<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
------------------------
COMMISSION FILE NUMBER 000-11573
MARINE TRANSPORT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 13-2625280
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: 201-330-0200
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
<TABLE>
<CAPTION>
TITLE OF CLASS NAME OF EXCHANGE ON WHICH REGISTERED
-------------- ------------------------------------
<S> <C>
COMMON STOCK, PAR VALUE $.50 PER SHARE NASDAQ STOCK MARKET
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. YES [ ] NO [ ]
Aggregate market value of registrant's voting stock, held by
non-affiliates, based on the closing price on the Nasdaq Stock Market as of the
close of business on March 26, 1999:
$18,436,973
Number of shares of the registrant's common stock outstanding as of March
26, 1999:
6,555,368
The following document is hereby incorporated by reference into Part III of
this Form 10-K:
- ---------------
(1) Portions of the Marine Transport Corporation 1998 Proxy Statement to be
filed with the Securities and Exchange Commission.
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<PAGE> 2
INDEX
<TABLE>
<CAPTION>
ITEMS PAGE
----- -----
<S> <C> <C>
Part I
1. and 2. Business and Properties..................................... 2-6
3. Legal Proceedings........................................... 6
4. Submission of Matters to a Vote of Security Holders......... 6
Part II
5. Market for Marine Transport Corporation's Common Stock and
Related Shareholder Matters................................. 7
6. Selected Financial Data..................................... 7-9
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 9-15
8. Financial Statements and Supplementary Data................. 15-38
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 39
Part III
10. Management.................................................. 39
11. Executive Compensation...................................... 39
12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 40
13. Certain Relationships and Related Transactions.............. 40
Part IV
14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 40-42
SIGNATURES.............................................................. 43
</TABLE>
1
<PAGE> 3
PART I
ITEM 1. BUSINESS
AND
ITEM 2. PROPERTIES
GENERAL
Marine Transport Corporation ("MTC" or the "Company"), formerly named OMI
Corp., was established in its present form through a series of transactions,
culminating June 17, 1998, through which OMI Corp.: (a) acquired Marine
Transport Lines, Inc. in a stock-for-stock exchange (the "Acquisition") and (b)
distributed to its shareholders the stock of a newly created Marshall Islands
corporation named OMI Corporation ("New OMI") containing OMI Corp.'s
international businesses (the "Distribution"). OMI Corp. then changed its name
to Marine Transport Corporation.
Upon completion of the Distribution, the assets, liabilities and equity for
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 including
the international businesses. For periods subsequent to the Acquisition and
Distribution, 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 financial position and results of operations of the Company
should be read and analyzed with careful consideration of the above transactions
and presentations.
Marine Transport Corporation is a U.S.-based supplier of marine
transportation services. The Company owns and operates a fleet of ships for its
own account, and it also manages vessels for other vessel owners. It presently
operates one of the largest U.S.-based fleets of ocean-going vessels.
Prior to the Acquisition and Distribution, OMI Corp.'s major business was
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
distributed to its shareholders in the Distribution. In addition, as a separate
domestic business segment, the Company provided lightering services in the Gulf
of Mexico, operated four tank vessels in the U.S. Jones Act trade and provided
ship management services to the U.S. Government for its Ready Reserve Fleet.
As a result of the Acquisition and the Distribution, the major businesses
of MTC are:
- marine transportation of chemicals, petroleum products and crude oil for
U.S.-based industrial customers, including lightering services for crude
oil customers in the Gulf of Mexico, and
- ship management services for third-party shipowners, including the U.S.
Government.
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<PAGE> 4
As of March 15, 1999, the ocean fleet of Marine Transport Corporation
consisted of the following vessels:
<TABLE>
<CAPTION>
OWNED,
MANAGED YEAR
VESSEL NAME OR CHARTERED BUILT SIZE EMPLOYMENT TRADE/CARGO
- ----------- ------------ ----- ---- ---------- -----------
<S> <C> <C> <C> <C> <C>
TRANSPORTATION SERVICES FOR ENERGY AND CHEMICALS:
Marine Chemist................ Owned 1970 35,491 dwt Affreightment and Spot Chemical Parcel
Chemical Pioneer(a)........... Managed 1983 36,526 dwt Affreightment and Spot Chemical Parcel
MBC-1 (Barge)................. Owned 1973 4,000 dwt Affreightment and Spot Chemical Parcel
Calina(b)..................... Owned 1964 13,000 cm Time charter Ammonia
Marine Duval(b)(c)............ Owned 1970 25,131 dwt Time charter Molten Sulphur
Courier....................... Owned 1977 35,662 dwt Time charter Oil Products
Patriot....................... Owned 1976 35,662 dwt Spot Oil Products
Rover......................... Owned 1977 35,662 dwt Spot Oil Products
Marine Columbia(d)............ Chartered 1983 138,698 dwt Time charter Crude Oil
BT Alaska(e).................. Managed 1978 191,120 dwt Management Crude Oil
Deneb......................... Chartered 1985 79,900 dwt Lightering Crude Oil
Jahre Prince.................. Chartered 1986 94,491 dwt Lightering Crude Oil
Stena Commander............... Chartered 1989 95,758 dwt Lightering Crude Oil
Rich Duke..................... Chartered 1986 81,279 dwt Lightering Crude Oil
SHIP MANAGEMENT:
Harbel Cutlass................ Managed 1980 11,734 dwt Management Latex
Harbel Tapper................. Managed 1981 11,682 dwt Management Latex
Lykes Explorer................ Managed 1987 3,000 teu Management Container
Lykes Discoverer.............. Managed 1987 3,000 teu Management Container
Lykes Navigator............... Managed 1987 3,000 teu Management Container
Lykes Liberator............... Managed 1987 3,000 teu Management Container
Marine Reliance(f)............ Chartered 1987 4,000 cars Time charter Car Carrier
</TABLE>
VESSELS MANAGED FOR U.S. MARITIME ADMINISTRATION
Eighteen vessels, primarily large roll-on/roll-off cargo vessels, are
managed under contracts which expired in June 1998 and have been extended to the
present time; MTC is presently bidding on five year renewal of these contracts.
NOTES:
(a) MTC manages this vessel for the owner and provides commercial
management for open parcel space.
(b) Vessel residual value at end of charter term shared with charterer.
(c) Cargo forebody 1970; stern steam/electric 1944.
(d) Time chartered in, with fixed purchase option.
(e) Vessel bareboat chartered in and time chartered out, with all operating
costs paid by time charterer.
