voting were as follows:
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FOR AGAINST
Craig H. Stevenson, Jr. 34,867,805 244,065
Jack Goldstein 34,868,914 242,956
Proposal 11 The ratification of Deloitte & Touche as auditors of the Company to
serve until its successors shall have been qualified pursuant to Proposal 9
The results of the voting were as follows:
FOR 35,015,587 AGAINST 41,121 ABSTAIN 55,162
Item 6. Exhibits and Reports of Form 8-K
(a) Exhibits
3.1 Certificate of Amendment of Restated Certificate of
Incorporation of OMI Corp., incorporated by reference to
Exhibit 3.1 to the Form 8-A filed by the Company on June 17,
1998.
10.1 Acquisition Agreement, dated as of September 15, 1997, by and
among OMI Corp., Universal Bulk Carriers, Inc., Marine
Transport Lines, Inc. and the persons set forth on Exhibit A
attached thereto, incorporated by reference to Exhibit 10.13
to the Form 10-Q Report of the Company for the quarterly
period ended September 30, 1997 (File No. 000-11573).
10.2 Amendment No. 1 to Acquisition Agreement, dated as of
September 15, 1997, by and among OMI Corp., Universal Bulk
Carriers, Inc., Marine Transport Lines, Inc. and the persons
set forth on Exhibit A attached thereto, incorporated by
reference to Exhibit 10.2 to the Company's Form 8-K dated June
18, 1998.
10.3 Distribution Agreement, dated as of June 17, 1998, by and
between OMI Corp. and OMI Corporation, a Marshall Islands
corporation, incorporated by reference to Exhibit 10.3 to the
Company's Form 8-K dated June 18, 1998.
10.4 Tax Cooperation Agreement, dated as of June 17, 1998, by and
between OMI Corp. and OMI Corporation, a Marshall Islands
corporation, incorporated by reference to Exhibit 10.4 to the
Company's Form 8-K dated June 18, 1998.
10.5 OMI Corp. 1998 Stock Option Plan for Non-Employee Directors,
incorporated by reference to Exhibit B to the Company's Proxy
Statement on Schedule 14A filed on May 15, 1998.
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10.6 OMI Corp. 1998 Incentive Equity Plan, incorporated by
reference to Exhibit C to the Company's Proxy Statement on
Schedule 14A filed on May 15, 1998.
10.7 Form of Employment Agreement for Executive Officers.
10.8 Consulting Agreement dated June 18, 1998 between the Company
and Paul B. Gridley.
27.0 Financial data schedule.
99.1 Press release dated August 10, 1998.
(b) Reports on Form 8-K.
During the quarter ended June 30, 1998, the Company filed the following
reports on Form 8-K:
Form 8-K dated May 8, 1998 reporting, reporting the issuance
of a press release under Item 5 of Form 8-K.
Form 8-K dated June 18, 1998, reporting a change in control of
the Company under Item 1 of Form 8-K, the acquisition and
disposition of assets under Item 2 of Form 8-K and other
events under Item 5 of Form 8-K. Pro forma financial
information was incorporated by reference into the Form 8-K
Form 8-K dated July 9, 1998, reporting the issuance of a press
release under Item 5 of Form 8-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 14, 1998 MARINE TRANSPORT CORPORATION
--------------------------
By: /s/ Richard T. du Moulin
-----------------------------------------
Richard T. du Moulin
President and Chief Executive Officer
Date: August 14, 1998 By: /s/ Mark L. Filanowski
-------------------------- -----------------------------------------
Mark L. Filanowski
Senior Vice President and Chief Financial
Officer
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EXHIBIT INDEX
-------------
10.7 Form of Employment Agreement for Executive Officers.
10.8 Consulting Agreement dated June 18, 1998 between the Company
and Paul B. Gridley.
27.0 Financial data schedule.
99.1 Press release dated August 10, 1998.
<PAGE> 1
Exhibit 10.7
FORM OF EMPLOYMENT AGREEMENT
FOR EXECUTIVE OFFICERS
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of
_______________, is by and between Marine Transport Corporation, a Delaware
corporation (the "Company") and _______________ ("Executive").
W I T N E S S E T H
WHEREAS, the Company desires to employ the Executive; and
WHEREAS, the Executive is willing to be employed by the
Company, as _______________ of the Company, for the period and upon the terms
and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants and
conditions contained herein, the Company and the Executive hereby agree as
follows:
1. Employment. The Company shall employ the Executive, and the
Executive accepts employment by the Company, as _______________ of the Company
upon the terms and conditions herein, for the period commencing as of
_______________, and ending on _______________, subject to termination as
hereinafter provided (the period from _______________ through _______________,
as such period may be extended as described in this paragraph, being herein
referred to as the "Employment Period"). The initial term of employment shall be
automatically extended for an additional period of one year unless 90 days
written notice of termination is given by either party, and for additional
periods of one year thereafter unless 90 days written notice of termination is
given by either party.
2. Duties. (a) Throughout the Employment Period, the Executive
shall be _______________ of the Company and shall report to the Chief Executive
Officer (the "CEO") of the Company. The Executive shall at all times comply with
Company policies and guidelines as in effect from time to time and with the
lawful and responsible instructions of the CEO.
(b) During the Employment Period, the Executive shall devote
his full-time working hours to his duties hereunder, except during vacation
time, any periods of illness and authorized leaves of absence. The Executive
shall have such responsibilities and authorities consistent with the status,
title and reporting requirements set forth herein as are appropriate to said
position, subject to change (other than diminution in position, authority,
duties or responsibilities) from time to time by the CEO.
(c) Throughout the Employment Period, the Executive shall
faithfully and diligently perform his duties under this Agreement and shall use
his best efforts to promote the interests of the Company.
<PAGE> 2
3. Compensation. During the Employment Period, as full
compensation to the Executive for his performance of the services hereunder and
for his acceptance of the responsibilities described herein, the Company agrees
to pay the Executive, and the Executive agrees to accept, the following salary
and other benefits:
(a) Salary
The Company shall pay the Executive a salary (the "Base
Salary") at the annual rate of $_________. The Compensation Committee of the
Board shall review such Base Salary on an annual basis and may increase it, from
time to time, in its sole discretion. The Base Salary due the Executive
hereunder shall be payable in equal monthly installments less any amounts
required to be withheld by the Company from such Base Salary pursuant to the
benefit plans of Section 3(d) and applicable laws and regulations described
under Section 10(e).
(b) Bonus
The Executive shall be eligible to receive bonuses (each a
"Bonus") at the discretion of, and in the amounts and at the times determined
by, the Compensation Committee of the Board.
(c) Long Term Incentives
The Executive shall be entitled to receive grants of
restricted stock, stock options and other stock awards and/or other stock and
cash awards granted pursuant to any other long term incentive plans implemented
by the Company for the benefit of senior executives of the Company at the
discretion of, and in the amounts and at the times determined by, the
Compensation Committee of the Board.
(d) Other Benefit Plans
Subject to all eligibility requirements, and to the extent
permitted by law, the Executive shall be entitled to participate in any and all
employee benefit plans (including, but not limited to, retirement, life
insurance, medical, dental, disability, and savings plans) established or
maintained by the Company from time to time for the benefit of its employees (or
its executives) in general.
(e) Further Benefits
The Executive shall be entitled to a minimum of four weeks per
annum paid vacation.
(f) Deferred Compensation
Notwithstanding any other provision of the Agreement, the
Executive shall have the right to request any lawful means (including, without
limitation, any deferred compensation arrangement requested by the Executive) by
which he wishes to receive any portion of his Base Salary, Bonus, or other
payments, and the Company shall reasonably cooperate with the
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Executive to grant such request, provided that the granting of such request does
not represent inequitable treatment as concerns other senior employees or
executives (in the Company's sole judgment), and does not impose additional
costs on the Company other than insignificant administrative costs.
4. Reasonable Expenses. The Company will reimburse the
Executive for all reasonable business expenses, including travel and lodging,
which are properly incurred by him in the performance of his duties hereunder,
upon presentation of proper vouchers therefor and in accordance with written
policies established from time to time by the Company for such reimbursements.
5. Executive Covenants. The Executive acknowledges that as a
result of the services to be rendered to the Company hereunder, the Executive
will be brought into close contact with many confidential affairs of the
Company, its subsidiaries and affiliates, not readily available to the public.
The Executive further acknowledges that the services to be performed under this
Agreement are of a special, unique, unusual, extraordinary and intellectual
character; that the business of the Company is international in scope; that its
services are marketed throughout the world; and that the Company competes with
other organizations that are or could be located in nearly any part of the
United States or elsewhere. In recognition of the foregoing:
(a) Except with the consent of or as directed by the Company,
or except if compelled by judicial or legal authorities, the Executive will keep
confidential and not divulge to any other person, during the Employment Period
or thereafter, any Confidential Information and Trade Secrets regarding the
Company, its subsidiaries and affiliates, except for information which is or
becomes publicly available other than as a result of disclosure by the
Executive. For the purposes of this Agreement "Confidential Information and
Trade Secrets" means information which is confidential and secret to the
Company, its subsidiaries and affiliates. It may include, but is not limited to,
information relating to new and future concepts and business of the Company, its
subsidiaries and affiliates, in the form of memoranda, reports, computer
software and data banks, customer lists, employee lists, books, records,
financial statements, manuals, papers, contracts and strategic plans. As a
guide, the Executive is to consider information originated, owned, controlled or
possessed by the Company, its subsidiaries or affiliates which is not disclosed
in printed publications stated to be available for distribution outside the
Company, its subsidiaries and affiliates as being secret and confidential. In
instances where doubt does or should reasonably be understood to exist in the
Executive's mind as to whether information is secret and confidential to the
Company, its subsidiaries and affiliates, the Executive agrees to request an
opinion, in writing, from the Company.
(b) All papers, books and records of every kind and
description relating to the business and affairs of the Company, its
subsidiaries and affiliates, whether or not prepared by the Executive, and all
property owned by the Company, its subsidiaries and affiliates shall be the sole
and exclusive property of the Company, and the Executive shall surrender them to
the Company, at any time upon request, during or after the Employment Period.
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(c) During the Employment Period and for one year following
termination of this Agreement pursuant to Sections 6(a) or 6(c), the Executive
will not, without the prior written consent of the Company, compete, directly or
indirectly, with the Company, its subsidiaries and affiliates or participate as
a director, officer, employee, agent, representative, stockholder or partner, or
have any direct or indirect financial interest, in any business which directly
or indirectly competes with the Company, its subsidiaries and affiliates;
provided, however, that this paragraph (c) shall not restrict the Executive from
holding up to 5% of the publicly traded securities of any entity.
(d) During the Employment Period and for one year following
termination of this Agreement pursuant to Sections 6(a) or 6(c), the Executive
shall not either for his or her own account or for any person, firm or company
(i) solicit any customers of the Company, its subsidiaries and affiliates or
(ii) solicit or endeavor to cause any employee of the Company, its subsidiaries
and affiliates to leave his employment or induce or attempt to induce any such
employee to breach any employment agreement with the Company, its subsidiaries
and affiliates, or otherwise interfere with the employment of any employee by
the Company, its subsidiaries and affiliates.