(f) Time chartered in and time chartered out, with fixed profit.
DESCRIPTION OF THE COMPANY'S SERVICES BY SEGMENT
The market for the Company's major business segments are further described
in the following sections.
Transportation Services for Energy and Chemicals: MTC pursues an
industrial shipping philosophy, serving the chemical and petroleum liquid bulk
market for large commercial customers.
3
<PAGE> 5
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 owned vessels and a managed vessel. These contracts
are typically arranged with major oil and chemical companies. Spot market
movements are used to fill out cargo capacity on vessels not fully utilized in
the carriage of contract cargo. The Company's vessels MARINE CHEMIST and MBC-1
are employed on this basis. These vessels are complemented by a commercial
agreement between the Company and the owner of the vessel CHEMICAL PIONEER which
is managed both commercially and technically by the Company and is employed on a
basis similar to the above-mentioned vessels. The Company charters-in other
vessels to carry contract cargo in excess of the Company's own vessel
capacities. 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.
The vessels CALINA and MARINE DUVAL operate under long-term contracts to
third party customers who pay all direct costs of operating the vessels. The
vessel COURIER is employed on a two-year timecharter to a major oil company. The
vessels PATRIOT and ROVER operate in the spot market for petroleum product bulk
movements or other cargo which may become available from time to time,
including, PL-480 grain movements.
The crude oil vessel MARINE COLUMBIA is on long-term charter (until
December 2002) to BP Oil Shipping Company USA ("BP"). Along with the vessel BT
ALASKA, managed by MTC under an agreement which lasts for the balance of the
vessel's economic life, these two crude oil carriers operate in the Alaska North
Slope oil trade moving Alaska oil to the U.S. West Coast and to the Far East for
BP. Revenues from BP were approximately 9% of consolidated revenues for the year
ended December 31, 1998.
All of the above-mentioned vessels except CALINA operate in the protected
U.S. Jones Act market. The Jones Act restricts participants in the U.S.
coastwise shipping trade to those owners who are qualified U.S. citizens and to
vessels which are built in the United States and are crewed with U.S. seafarers.
Participants in the Jones Act trades are limited, but competition in most areas
of the trade is intense. The Company attempts to differentiate itself in its
energy and chemical segment by specializing in areas such as chemical parcels
and Alaska crude oil where its unique vessel tonnage meets charterers' specific
needs. This differentiation is more difficult in petroleum product movements,
where competitors have similar vessels, cargo requirements are less demanding
and some overcapacity exists at the present time. Other forms of competition
include movement of energy sources and chemicals by pipeline and rail, and
imports and exports of products by internationally registered vessels to and
from geographic areas which are not restricted by Jones Act requirements.
MTC also provides lightering services in the Gulf of Mexico through its
subsidiary MTL Petrolink Corp. Lightering involves transfer of crude oil from
large crude carriers ("VLCC's" or "ULCC's") to smaller vessels that bring the
crude oil to refinery storage terminals. The Company timecharters-in four
international flag Aframax tankers, and frequently charters in on a spot basis
other vessels, to perform its services. MTL Petrolink Corp. 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 Corp. also provides
repair services for its own assist vessels as well as for small vessels engaged
in commercial offshore and fishing trades. MTL Petrolink Corp. has two main
competitors for its services. The methods of competition include price as well
as the quality and safety of services. MTL Petrolink Corp. believes it is the
second largest company providing lightering services in the Gulf of Mexico.
The Transportation Services for Energy and Chemicals segment usually
experiences a slight seasonal downturn in the summer months due to refinery
shutdowns and inventory adjustments by customers.
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 ship
operating activities. MTC manages one of the largest U.S.-based fleets.
Management contracts range in length from one to five years in term. Ship
Management fees are the primary component of other operating revenues. There are
a large number of competitors for ship management business. There are many
international ship management
4
<PAGE> 6
companies which are greater in size than MTC, but internationally-owned
companies cannot perform ship management services for Jones Act vessels.
Management fees, quality of service, and experience with particular vessel types
are the significant forms of competition for ship management services.
The Company also charters in and charters out the car carrier MARINE
RELIANCE, retaining a small profit between the charters. Results of operation of
this vessel are included in the Ship Management business segment.
MEASUREMENT OF SEGMENT PROFITABILITY AND SEGMENT ASSETS
The Company evaluates performance of each of its vessels engaged in the
Transportation of Energy and Chemicals segment based on the cash contribution of
each vessel in its specific trade. This contribution is determined by
subtracting voyage and vessel operating costs (other than depreciation and
amortization) from voyage revenues. For voyages in process at the measurement
date, the percentage of completion accounting method is used. All of the
Company's owned vessels are included in this business segment. For managed
vessels participating in this business segment, the management fee and
commercial management fee, if any, generate whatever cash is contributed.
Ship management fee revenues, which are determined by contract with
customers, are the measurement of performance used for the Ship Management
segment. The owners of the managed vessels are responsible for their vessel
operating costs.
The Company operates its owned vessels as well as vessels for other owners.
No allocation of general and administrative expense is made to the business
segments, nor is any inter-company revenue allocated for the management services
performed for the Transportation of Energy and Chemicals segment by the Ship
Management segment.
MTC considers Ship Management to be a core competence for a major ship
owner. However, because the business segments are managed separately within the
Company, and are marketed separately to the Company's potential customers, they
are presented separately.
See Note 14 -- Financial Information Relating to Segments of the Notes to
Consolidated Financial Statements for more information concerning industry
segments.
CONTRACTUAL RELATIONSHIPS
With the exception of two vessels operating on the spot market for
petroleum products and PL-480 grain movements, and the vessels operated by the
Company for the U.S. Maritime Administration, all of the vessels are employed on
either (a) year to year contracts or vessel operating agreements which renew
annually unless terminated by MTC's customer, or (b) charters or contracts of
affreightment or vessel operating agreements having terms which expire more than
one year into the future. The termination of any significant contract, charter
or operating agreement could have a material impact on the Company.
The management contracts between MTC and the U.S. Maritime Administration
expired in June 1998, but have been extended for the convenience of the
government until new awards are made on the basis of a competitive bidding
process. This process is expected to be completed by May 1999. MTC cannot
predict the extent to which it will be successful in renewing its contracts to
manage vessels for the Maritime Administration. Net fees derived from these
contracts accounted for 6% of consolidated revenues for the year ended December
31, 1998.