(e) Without limiting any other provision of this Agreement,
the Executive hereby agrees to be bound by and to comply with any obligations
known to the Executive and imposed on the Company, its subsidiaries and
affiliates, by law, rule, regulation, ordinance, order, decree, instrument,
agreement, understanding or other restriction of any kind.
(f) The Executive hereby agrees to provide reasonable
cooperation to the Company, its subsidiaries and affiliates during the
Employment Period and thereafter in any litigation between the Company, its
subsidiaries and affiliates, and third parties.
(g) The parties agree that the Company shall, in addition to
other remedies provided by law, have the right and remedy to have the provisions
of this Section 5 specifically enforced by any court having equity jurisdiction,
it being acknowledged and agreed that any breach or threatened breach of the
provisions of this Section 5 will cause irreparable injury to the Company and
that money damages will not provide an adequate remedy to the Company. Nothing
contained herein shall be construed as prohibiting the Company from pursuing any
other remedies available to it for such breach or threatened breach, including
the recovery of damages from the Executive.
(i) Although the restrictions contained in Sections 5(a), (b),
(c) and (d) above are considered by the parties hereto to be fair and reasonable
in the circumstances, it is recognized that restrictions of such nature may fail
for technical reasons, and accordingly it is hereby agreed that if any of such
restrictions shall be adjudged to be void or unenforceable for whatever reason,
but would be valid if part of the wording thereof were deleted, or the period
thereof reduced or the area dealt with thereby reduced in scope, the
restrictions contained in Sections 5(a), (b), (c) and (d) shall be enforced to
the maximum extent permitted by law, and the parties consent and agree that such
scope or wording may be accordingly judicially modified in any proceeding
brought to enforce such restrictions.
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<PAGE> 5
(ii) Notwithstanding that the Executive's employment hereunder
may expire or be terminated as provided in Section 1 or Section 6 hereof, this
Agreement shall continue in full force and effect insofar as is necessary to
enforce the covenants and agreements of the Executive contained in this Section
5.
6. Termination of Employment Period and Severance.
(a) Termination by the Company without Cause. If for any
reason other than the provisions of Section 6(d) hereof, the Company wishes to
terminate the Employment Period and the Executive's employment hereunder or
fails to extend the Employment Period for additional one year periods as
provided in Section 1, the Company shall give a written notice to the Executive
of such termination upon termination and shall pay to Executive an amount equal
to 150% of the Base Salary then in effect. Upon receipt of such notice by the
Executive or upon expiration of the employment period that is not extended, the
Employment Period shall terminate (and the Executive shall have no further
duties under Section 2 hereof). The Executive agrees that the payment described
in this Section 6(a) shall be full and adequate compensation to the Executive
for all damages the Executive may suffer as a result of the termination of his
employment pursuant to this Section 6(a), and hereby waives and releases the
Company from any and all obligations or liabilities to the Executive arising
from or in connection with the Executive's employment with the Company or the
termination and claims the Executive may have under federal, state or local
statutes, regulations or ordinances or under any common law principles or breach
of contract or the covenant of good faith and fair dealing, defamation, wrongful
discharge, intentional infliction of emotional distress or promissory estoppel;
provided, however, that any rights and benefits the Executive may have under the
employee benefit plans and programs of the Company in which the Executive is a
participant, shall be determined in accordance with the terms and provisions of
such plans and programs.
(b) Death. If the Executive dies during the Employment Period,
the Employment Period shall automatically terminate and the obligations of the
parties shall terminate effective the date of death.
(c) Disability. If the Executive becomes Disabled (as
hereinafter defined) during the Employment Period, the Company shall be entitled
to terminate his or her employment and the Employment Period upon written notice
to the Executive from the Company. In the event of such termination, the
Executive shall be released from any duties hereunder and the Company shall pay
to Executive an amount equal to 150% of the Base Salary then in effect. For
purposes of this Agreement, "Disabled" shall mean mental or physical impairment
or incapacity rendering the Executive substantially unable to perform his duties
under this Agreement for a period of longer than 90 days out of any 360-day
period during the Employment Period. A determination of whether the Executive is
Disabled shall be made by the Company in its sole discretion upon its own
initiative or upon request of the Executive or a person acting on his behalf.
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<PAGE> 6
(d) Termination by the Company for Cause. The Company by
written notice to the Executive, shall have the right to terminate the
Employment Period in the event of any of the following (which shall constitute
"Cause"):
(i) The Executive's breach in respect of his duties
under this Agreement, such breach continuing
unremedied for 10 days after written notice thereof
from the Company to the Executive specifying the acts
constituting the breach and requesting that they be
remedied;
(ii) Any misconduct, dishonesty, breach of fiduciary
duty, insubordination or other act by the Executive
which other act is materially detrimental to the
assets, business or goodwill of the Company, or
materially damaging to the Company's, its
subsidiaries' and/or affiliates' relationships with
their customers or employees, including, without
limitation, the Executive having been indicted for or
convicted of (including entry of a no contest plea)
in respect of a felony or of any crime involving
moral turpitude or fraud during the Employment
Period, provided such indictment or conviction has
resulted or is likely to result in substantial
detriment to the Company, its subsidiaries and/or
affiliates;
(iii) misappropriation (or attempted
misappropriation) of any of the Company's funds or
property or of a business opportunity of the Company,
including attempting to secure or securing any
personal profit in connection with any transaction
entered into on behalf of the Company;
(iv) Executive's gross negligence in connection with
the performance of Executive's obligations hereunder;
or
(v) Executive's excessive alcohol abuse or abuse of
any controlled substance.
Any termination under this Section 6(d) shall be without
damages or liability to the Company for compensation and other benefits which
would have accrued to the Executive hereunder after termination, but all
compensation, benefits and reimbursements accrued through the date of
termination shall be paid to the Executive at the times normally paid by the
Company. In this event, there shall be no severance period.
(e) Voluntary Termination by the Executive. In the event of
voluntary termination of employment by the Executive, the terms of the last
paragraph of Section 6(d) shall apply, except in the event that Executive
terminates for Good Reason. Good Reason shall
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<PAGE> 7
mean voluntary termination by Executive that occurs within ninety days of (i) a
relocation of the Company's offices (or the location of the performance of work
by the Executive) beyond a fifty mile radius of New York City, (ii) a material
diminution of the Executive's duties and responsibilities as provided in Section
2 or (iii) a reduction in Base Salary. If Executive terminates for Good Reason,
the provisions of Section 6(a) shall apply and Executive will be bound by the
provisions of Section 5, including, without limitation, Sections 5(c) and 5(d).
(f) Termination Following a Change in Control. (i) Subject to
Section 6(f)(ii), should the Executive's employment hereunder be terminated by
the Company without Cause (other than for reason of the Executive becoming
Disabled) or by Executive for Good Reason within two years of a Change in
Control (as defined below), the Company shall pay and the Executive shall
receive in cash an amount equal to (A) 100% of Executive's then current Base
Salary plus (B) the average of the last three annual bonuses received by
Executive, and any options held by Executive to purchase Company securities
shall immediately vest, notwithstanding anything to the contrary in any other
agreement between Executive and the Company. Upon termination under this
paragraph (f), the Executive shall no longer be bound by the provisions of
Section 5 of this Agreement.
(ii) In the event that any payment received or to be received
by the Executive in connection with a Change in Control or the termination of
the Executive's employment (whether payable pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any
person whose actions result in a Change in Control or any person affiliated with
the Company or such person (together with the payment pursuant to Section
6(f)(i), the "Total Payments")) would not be deductible by the Company (in whole
or in part) as a result of Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"), the payment pursuant to Section 6(f)(i) shall be reduced
until no portion of the Total Payments are not deductible as a result of Section
280G of the Code, or the payment pursuant to Section 6(f)(i) is reduced to zero.
For purposes of this limitation (A) no portion of the Total Payments the receipt
or enjoyment of which the Executive shall have effectively waived in writing
prior to the date of payment of the payment pursuant to Section 6(f)(i) shall be
taken into account, (B) no portion of the Total Payments shall be taken into
account which, in the opinion of tax counsel selected by the Company's
independent auditors and acceptable to the Executive, does not constitute a
"parachute payment" within the meaning of Section 280G(b)(2) of the Code, and
(C) the value of any non-cash benefit or any deferred payment or benefit
included in the Total Payments shall be determined or benefit included in the
Total Payments shall be determined by the Company's independent auditors
servicing the Company immediately prior to the time of a Change in Control in
accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
(iii) For purposes of this Section 6(f) the following
definitions shall apply:
"Change in Control" shall mean a change in control with
respect to the Company that would be required to be reported in response to Item
1(a) of the Current Report on Form 8-K, as in effect on the date hereof,
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); provided that, without limitation,
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such a Change in Control shall be deemed to have occurred at such time as any
Person is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly of 35% or more of the outstanding
securities of the Company ordinarily having the right to vote at an election of
directors. A change in control shall be deemed to have occurred if individuals
who constitute the Incumbent Board cease for any reason to constitute at least a
majority of the Board of Directors of the Company (the "Board").
Notwithstanding anything aforesaid to the contrary, a Change
in Control shall not be deemed to have occurred if prior to the time the Change
in Control would have otherwise occurred, the Board shall have approved the
event or transaction that would otherwise result in a Change in Control for
purposes of this Agreement.
"Incumbent Board" shall mean those individuals who constitute
the Board on the date hereof, or any successor or additional individual who
becomes a member of the Board and whose election, or nomination for election, by
the members of the Board was approved by a vote of at least two-thirds of the
members of the Board comprising the Incumbent Board (either by a specific vote
or by approval of the proxy statement of the Company in which such individual
was named as nominee for member of the Board without objection to such
nomination).
"Person" shall mean and include any individual, corporation,
partnership, group, association or other "person", as such term is used in
Section 14(d) of the Exchange Act, other than the Company or any subsidiary or
any employee benefit plan sponsored by the Company or any subsidiary.
7. Conflicting Agreements. The Executive hereby represents and
warrants to the Company that his entering into this Agreement, and the
obligations and duties undertaken by him hereunder, will not conflict with,
constitute a breach of, or otherwise violate the terms of any other employment
of other agreement to which he is a party.
8. Assignment.
(a) By the Executive. This Agreement, any part thereof and any
rights (including compensation) or obligation hereunder shall not be assigned,
pledged, alienated, sold, attached, charged, encumbered or transferred in any
way by the Executive and any attempt to do so shall be void except that (i) the
Executive may designate any of his beneficiaries to receive (and such
beneficiaries shall receive) any compensation, payments or other benefits
payable hereunder upon his death, (ii) any assignment by will or by laws of
descent and distribution or following the occurrence of the Executive's legal
incompetence is permitted and (iii) the Executive's executors, administrators or
other legal representatives may assign any rights hereunder to the person or
persons entitled thereto.
(b) By the Company. Provided the substance of the Executive's
duties set forth in Section 2 shall not change, and provided that the
Executive's compensation as set forth in Section 3 shall not be adversely
affected, the Company may assign or otherwise transfer this
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<PAGE> 9
Agreement to any succeeding entity without limitation, which entity shall assume
all rights and obligations hereunder.