REGULATION AND ENVIRONMENTAL IMPACT
The Company and its vessel operations are subject to numerous U.S. and
international regulations impacting the manner in which vessels are constructed,
operated, and maintained, as well as the operation of the Company, and its
potential liability arising from accidents which result in oil pollution. In
particular, the Oil Pollution Act of 1990 ("OPA 90") provides, among other
things, for the (a) phase-in of the exclusive use of double-hulled tankers in
petroleum trades in the United States waters; and (b) potentially unlimited
5
<PAGE> 7
liability of owners, operators and bareboat charterers for certain oil spills
and other accidents in the U.S. and in U.S. waters.
OPA 90 applies to a number of MTC vessels. The MARINE CHEMIST must be
refitted with a double hull (at an estimated cost of $15-20 million) or be
remeasured by November 2000 in order to be eligible to continue carrying
petroleum products. Such remeasurement has the effect of reducing the vessel's
cubic cargo capacity by approximately 15%. The COURIER, PATRIOT, ROVER and
MARINE COLUMBIA will no longer be able to carry petroleum products in the U.S.
under OPA 90 in 2003, 2003, 2004 and 2006, respectively.
OFFICE AND EMPLOYEES
MTC's offices are located at 1200 Harbor Boulevard, Weehawken, New Jersey,
07087-0901. The Company leases approximately 16,500 square feet of space at this
location under a lease which expires in 2004.
The Company employs approximately 160 people ashore and has approximately
800 positions, or berths, filled on its vessels when all are engaged in
operation. Generally, each berth on a vessel requires full employment of at
least two people during a twelve-month period. Most of the positions filled on
the Company's vessels are covered by multi-year maritime union contracts, none
of which expire before May 2000.
ITEM 3. LEGAL PROCEEDINGS
In February 1999, the Company paid $1 million in full settlement of an
income tax indemnity claim by a subsidiary of the Fuji Bank and Trust Company
(the "Bank") in connection with an earlier transaction between a subsidiary of
the Company and the Bank. The settlement amount has been reflected in the
accompanying consolidated financial statements as an adjustment of the purchase
price of MTL, and is included in accrued expenses at December 31, 1998.
As of August 15, 1998, the Company 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 most cases.
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company
during the fourth quarter of 1998.
6
<PAGE> 8
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
Marine Transport Corporation's common stock is traded on the Nasdaq Stock
Market under the symbol MTLX. Prior to the Distribution, the Company's common
stock was traded on the New York Stock Exchange under the symbol OMM. As of
March 15, 1999, the number of shareholders of Marine Transport Corporation stock
was approximately 3,443. The Company's historical stock prices should be
analyzed carefully in the context of the Acquisition and the Distribution which
are more fully described earlier in this report.
The high and low sales prices of the common stock, as reported by the
Nasdaq Stock Market (New York Stock Exchange prior to Distribution), were as
follows:
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
---- ---- ---- ----
<S> <C> <C> <C> <C>
1998 Quarter
High................................................ 98 3/4 108 1/8 4 2 15/16
Low................................................. 81 7/8 3 3/4 1 23/32 1 5/8
1997 Quarter
High................................................ 112 1/2 106 1/4 145 137 1/2
Low................................................. 82 1/2 90 95 91 1/4
</TABLE>
In June 1998 the Company completed the Acquisition and the Distribution,
effecting a separation of the Company, and completed a 1 for 10 reverse stock
split. The above prices give effect to the reverse split on a retroactive basis.
Payment of dividends is restricted by the terms of the Company's long term
debt agreements.
ITEM 6. SELECTED FINANCIAL DATA
Comparisons of Selected Financial Data for the periods presented should be
made with consideration of the Acquisition and the Distribution. See Notes to
the Consolidated Financial Statements. For pro forma information giving effect
to the Acquisition and the Distribution see Note 2 to the Consolidated Financial
Statements.
MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues:
Voyage revenues........................... $173,118 $224,413 $225,578 $232,589 $261,357
Other operating revenues.................. 11,660 7,127 7,044 7,520 5,135
-------- -------- -------- -------- --------
184,778 231,540 232,622 240,109 266,492
-------- -------- -------- -------- --------
Operating expenses:
Vessel and voyage......................... 151,930 174,363 167,259 212,963 223,540
Depreciation and amortization............. 22,407 28,944 30,448 34,734 37,770
General and administrative................ 16,396 23,998 16,438 15,303 18,972
Provision for losses:
Impaired value of vessels.............. -- -- -- 8,707 14,798
Lease obligation....................... -- -- -- 6,687 19,800
-------- -------- -------- -------- --------
190,733 227,305 214,145 278,394 314,880
-------- -------- -------- -------- --------
Operating income (loss)..................... (5,955) 4,235 18,477 (38,285) (48,388)
-------- -------- -------- -------- --------
</TABLE>
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<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Other income (expense):
Net gain on disposal of assets............ 538 870 11,153 5,480 10,222
Interest expense.......................... (8,378) (12,249) (26,462) (26,708) (28,808)
Interest income........................... 4,529 3,257 2,810 2,076 2,843
Equity in income of unconsolidated
joint ventures......................... 2,353 737 2,482 5,528 5,402
Provision for write down of investments... -- -- -- -- (1,250)
Other -- net.............................. -- -- -- 1,040 (191)
-------- -------- -------- -------- --------
Net other expenses........................ (958) (7,385) (10,017) (12,584) (11,782)
-------- -------- -------- -------- --------
Income (loss) before income taxes,
extraordinary item and cumulative effect
of change in accounting principle......... (6,913) (3,150) 8,460 (50,869) (60,170)
Benefit (provision) for income taxes........ 39,985 180 (2,271) 18,973 22,305
-------- -------- -------- -------- --------
Income (loss) before extraordinary item and
cumulative effect of changes in accounting
principle................................. 33,072 (2,970) 6,189 (31,896) (37,865)
Extraordinary loss, net of income tax
benefit of $1,493......................... -- -- (2,772) -- --
Cumulative effect of change in accounting
principle -- net of income tax expense
of $7,429................................. -- 13,797 -- -- --
-------- -------- -------- -------- --------
Net income (loss)........................... $ 33,072 $ 10,827 $ 3,417 $(31,896) $(37,865)
======== ======== ======== ======== ========
Basic earnings (loss) per common share:
Income (loss) before extraordinary item
and cumulative effect of change in
accounting principle...................... $ 6.31 $ (0.69) $ 1.85 $ (10.37) $ (12.45)
======== ======== ======== ======== ========
Net income (loss)......................... $ 6.31 $ 2.52 $ 1.02 $ (10.37) $ (12.45)
======== ======== ======== ======== ========
Diluted earnings (loss), per common share:
Income (loss) before extraordinary item
and cumulative effect of change in
accounting principle...................... $ 6.31 $ (0.69) $ 1.83 $ (10.37) $ (12.45)
======== ======== ======== ======== ========
Net income (loss)......................... $ 6.31 $ 2.52 $ 1.01 $ (10.37) $ (12.45)
======== ======== ======== ======== ========
Weighted average shares outstanding......... 5,244 4,291 3,344 3,075 3,042
======== ======== ======== ======== ========
</TABLE>
8
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MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Other Financial Data:
Cash flows provided (used) by:
Operating activities...................... $ 15,529 $ 8,279 $ (5,721) $ (4,601) $ 1,647
Investing activities...................... (71,455) 49,343 31,989 (9,959) 9,739
Financing activities...................... 31,915 (73,762) (10,960) 15,332 (24,910)
Balance Sheet Data:
Cash and cash equivalents................. $ 8,652 $ 32,489 $ 47,877 $ 32,569 $ 31,797
Vessel and other property -- net.......... 38,878 314,193 341,309 368,441 400,998
Construction in progress.................. -- 56,032 10,754 -- --
Investments in, and advances to joint
ventures............................... -- 28,155 59,322 84,915 81,868
Total assets.............................. 106,470 518,587 552,282 565,486 605,132
Total debt................................ 27,145 162,916 237,148 283,866 272,139
Total stockholders' equity................ 15,969 221,023 207,578 145,415 179,896
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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 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. 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 Acquisition and the Distribution.