9. Notices. All notices, requests, demands and other
communications hereunder must be in writing and shall be deemed to have been
duly given if delivered by hand or mailed within the continental United States
by first class, registered mail, return receipt requested, or sent by overnight
mail, such as Federal Express, postage and registry fees prepaid, to the
applicable party and addressed as follows:
If to the Company:
Board of Directors
Marine Transport Corporation
1200 Harbor Boulevard
Weehawken, NJ 07087
With a copy (which will constitute notice to the Company) to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attention: Louis J. Bevilacqua, Esq.
If to Executive:
----------------------
----------------------
----------------------
----------------------
Addresses may be changed by notice in writing signed by the addressee.
10. Miscellaneous.
(a) If any provision or portion of this Agreement shall, for
any reason, be adjudged by any court of competent jurisdiction to be invalid or
unenforceable, such judgment shall not affect, impair or invalidate the
remainder of this Agreement but shall be confined in its operation to the
jurisdiction in which made and to the provisions of this Agreement directly
involved in the controversy in which such judgment shall have been rendered.
(b) No course of dealing and no delay on the part of any party
hereto in exercising any right, power or remedy under or relating to this
Agreement shall operate as a waiver thereof or otherwise prejudice such party's
rights, powers and remedies. No single or partial exercise of any rights, powers
or remedies under or relating to this Agreement shall
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<PAGE> 10
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy.
(c) This Agreement may be executed by the parties hereto in
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same instrument, and all
signatures need not appear on any one counterpart.
(d) (i) Any other agreement, rule or regulation to the
contrary, notwithstanding, the parties hereby agree that any action or
proceeding relating to this Agreement or its subject matter shall be brought in
a state or federal court situated in the County of New York, State of New York
and such court shall have exclusive jurisdiction thereof; provided, however, any
court with jurisdiction over the parties may, at the election of Company, have
jurisdiction over any action brought with regard to or any action brought to
enforce any violation or claimed violation of Section 5. The parties each hereby
specifically submit to the jurisdiction of such court and further agree that
service of process may be made within or without the State of New York by giving
notice in the manner provided in Section 9. Each party further agrees to waive
and hereby waives any right to a trial by jury, and to any objection it or he
may have in any such action, based on lack of personal jurisdiction or venue, or
inconvenient forum.
(ii) In any such action or proceeding, the prevailing party
shall be entitled to recover from the other party reasonable costs, including
attorneys' fees and expenses. In any action or proceeding before a court or
other tribunal relating to this Agreement with respect to which damages are an
adequate remedy, the parties agree that no damages other than compensatory
damages shall be sought or claimed by either party and each party waives any
claim, right or entitlement to punitive, exemplary or consequential damages, or
any statutory damages, or any other damages of any kind or nature in excess of
compensatory damages, and any court or arbitration tribunal is specifically
divested of any power to award any damages in the nature of punitive, exemplary,
or consequential damages, or any statutory damages, or any other damages of any
kind or nature in excess of compensatory damages.
(e) All payments required to be made by the Company hereunder
to the Executive or his beneficiaries, including his estate, shall be subject to
withholding and deductions as the Company may reasonably determine it should
withhold or deduct pursuant to any applicable law or regulation. In lieu of
withholding or deducting such amounts in whole or in part, the Company may, in
its sole discretion, accept other provision for payment as permitted by law,
provided it is satisfied in its sole discretion that all requirements of law
affecting its responsibilities to withhold such taxes have been satisfied.
(f) This Agreement embodies the entire understanding, and
supersedes all other oral or written agreements or understandings, between the
parties regarding the subject matter hereof. No change, alteration or
modification hereof may be made except in writing signed by both parties hereto.
The headings in this Agreement are for convenience of reference only and shall
not be considered part of this Agreement or limit or otherwise affect
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<PAGE> 11
the meaning hereof. This Agreement and the rights and obligations of the parties
hereunder shall be construed in accordance with and governed by the laws of the
State of New York (disregarding any choice of law rules which might look to the
laws of any other jurisdiction).
(g) The Executive acknowledges that the terms of this
Agreement have been fully explained to him, that the Executive understands the
nature and extent of the rights and obligations provided under this Agreement,
and that the Executive has been given the opportunity to be represented by legal
counsel in the negotiation and preparation of this Agreement.
(h) Nothing herein contained shall be construed to prevent or
limit any acquisition, consolidation or merger of the Company.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the day and year first above written.
MARINE TRANSPORT CORPORATION
By:
----------------------------------
Name:
Title:
----------------------------------
[Executive]
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<PAGE> 1
Exhibit 10.8
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement") is made and
entered into as of June 18, 1998 by and between MARINE TRANSPORT CORPORATION, a
Delaware corporation ("NEW MTL"), and PAUL B. GRIDLEY ("Consultant").
WHEREAS, New MTL desires to retain the services of Consultant
as a consultant to New MTL in order to benefit from Consultant's skills and
abilities in connection with the operations of NEW MTL's shipping business; and
WHEREAS, Consultant desires to be retained by New MTL on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth herein, and in reliance on the representations, warranties,
conditions and covenants contained herein, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. Consulting Arrangement. (a) New MTL hereby agrees,
subject to the terms and conditions set forth in this Agreement, to retain
Consultant during the Term (as defined in Section 2) to serve as a consultant to
New MTL and to perform such services as requested by New MTL from time to time,
including, without limitation: (i) furnishing knowledge, advice and
recommendations with respect to the shipping industry; and (ii) such other
services reasonably related to the operation of the business of New MTL as
requested by New MTL's Board of Directors, including visits to customers.