PRO FORMA FINANCIAL INFORMATION
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,
1997. 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 Notes to the Consolidated
Financial Statements.
FORWARD-LOOKING 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, as well as potential impacts
of the Year 2000 issue on the Company. 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 normally publicly update its forward-looking
statements even if experience or future changes make it clear that any projected
results expressed or implied therein will not be realized.
OVERVIEW
The Company's vessels may operate 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. This
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<PAGE> 11
means that the revenues generated by a bareboat charter are likely to be lower
than those generated by 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 bunker prices.
Vessel expenses include operating expenses such as crew
payroll/benefits/travel, stores, maintenance and repairs, insurance and
communications. These expenses vary depending on the fleet size, utilization
levels 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.
The Company processes most of the transactions required for operation of
the vessels it manages for other owners, including those related to crew payroll
and transportation, repairs and maintenance, spare parts, drydocking and
overhauls, communications, and insurance. MTC is administratively staffed to
perform these functions for its large fleet of managed vessels; however, only
the management fee is included in revenues for these vessels, not the actual
revenue earned by commercial operation by third party owners.
SIGNIFICANT ADJUSTMENTS RELATED TO DISTRIBUTION AND CHANGE IN ACCOUNTING
PRINCIPLE
Net income for the year ended December 31, 1998 was $33.1 million compared
to $10.8 million for the year ended December 31, 1997. Included in the 1998
income is a benefit of $39.9 million for Federal income taxes. In connection
with the Distribution, the subsidiary holding the Company'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 net
income is $13.8 million, net of income taxes, from the cumulative effect of a
change in accounting principle.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Voyage revenues decreased substantially in 1998 compared to 1997. The
primary reason for the substantial decrease in revenues is the exclusion of the
revenues and the results of operations of the Company's international businesses
for periods after the Distribution. On a pro-forma basis, assuming the
Distribution and Acquisition occurred on January 1, 1997, revenues increased $7
million, primarily resulting from operation of three product tankers which were
placed in service in the third quarter of 1998; these same vessels were idle for
most of 1997.
Other operating revenues for all periods presented primarily represent
revenues from ship management services, with the increases in ship management
revenues for the 1998 year attributable to the Acquisition of Marine Transport
Lines, Inc.
Vessel and voyage operating expenses decreased primarily as a result of the
impact of the Distribution (international businesses that were separated from
the Company in June 1998). This decrease in expense was partially offset by the
addition of vessels from Marine Transport Lines, Inc., and the costs associated
with the start up expenses of activating three vessels that had been in extended
lay-up periods.
Operating lease expenses included in vessel and voyage operating expenses
increased because of the Company's decision to charter in four Suezmax tankers
during 1998. These chartered vessels were part of the international business
distributed to shareholders in connection with the Distribution.
The operating loss of $6 million for the year ended December 31, 1998
resulted from several factors: the decrease in market charter rates for the
Company's previously-held international Suezmax and Product Tanker fleets;
increased depreciation and amortization charges in connection with the
Acquisition for periods after the Acquisition; and, general and administrative
expense incurred in concluding the Acquisition and the Distribution. The actual
charges for depreciation and amortization and general and administrative expense
were lower in 1998 than 1997 due to the Distribution in June 1998.
10
<PAGE> 12
The significant decrease in interest expense results from lower borrowings
by the Company (mostly arising from the transfer to OMI Corporation of long-term
debt in connection with the Distribution) as well as lower interest rates for
current periods. In October 1998, the Company fixed interest rates on $19.9
million of floating rate long-term debt for three years through an interest rate
swap (see Item 7A and Notes to the Consolidated Financial Statements).
Equity in income of unconsolidated joint ventures primarily represents
investments the Company had in vessels used in international trade which were
part of the Distribution.
The income tax benefit for the year ended December 31, 1998 represents
principally the reversal of deferred taxes at the Distribution date for the
Company's foreign subsidiaries which became decontrolled corporations though the
Distribution; income taxes are no longer payable on the deferred taxable income
of those companies and the deferred taxes were reversed. For current earnings,
the income tax provision is similar to the statutory rate.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Net voyage revenues (voyage revenues less vessel and voyage expenses) of
$50.1 million for the year ended December 31, 1997 decreased by a net $8.2
million from $58.3 million for the same period in 1996. Changes in net voyage
revenues for the year ended 1997 compared to 1996 are discussed as follows by
the market segments in which the Company primarily operated in periods prior to
the Distribution.
Domestic net voyage revenues decreased $24.1 million to a loss of $5.2 for
the year ended December 31, 1997, as compared to $18.9 million for the same
period in 1996.
Decreases of approximately $8.5 million in net voyage revenues were
attributable to the six vessels sold during 1996. Included in the $8.5 million
decrease is a $3.8 million credit to drydock expense relating to the reversals
of the drydock accruals (the accrual method of accounting for drydock was used
in 1996) for the vessels disposed of in 1996. Approximately $6.6 million of the
decrease in net voyage revenues was a result of two product carriers which were
on time charters in 1996 but were laid up for an aggregate 527 days in 1997. The
third product carrier's net voyage revenues decreased by approximately $2.8
million primarily because it operated on a time charter in 1996 which ended in
1997 at a time when rates were lower. In addition, the vessel incurred 23 more
offhire days due to idle time. Net voyage revenues generated by the MARINE
COLUMBIA decreased $6.4 million as a result of the sale of the vessel in January
1997, as well as offhire incurred for repairs in 1997.
On January 31, 1997, the MARINE COLUMBIA, a crude oil tanker which
transports Alaskan North Slope oil for a major oil company, was sold and leased
back under a charter agreement terminating December 31, 2002. MTC operates the
MARINE COLUMBIA and the decrease in net voyage revenue mentioned above was
attributable to charter hire expense. The Company received $40 million in cash
and a $9 million note receivable for the vessel. A gain of approximately $25
million was deferred and is being amortized to the end of the lease term.
The three remaining vessels in the domestic fleet were on time charters in
the first half of 1996. Two of the vessels were redelivered in February and
April 1997 having been on long-term time charters with the U.S. Military Sealift
Command. One of the vessels was then on another time charter until February
1998. The third vessel was on time charter in 1996 which ended in February 1997.
All of these vessels were idle at December 31, 1997.
Net foreign voyage revenues increased $15.9 million to $55.3 million for
the year ended December 31, 1997, as compared to $39.4 million for the same
period in 1996. Decreases of $3.0 million relate to the sale of the LPG carrier
which was disposed of in March 1997. Other changes are discussed as follows
according to the two foreign market segments in which the Company previously
operated.
The product carrier fleet consisted of thirteen vessels (ten Handysize and
three Panamaxes) at December 31, 1997 as compared to ten vessels (seven
Handysize and three Panamaxes) at December 31,
11
<PAGE> 13
1996. The Company maintained a mix of approximately half its product carriers on
time charters in both years.
Net voyage revenues include results of two product carriers acquired in
1996 and one vessel, purchased in April 1997, which contributed an additional
$6.5 million to net voyage revenues during the twelve months ended 1997. With
respect to the ten remaining vessels, net voyage revenues, in the aggregate,
remained relatively unchanged during 1997 compared to 1996.
In the year ending December 31, 1997, the crude oil fleet consisted of six
wholly-owned vessels and four chartered-in vessels; eight were currently
operating in the spot market and two vessels were operating on time charters.
One vessel which had been on a long-term time charter was redelivered in the
fourth quarter of 1997. In 1996, the Company owned seven vessels and
chartered-in one vessel, with four of these vessels operating in the spot
market. The Company maintained the majority of its crude oil tankers in the spot
market.
Net voyage revenues generated by the crude oil tanker fleet increased
primarily for two reasons; first, by $9.9 million due to the acquisition of the
ALTA and the TANANA, (two Suezmax tankers in which the Company acquired its
partner's interest on December 30, 1996) and second, due to improved rates
resulting from better market conditions in 1997. In addition, in order to
maximize profits on voyages, the Company attempted to triangulate voyages for
the new ships, that is, lessen the amount of the ballast leg (the part of the
voyage where no cargo is carried), in order to increase the utilization of the
vessel.
The Company's operating expenses, other than vessel and voyage expenses,
operating lease expenses and provision for losses, consisted of depreciation and
amortization and general and administrative expenses. For the year ended
December 31, 1997, these expenses increased $6.1 million to $52.9 million, from
$46.8 million for the same period in 1996. General and administrative expenses
increased $7.6 million primarily due to accruals for bonuses and severance
aggregating approximately $5.3 million, expenses incurred in the relocation of
corporate headquarters to Stamford, Connecticut of approximately $2.6 million,
and expenses allocated to the anticipated spin off and formation of OMI
Corporation ("New OMI") of approximately $.8 million. Other general and
administrative expenses declined approximately $1.1 million. The decrease in
depreciation expense of $1.5 million related to the sale of vessels (including
the sale and leaseback of the MARINE COLUMBIA).
Other income (expense) consisted of gain on disposal of assets-net,
interest expense, interest income, equity in income of unconsolidated joint
ventures and other-net. Net other expense decreased by $5.5 million for the year
ended December 31, 1997 compared to the same period in 1996. Interest expense
decreased by a net of $14.2 million due to the following; reduction in the
average mortgage debt in 1997 compared to 1996, payment of debt from proceeds of
vessel sales and proceeds from the public offering of stock in the fourth
quarter of 1996, increased capitalized interest on four vessels under
construction for twelve months in 1997 compared to two vessels for one month in
1996 and lower average interest rates on debt refinanced in July 1996 and April
1997. Decreases in net other expense were offset in part by decreases in the
gain on disposal of assets-net of $10.3 million for the year ended December 31,
1997. This decrease resulted primarily from the gain on sale of $9.7 million for
OMI Petrolink Corporation ("Petrolink", now MTL Petrolink Corp.) workboats and
$3.6 million gain on the sale of a crude oil carrier in 1996 offset in part by
the gain on sale of the LPG carrier of approximately $1.0 in the first quarter
of 1997.
Equity in income of unconsolidated joint ventures decreased by $1.7 million
to $.7 in the year ended 1997 compared to $2.5 million for the same period in
1996. The decrease in equity was primarily attributable to the loss on sale of a
vessel owned by Mosaic (a joint venture) of approximately $10.5 million (the
Company's portion of the loss was approximately $5.2 million) in the third
quarter of 1997 offset in part by the gain on the sale of a vessel of $1.9
million (the Company's portion of the gain was approximately $0.9 million) in
the second quarter of 1997. In accordance with the Company's plan to decrease
its participation in joint ventures, on December 10, 1997, Mosaic acquired the
majority shareholder's interest in the venture for cash of $32.3 million and
50.1 percent of stock in its subsidiary Kanejoy Corporation, with a book value
of $3.5 million, and Mosaic became a 100 percent owned subsidiary of the
Company.
12
<PAGE> 14
On December 30, 1996, the interest in Wilomi owned by a partner was
acquired by the venture, and Wilomi became a 100 percent owned subsidiary of the
Company with its earnings consolidated in the Company's results. The decrease in
equity in operations of joint ventures attributable to Wilomi was $1.3 million
for the year ended December 31, 1997.