(b) Consultant hereby accepts such engagement and agrees to
make himself available at reasonable times and locations (taking necessary
account of Consultant's business commitments) to perform consulting services as
reasonably requested by New MTL; provided, however, that (i) Consultant shall be
given at least 48 hours prior written notice of the requested services; (ii) all
such consulting services shall be rendered in such places as the parties may
mutually agree; (iii) Consultant shall not be required to devote more than 3
days per month to the business of New MTL; and (iv) such services will not
interfere with Consultant's other activities in any material way. All consulting
services rendered to New MTL by Consultant shall be performed as an independent
contractor, and Consultant shall not for any purpose be deemed to be an employee
of New MTL.
Section 2. Term of Agreement. The term of this Agreement (the
"Term") shall commence on the date hereof and, unless earlier terminated in
accordance with this Agreement, shall end on the date that is two (2) years
subsequent to the date hereof.
<PAGE> 2
Section 3. Compensation. During the Term, New MTL agrees to
pay to Consultant a fee equal to $189,000 per annum (the "Consulting Fee"), such
Consulting Fee to be payable in equal monthly installments on the first day of
each month commencing on the first day of the full first month commencing
immediately after the date hereof. Each such installment shall be less any
amounts required to be withheld by New MTL from time to time under applicable
laws and regulations then in effect. New MTL shall also reimburse Consultant for
his reasonable expenses and costs actually incurred in providing services
hereunder to New MTL; provided, however, that any expenses and costs shall be
appropriately documented, shall be subject to prompt review and approval by a
designee of New MTL's Board of Directors and shall be paid promptly (if
approved). The parties acknowledge that from time to time Consultant may source
transactions and investments for New MTL or its affiliates through Consultant's
contacts or otherwise act as a transaction broker for or provide investment
banking services to New MTL or its affiliates. To the extent that any such
services are provided by Consultant to New MTL or any of its affiliates, the
Consulting Fee shall be due and payable without diminution and Consultant and
New MTL may agree that additional payment (in the form of cash or non-cash
consideration) shall be made by New MTL or its affiliates in an amount or having
an aggregate value which would be customary for an independent broker or advisor
to charge in a comparable transaction.
Section 4. Termination. (a) Termination For Cause. New MTL may
terminate its obligations under this Agreement at any time if Consultant:
(i) engages in any act which involves personal dishonesty
or breach of fiduciary duty to, or the
misappropriation by Consultant of any funds,
properties or opportunities of, New MTL; or
(ii) is indicted or convicted of any felony (including
fraud)
(b) Death or Disability. New MTL's obligations under this
Agreement shall continue upon Consultant's death, disability or physical or
mental illness regardless of Consultant's ability to perform his duties
hereunder.
Section 6. Failure to Make Payments. If New MTL fails to make
any payment required by Section 3 above, New MTL shall have seven (7) days from
its receipt of written notice to cure such default. If New MTL shall have failed
to cure such default within seven (7) days from the date New MTL receives such
notice from Consultant, Consultant shall have the right to elect to declare all
unpaid amounts payable pursuant to Section 3 of this Agreement to be immediately
due and owing. If Consultant so elects, New MTL agrees to confess judgment for
the unpaid amount, to pay interest on such unpaid amount from the date of notice
of acceleration at the statutory rate provided under Section 5004 of the New
York Civil Practice Law and Rules, and pay all attorney's fees, expenses and
court costs incurred by Consultant and any of his beneficiaries, heirs or legal
representatives in attempting to collect such amounts. Any election by
Consultant to accelerate the payments under Section 3 of this
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<PAGE> 3
Agreement must be made in writing within twenty (20) days of the end of the
default cure period set forth above, and shall thereafter constitute
Consultant's sole and exclusive remedy for such breach.
Section 7. No Solicitation of Employees. Consultant hereby
represents and warrants that he has not solicited for employment or induced any
person employed by New MTL to terminate employment during the sixty-day period
preceding the date hereof.
Section 8. Covenant Not to Compete. During the Restricted Term
(as defined below), Consultant will not (i) directly or indirectly own, manage,
operate, control, be employed by or participate in the ownership, management,
operation or control of, or be connected in any manner with, any business
directly competitive with that conducted by New MTL. This paragraph shall not
per se bar Consultant from engaging in the shipping business unless directly
competitive with the business of New MTL. For these purposes, Consultant's
ownership of securities of a public company not in excess of 5% of any class of
such securities shall not be considered to be competition with New MTL.
During the Restricted Term, Consultant agrees to refrain from
interfering with the employment relationship between New MTL and its other
employees and agrees to refrain from soliciting business (of a type New MTL does
or may do) from any long term customer or joint venture partner of New MTL for
himself or for any entity in which Consultant, but not New MTL, has an interest.
For the purposes hereof, "Restricted Term" shall mean the
period commencing on the date hereof and continuing until the later of (i) one
year from the date hereof or (ii) the date on which Consultant ceases to serve
as a director of New MTL or any successor thereto.
It is the desire and intent of the parties that the provisions
of this Section 8 shall be enforced to the fullest extent permissible under the
laws and public policies applied in each jurisdiction in which enforcement is
sought. If any particular provisions or portion of this Section 8 shall be
adjudicated to be invalid or unenforceable, this Section 8 shall be deemed
amended to delete therefrom such provision or portion adjudicated to be invalid
or unenforceable, such amendment to apply only with respect to the operation of
this Section 8 in the particular jurisdiction in which such adjudication is
made.
Notwithstanding any provision of this Agreement to the
contrary, the foregoing provisions of this Section 8 shall be of no force and
effect if, and from the time that, Consultant's obligations to New MTL hereunder
are terminated by New MTL in breach of this Agreement.