Increases in equity in income of unconsolidated joint ventures offsetting
the aforementioned decreases relate to Amazon, a 49 percent owned joint venture
which operates one crude oil tanker, the SETTEBELLO. The equity in earnings for
Amazon increased by $3.1 million in 1997 as compared to the same period in 1996.
The SETTEBELLO was in drydock for 92 days in 1996 which resulted in both a lack
of earnings and additional drydock expense. Also, equity increased by $1.7
million from WHITE SEA as a result 66 offhire days in 1996 related to drydocking
of the vessel.
BENEFIT (PROVISION) FOR INCOME TAXES
The income tax benefit of $.2 million (excluding the income tax provision
for the cumulative effect of the change in accounting principle) for the year
ended December 31, 1997 varied from statutory rates primarily because deferred
taxes are not recorded for equity in operations of joint ventures, net of
dividends declared, other than Amazon Transport, Inc. ("Amazon") and White Sea
Holdings, Ltd. ("White Sea") as management considers such earnings to be
invested for an indefinite period.
BALANCE SHEET AS OF DECEMBER 31, 1998
MTC's balance sheet as of December 31, 1998 reflects both the Acquisition
and the Distribution, whereas the balance sheet as of December 31, 1997 reflects
the historical balance sheet of the Company prior to such transactions.
LIQUIDITY AND CAPITAL RESOURCES
Cash balances of $8.6 million as of December 31, 1998 include cash of $1.8
million drawn from one of the Company's revolving credit lines. Concurrent with
the Acquisition and the Distribution the Company: (a) restructured its loan
agreement between Marine Transport Lines, Inc. and a commercial bank; and (b)
arranged a new loan agreement between MTC and the same commercial bank. At
December 31, 1998, the Company had total borrowings under these agreements of
$20.5 million, which was $1.2 million less than its total borrowing capacity at
that date under the lines of credit provided pursuant to those loan agreements.
Other forms of cash available for operations and investment by the Company
include $4 million included in the Company's Capital Construction Fund (before
applicable income taxes payable on amounts withdrawn from their current use).
Cash balances and available credit lines are expected to be sufficient to
meet the Company's normal operating requirements, including scheduled payments
of long-term debt.
OTHER OPERATING MATTERS
The Company is in negotiations with the charterer 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.
PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma financial information included in the Notes to the
Consolidated Financial Statements for the year ended December 31, 1998 and 1997
present certain historical financial information as if the Acquisition and
Distribution occurred on January 1, 1997. Although this unaudited 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
13
<PAGE> 15
$8 million on an annualized basis as compared to that amount allocated to the
Company's Domestic Business on a historical basis; employment of the laid up
vessel Courier on a two year charter at profitable rates, and implementation of
plans for other previously laid up vessels to profitably employ these vessels;
and expansion of the Company's ship management business.
AGREEMENTS
As part of the Distribution, the Company is party to certain agreements
with New OMI. Certain provisions of these agreements are summarized in the Notes
to the Consolidated Financial Statements (see Note 2) included herein. These
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.
YEAR 2000
MTC's management has identified the following areas of concern relating to
the Year 2000 issue and has determined appropriate courses of action as
described below. Internally generated funds will be used to fund testing,
improvements or replacements where necessary.
Navigation of vessels: the potential impact of failure of embedded
microprocessor chips on navigational equipment. All critical equipment on each
of the Company's vessels has been identified and vendors have been contacted for
certification for Year 2000 compliance. Where manufacturers cannot provide
certification for critical equipment, non-compliant equipment will be replaced.
Management does not anticipate material expenditures for certification or
replacement.
Communications: the potential failure of computer equipment used for
communications ship-to-shore and with other third parties ashore. All equipment
used for ship-to-shore communication is being tested for compliance by the
Company or an independent third party and will be replaced where necessary; most
of this equipment consists of personal computers, off the shelf software and
small servers. The cost of testing and replacement is not expected to be
significant.
Operations: the potential failure of embedded microprocessor chips on
power, steering and cargo systems aboard vessels. Critical machinery has been
identified and is being surveyed and tested by Company personnel or independent
third parties. Most systems have manual backup procedures or systems in the
event of failure. Management expects to complete this testing prior to projected
impact dates of Year 2000, but at this time is not certain of the costs of
remediation of any identified problems.
Administration: the impact of Year 2000 problems on the Company's computer
systems and those systems of third parties, such as vendors, customers and
banks. The Company may replace existing administrative (including accounting)
software and hardware used in related applications prior to the projected impact
dates of Year 2000. The cost of replacement of these systems is expected to
exceed $750,000. This expenditure was planned because of the recent changes in
the Company's operation, but implementation may be accelerated as a result of
identified Year 2000 problems.
Management is not certain of the preparedness of all of its third party
relations, and the potential impact of failure of their systems on the Company's
results of operations, liquidity and financial condition. Interruption of
services provided by the Company's vessels could result from many factors for
which the Company relies on third parties, such as delivery of equipment, fuel
and personnel, availability of assist vessels to enter and leave ports,
availability of cargo to haul and capacity to discharge ashore and availability
of repair facilities. Management is aware that most of its important customers
(mostly large, multi-national companies), and the Company's banks, are studying
Year 2000 issues and implementing changes where appropriate.
14
<PAGE> 16
ITEM 7A. MARKET RISKS
All of the Company's revenues, and most of its expenses, are in U.S.
dollars. As a leveraged company, MTC is subject to interest rate risks. The
Company uses interest rate swap agreements to manage interest costs and the risk
associated with changing interest rates. At December 31, 1998, the Company had
outstanding an interest rate swap, with a notional amount of $19,453,993, which
fixed the base LIBOR rate on the Company's term loans at 4.75 percent for a
three year period. See Notes to the Consolidated Financial Statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
CONTENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Reports of Independent Auditors............................. 16-17
Consolidated Balance Sheets as of December 31, 1998 and
1997...................................................... 18
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996.......................... 19
Consolidated Statements of Changes in Shareholders' Equity
for the years ended December 31, 1998, 1997 and 1996...... 20
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996.......................... 21
Notes to Consolidated Financial Statements.................. 22-38
</TABLE>
15
<PAGE> 17
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
Marine Transport Corporation
We have audited the accompanying consolidated balance sheet of Marine
Transport Corporation and subsidiaries as of December 31, 1998 and the related
consolidated statements of operations, changes in shareholders' equity, and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Marine
Transport Corporation and subsidiaries at December 31, 1998 and the consolidated
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
ERNST & YOUNG, LLP
New York, New York
February 26, 1999
16
<PAGE> 18
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Marine Transport Corporation (formerly OMI Corp.):
We have audited the accompanying consolidated balance sheet of Marine
Transport Corporation (formerly OMI Corp.) and its subsidiaries as of December
31, 1997 and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the two years in the period ended December 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the companies at December 31,
1997 and the results of their operations and their cash flows for each of the
two years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles.
As disclosed in Note 3 to the consolidated financial statements, effective
January 1, 1997 the Company changed its method of accounting for special survey
and drydock expenses from the accrual method to the prepaid method.
DELOITTE & TOUCHE, LLP
New York, New York
March 9, 1998
17
<PAGE> 19
MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents:
Unrestricted........................................... $ 7,726 $ 31,737
Restricted............................................. 926 752
Receivables:
Trade receivables, net of allowances of $509 in 1998
and $795 in 1997...................................... 10,692 16,167
Other.................................................. 2,932 4,014
Income taxes receivable................................... 643 --
Prepaid expenses and other current assets................. 5,921 16,423
Vessel held for sale...................................... 100 --
-------- --------
Total current assets........................................ 28,940 69,093
-------- --------
Marketable securities and cash held in capital construction
fund...................................................... 4,069 10,969
Vessels and other property:
Vessels................................................... 104,528 510,312
Construction in progress.................................. -- 56,032
Other property............................................ 1,953 8,397
-------- --------
Total vessels and other property.................. 106,481 574,741
Less: accumulated depreciation............................ 67,703 204,516
-------- --------
38,778 370,225
-------- --------
Vessel drydocking costs..................................... 7,429 8,514
Investments in and advances to joint ventures............... -- 28,155
Note receivable............................................. 9,000 9,000
Other assets and deferred charges........................... 6,602 10,288
Goodwill.................................................... 11,652 12,343
-------- --------
Total assets................................................ $106,470 $518,587
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 9,604 $ 6,314
Accrued liabilities....................................... 8,092 22,931
Current portion of debt................................... 3,034 16,575
-------- --------
Total current liabilities................................... 20,730 45,820
Advance time charter revenues and other liabilities......... 1,500 3,114
Long-term debt.............................................. 24,111 146,341
Deferred gain on sale of vessels............................ 21,258 36,108
Deferred income taxes....................................... 22,902 64,264
Minority interest in subsidiary............................. -- 1,917
-------- --------
Total liabilities........................................... 90,501 297,564
-------- --------
SHAREHOLDERS' EQUITY
Common stock, $0.50 par value; 15,000,000 shares authorized;
shares issued and outstanding: 1998 -- 6,555,368;
1997 -- 4,306,668......................................... 3,277 2,154
Capital surplus............................................. 25,461 206,105
Retained earnings (deficit)................................. (11,996) 8,979
Accumulated other comprehensive income (loss)............... (51) 4,890
Unearned compensation -- restricted stock................... -- (1,105)
Treasury stock at cost; 350,000 shares...................... (722) --
-------- --------
Total shareholders' equity.................................. 15,969 221,023
-------- --------
Total liabilities and shareholders' equity.................. $106,470 $518,587
======== ========
</TABLE>
See notes to consolidated financial statements.
18
<PAGE> 20
MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Voyage revenues.......................................... $173,118 $224,413 $225,578
Other operating revenues................................. 11,660 7,127 7,044
-------- -------- --------
184,778 231,540 232,622
-------- -------- --------
Operating expenses:
Vessel and voyage........................................ 151,930 174,363 167,259
Depreciation and amortization............................ 22,407 28,944 30,448
General and administrative............................... 16,396 23,998 16,438
-------- -------- --------
190,733 227,305 214,145
-------- -------- --------
Operating income (loss).................................... (5,955) 4,235 18,477
-------- -------- --------
Other income (expense):
Net gain on disposal of assets........................... 538 870 11,153
Interest expense......................................... (8,378) (12,249) (26,462)
Interest income.......................................... 4,529 3,257 2,810
Equity in income of unconsolidated joint ventures........ 2,353 737 2,482
-------- -------- --------
Net other expenses....................................... (958) (7,385) (10,017)
-------- -------- --------
Income (loss) before income taxes, extraordinary item and
cumulative effect of change in accounting principle...... (6,913) (3,150) 8,460
Benefit (provision) for income taxes....................... 39,985 180 (2,271)
-------- -------- --------
Income (loss) before extraordinary item and cumulative
effect of changes in accounting principle................ 33,072 (2,970) 6,189
Extraordinary loss, net of income tax benefit of $1,493.... -- -- (2,772)
Cumulative effect of change in accounting principle, net of
income tax expense of $7,429............................. -- 13,797 --
-------- -------- --------
Net income................................................. $ 33,072 $ 10,827 $ 3,417
======== ======== ========
Basic income per common share:
Income (loss) before extraordinary item and cumulative
effect of change in accounting principle.............. $ 6.31 $ (0.69) $ 1.85
Extraordinary loss, net of income tax benefit............ -- -- (.83)
Cumulative effect of change in accounting principle, net
of income tax provision............................... -- 3.21 --
-------- -------- --------
Net income............................................... $ 6.31 $ 2.52 $ 1.02
======== ======== ========
Diluted income per common share:
Income (loss) before extraordinary item and cumulative
effect of change in accounting principle.............. $ 6.31 $ (0.69) $ 1.83
Extraordinary loss, net of income tax benefit............ -- -- (.82)
Cumulative effect of change in accounting principle, net
of income tax provision............................... -- 3.21 --
-------- -------- --------
Net income............................................... $ 6.31 $ 2.52 $ 1.01
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
19
<PAGE> 21
MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
-------------
COMMON STOCK RETAINED OTHER OTHER
------------------ CAPITAL EARNINGS COMPREHENSIVE COMPREHENSIVE RESTRICTED TREASURY
SHARES(1) AMOUNT SURPLUS (DEFICIT) INCOME INCOME STOCK STOCK
--------- ------ --------- --------- ------------- ------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of January 1,
1996....................... 3,104 $1,552 $ 145,591 $ (5,265) $ 4,941 $(1,404) --
Comprehensive income:
Net income................. 3,417 $ 3,417
Net unrealized gain (loss)
on securities, net of tax
benefit of $39........... (73) (73)
-------
Comprehensive income....... $ 3,344
-------
Shares issued in common stock
offering................... 1,150 575 75,157
Retirement of partner's
equity interest in joint
venture.................... (18,072)
Exercise of stock option and
stock appreciation
rights..................... 15 8 786
Amortization of unearned
compensation............... 365
----- ------ --------- -------- ------- ------- -----
Balance at December 31,
1996....................... 4,269 $2,135 $ 203,462 $ (1,848) $ 4,868 $(1,039) --
Comprehensive income:
Net income................. 10,827 $10,827
Net unrealized gain (loss)
on securities, net of tax
benefit of $(12)......... 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 option and
stock appreciation
rights..................... 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 $ 8,979 $ 4,890 $(1,105) $ --
Comprehensive income:
Net income................. 33,072 $33,072
Net unrealized gain (loss)
on securities, net of tax
benefit of $16........... (29) (29)
-------
Comprehensive income....... $33,043
-------
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..... 2,243 1,121 10,779
Spin-off of foreign
subsidiaries............... (190,952) (54,047) (4,912)
Purchase of treasury stock... (722)
----- ------ --------- -------- ------- ------- -----
Balance at December 31,
1998....................... 6,555 $3,277 $ 25,461 $(11,996) $ (51) $ -- $(722)
===== ====== ========= ======== ======= ======= =====
<CAPTION>
TOTAL
---------
<S> <C>
Balance as of January 1,
1996....................... $ 145,415
Comprehensive income:
Net income................. 3,417
Net unrealized gain (loss)
on securities, net of tax
benefit of $39........... (73)
Comprehensive income.......