Section 9. Indemnification. New MTL shall indemnify, defend
and hold Consultant harmless against all losses, expenses, claims, damages,
liabilities or judgments, fines or amounts that are paid in settlement in
connection with any claim, action, suit, proceeding or investigation (each a
"Claim") based in whole or in part on the fact that
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<PAGE> 4
Consultant is a consultant to New MTL or any of its subsidiaries or by reason of
anything done or not done by such person in any such capacity whether pertaining
to any matter existing or occurring at or prior to the date hereof or any acts
or omissions occurring or existing at or prior to the date hereof and whether
asserted or claimed prior to, at or after the date hereof, in each case to the
fullest extent permitted under the General Corporation Law of the State of
Delaware (the "DGCL"). New MTL shall pay expenses in advance of the final
disposition of any such Claim to Consultant to the fullest extent permitted by
the DGCL, upon receipt from Consultant of any undertaking to repay such advances
required by Section 145(e) of the DGCL. If Consultant wishes to claim
indemnification under this Section 9, upon learning of any Claim, Consultant
shall notify New MTL (but the failure to so to notify shall not relieve New MTL
from any liability which it may have under this Section 9, except to the extent
that such failure materially prejudices New MTL), and shall deliver to New MTL,
any undertaking required by Section 145(e) of the DGCL.
Without limiting the generality of the foregoing and unless
New MTL assumes the defense thereof, in the event that any Claim is brought
against Consultant: (i) Consultant may retain one counsel satisfactory to him
with the consent of New MTL which consent shall not be unreasonably withheld or
delayed; and (ii) New MTL shall pay all reasonable fees and expenses of such
counsel for Consultant promptly as statements therefor are received, provided,
however, that New MTL shall not be liable for settlement effected without its
prior written consent, which consent shall not be unreasonably withheld.
If a Claim is made against Consultant, and Consultant claims
indemnification for such Claim under this Section 9, New MTL shall be entitled
to participate in the defense thereof and, if it so chooses, to assume and
control the defense thereof with counsel selected by New MTL. If New MTL assumes
such defense, Consultant shall have the right to participate in the defense and
to employ counsel, at Consultant's expense, separate from the counsel employed
by New MTL, it being understood that New MTL shall control such defense. If New
MTL so elects to assume the defense of any Claim, Consultant shall cooperate
with New MTL in the defense or prosecution thereof. In no event will Consultant
admit any liability with respect to, or settle, compromise or discharge, any
Claim without New MTL's prior written consent, whether or not New MTL has
assumed the defense thereof. Consultant will agree to any settlement, compromise
or discharge of a Claim that New MTL may recommend and that by its terms
obligates Consultant to pay the full amount of the liability in connection with
such Claim (which liability shall be subject to indemnification under this
Section 1.4) and releases Consultant completely in connection with such Claim
and would not otherwise adversely affect Consultant.
New MTL agrees that the foregoing rights to indemnification,
including provisions relating to advancement of expenses, existing in favor of
Consultant with respect to matters through the date hereof shall remain in full
force and effect for a period of not less than six years after the end of the
Term; provided, however, that all rights to indemnification
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<PAGE> 5
(including rights relating to advancement of expenses) in respect of any Claim
asserted or made within such period shall continue until the disposition of such
Claim.
Section 10. Confidentiality. Consultant acknowledges that he
has had, and in the performance of consulting services hereunder may continue to
have, access to Confidential Information (as hereinafter defined) of New MTL.
Consultant agrees not to disclose, communicate or divulge to, or use for the
direct or indirect benefit of, any person (including Consultant), firm,
association or other entity (other than New MTL or its affiliates) any
Confidential Information. "Confidential Information" includes, but is not
limited to, business methods, business policies, procedures, techniques,
research or development projects or results, trade secrets (which Consultant
agrees include New MTL's customer and prospective customer lists), pricing
policies, business plans, computer software, intellectual property, and other
such information not otherwise available to the general public, unless the
information is disclosed to Consultant without confidential or proprietary
restriction by New MTL or a third party who rightfully possesses the information
(without confidential or proprietary restriction) and did not learn of it,
directly or indirectly, from New MTL. If any person (including any government
employee) requests the disclosure or release of Confidential Information,
Consultant shall (i) promptly notify New MTL of such request so that New MTL may
pursue any available remedies to prevent the disclosure or release of such
Confidential Information and (ii) furnish New MTL a copy of all written
materials pertaining to such request for Confidential Information as New MTL
shall deem appropriate.
Section 11. Arbitration. Any dispute arising under this
Agreement between Consultant and New MTL, or any of their successors and/or
assigns, shall be settled by arbitration conducted on a confidential basis,
under the U.S. Arbitration Act, if applicable, and the then-current Commercial
Arbitration Rules of the American Arbitration Association (the "Association")
strictly in accordance with the terms of this Agreement and the substantive law
of the State of New York. The arbitration shall be conducted at the
Association's regional office located in the New York City area by three
independent arbitrators. Judgment upon the arbitrators' award may be entered and
enforced in any court of competent jurisdiction.
Section 12. Benefits Terminated. Consultant acknowledges that
he is not entitled to receive benefits from New MTL other than as set forth in
Section 3 of this Agreement.
Section 13. Miscellaneous.
(a) Assignment. This Agreement and all rights and obligations
of New MTL hereunder may be assigned by New MTL to OMI Corp. without the prior
written consent of Consultant. Otherwise, this Agreement or any interest herein
shall not be assigned by any party hereto, except to the extent expressly
provided herein, without the prior written consent of the other party.
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<PAGE> 6
(b) Notices. Any notice or other communication required or
permitted hereunder will be in writing and will be deemed sufficiently given
only if delivered in person or sent by facsimile or telex and confirmed by
registered mail (return receipt requested), postage prepaid, addressed as
follows:
(i) If to New MTL:
Marine Transport Corporation
1200 Harbor Boulevard
Weehawken, New Jersey 07087
Attention: Richard T. du Moulin
Fax No.: (201) 330-9645
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: Louis J. Bevilacqua, Esq.
Fax No.: (212) 504-6666
(ii) If to Consultant:
Paul B. Gridley
356 East 69th Street
New York, NY 10024
Fax No.: ___________
or to such other address as the party may have specified in a notice duly given
to the other party as provided herein. Such notice or communication will be
deemed to have been given as of the date so delivered, or, if mailed, faxed or
telexed, on the date received.
(c) Waivers. No waiver by any party of any default with
respect to any provision, condition or requirement hereof shall be deemed to be
a waiver of any other provision, condition or requirement hereof; nor shall any
delay or omission of any party to exercise any right hereunder in any manner
impair the exercise of any such right accruing to it thereafter.
(d) Preservation of Intent. Should any provision of this
Agreement be determined by a court having jurisdiction over the subject matter
hereof to be illegal or in conflict with any applicable laws of any state or
jurisdiction, the parties hereto agree that such provision shall be modified to
the extent legally possible so that the intent of this Agreement may be legally
carried out.
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<PAGE> 7
(e) Relationship of Parties. Nothing herein contained shall
constitute the parties members of any partnership, joint venture, association,
syndicate or other entity, or be deemed to confer on either of them any express,
implied or apparent authority to incur any obligation or liability on behalf of
the other.
(f) Third Party Beneficiaries. The terms and provisions of
this Agreement are not intended to confer upon any person other than the parties
hereto and their respective permitted successors and assigns any rights or
remedies, and such terms and provisions will be enforceable only by the parties
hereto and their respective permitted successors and assigns; provided, however,
that OMI Corp. shall be deemed a third party beneficiary of this Agreement.
(g) Entire Agreement. This Agreement sets forth the entire and
only agreement or understanding between the parties relating to the subject
matter hereof and supersedes and cancels all previous agreements, negotiations,
commitments and representations in respect thereof between them, and no party
shall be bound by any conditions, definitions, warranties, or representations
with respect to the subject matter of this Agreement except as provided in this
Agreement.
(h) Amendment. This Agreement may not be amended in any
respect except by an instrument in writing signed by the parties hereto.
(i) Remedies. The parties hereto recognize that the
obligations of each of the parties under this Agreement are special and unique,
and that, in the event of the breach of any such obligations by any party
hereto, the other party shall be entitled in any proceeding brought hereunder,
if it so elects, to obtain damages for such breach, or to enforce the specific
performance thereof or to enjoin the breaching party from continuing such
breach, but nothing herein contained shall be construed to prevent the election
or invocation of any or all such remedies or any other remedy in case of any
breach, as the party commencing any proceeding may elect or invoke.
(j) Headings. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
(k) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
(l) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without reference
to its choice of law doctrine.
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<PAGE> 8
(m) Survival. The obligations and covenants of Consultant in
Section 7 and 9 hereof shall survive the expiration or earlier termination of
the Term and shall survive thereafter unless otherwise expressly limited in
duration hereunder.
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<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
MARINE TRANSPORT CORPORATION
By: /s/ Richard T. du Moulin
------------------------------------
Name: Richard T. du Moulin
Title: CEO
/s/ PAUL B. GRIDLEY
------------------------------------
PAUL B. GRIDLEY
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27 CONTAINS SUMMARY INFORMATION EXTRACTED FROM MARINE TRANSPORT
CORPORATION SUBSIDIARIES CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 10,157
<SECURITIES> 0
<RECEIVABLES> 12,130
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 27,126
<PP&E> 103,977
<DEPRECIATION> 63,553
<TOTAL-ASSETS> 106,998
<CURRENT-LIABILITIES> 17,843
<BONDS> 28,393
0
0
<COMMON> 3,119
<OTHER-SE> 15,163
<TOTAL-LIABILITY-AND-EQUITY> 106,998
<SALES> 0
<TOTAL-REVENUES> 116,918
<CGS> 0
<TOTAL-COSTS> 95,654
<OTHER-EXPENSES> 24,079
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,219
<INCOME-PRETAX> (3,624)
<INCOME-TAX> (38,885)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,261
<EPS-PRIMARY> 7.91
<EPS-DILUTED> 7.77
</TABLE>
<PAGE> 1
EXHIBIT 99.1 TO FORM 10-Q
MARINE TRANSPORT CORPORATION
PRESS RELEASE
Contact: Mark Filanowski
Marine Transport Corporation
201-330-0200 EXT. 203
William W. Galvin III
The Galvin Partnership
212-838-5454
MARINE TRANSPORT CORPORATION REPURCHASES SHARES
Weehawken, NJ- August 10, 1998- Marine Transport Corporation ("MTC")
(Nasdaq:MTLX) announced today the Company has purchased 350,000 (5.6%) of its
common stock in a private transaction at $2.0625 per share. As a result of this
purchase of shares, MTC now has issued and outstanding 5,892,605 shares of
common stock.
Marine Transport Corporation is a U.S.-based supplier of marine transportation
services, and owns and/or manages 37 ships, six supply vessels and five
chartered-in vessels, making it one of the largest U.S. based fleets of ocean
going vessels. MTC's core business is industrial shipping based on long-term
alliances, some as long as 50 years, with leading chemical and energy customers.
As an operator with International Safety Management (ISM) certification, MTC is
able to provide services to support U.S. and international shipping expansion
for quality-conscious commercial and U.S. government customers. MTC's
Houston-based company, MTL Petrolink, provides crude oil lightering services in
the Gulf of Mexico.