Shares issued in common stock
offering................... 75,732
Retirement of partner's
equity interest in joint
venture.................... (18,072)
Exercise of stock option and
stock appreciation
rights..................... 794
Amortization of unearned
compensation............... 365
---------
Balance at December 31,
1996....................... $ 207,578
Comprehensive income:
Net income................. 10,827
Net unrealized gain (loss)
on securities, net of tax
benefit of $(12)......... 22
Comprehensive income.......
Retirement of partner's
equity interest in joint
venture.................... 777
Retirement of minority
stockholders' equity
interest in subsidiary..... (549)
Exercise of stock option and
stock appreciation
rights..................... 1,996
Issuance of restricted stock
awards..................... --
Amortization of unearned
compensation............... 372
---------
Balance at December 31,
1997....................... $ 221,023
Comprehensive income:
Net income................. 33,072
Net unrealized gain (loss)
on securities, net of tax
benefit of $16........... (29)
Comprehensive income.......
Exercise of stock options.... 212
Retirement of minority
stockholders' equity
interest in subsidiary..... (681)
Amortization of unearned
compensation............... 1,105
Issuance of common stock..... 11,900
Spin-off of foreign
subsidiaries............... (249,911)
Purchase of treasury stock... (722)
---------
Balance at December 31,
1998....................... $ 15,969
=========
</TABLE>
20
<PAGE> 22
MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
CASH FLOW PROVIDED (USED) BY OPERATING ACTIVITIES:
Net income.................................................. $ 33,072 $ 10,827 $ 3,417
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Cumulative effect of change in method of accounting, net
of income tax provision................................. -- (13,797) --
Extraordinary loss, net of income tax benefit............. -- -- 2,772
Depreciation and amortization............................. 34,976 28,944 30,448
Amortization of unearned compensation..................... 1,052 372 365
(Decrease) in doubtful accounts........................... (286) (152) (1,313)
Deferred income taxes..................................... (39,625) (6,984) 2,258
(Gain) loss on sale or disposal of vessels and other
property................................................ 522 (870) (11,153)
Amortization of deferred gain on sale of vessels.......... (1,426) (4,377) --
Equity in income of unconsolidated joint ventures in
excess of dividends received............................ (1,783) (2) (2,114)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable.............. (3,695) (5,596) 6,181
Decrease (increase) in prepaid expenses and other
current assets........................................ (957) (1,624) (416)
Increase (decrease) in advance time charter revenues and
other liabilities..................................... (2,442) (1,311) 1,223
Other assets and liabilities -- net..................... 114 222 406
(Decrease) increase in accounts payable................. (4,355) 2,777 (30,436)
(Decrease) increase in accrued expenses................. (3,684) -- --
(Decrease) increase in income taxes payable............. 4,046 -- --
Advances (from) to joint ventures -- net................ -- (150) (7,359)
-------- -------- --------
Net cash provided (used) by operating activities............ 15,529 8,279 (5,721)
-------- -------- --------
CASH FLOW PROVIDED (USED) BY INVESTING ACTIVITIES:
Additions to vessels and other property..................... (68,976) (58,470) (50,770)
Proceeds and interest received and reinvested in capital
construction fund......................................... (352) (661) (717)
Proceeds from sale of securities............................ -- -- 1,080
Net proceeds from sale of vessels........................... 850 78,972 76,808
Purchase of treasury stock.................................. (722) -- --
Cash distributed to UBC..................................... (12,601) -- --
Cash acquired in retirement of partner's equity interests in
joint ventures............................................ 4,855 32,301 4,813
Cash acquired with acquisition of MTL....................... 8,091 -- --
Payments for the retirement of minority stockholder's
interest.................................................. (2,600) (2,456) --
Other....................................................... -- (343) 775
-------- -------- --------
Net cash provided (used ) by investing activities........... (71,455) 49,343 31,989
-------- -------- --------
CASH FLOW PROVIDED (USED) BY FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt.................... 83,007 114,090 173,923
Payment of debt............................................. (45,775) (188,322) (259,556)
Payments for debt issue costs............................... -- (774) (1,853)
Vessel lease payments....................................... (5,869) -- --
Proceeds from the issuance of common stock.................. -- 1,996 76,526
Decrease in other assets.................................... 726 -- --
Increase in restricted cash................................. (174) (752) --
-------- -------- --------
Net cash provided (used) by financing activities............ 31,915 (73,762) (10,960)
-------- -------- --------
(Decrease) increase in unrestricted cash and cash
equivalents............................................... (24,011) (16,140) 15,308
Unrestricted cash and cash equivalents at beginning of
year...................................................... 31,737 47,877 32,569
-------- -------- --------
Unrestricted cash and cash equivalents at end of year....... $ 7,726 $ 31,737 $ 47,877
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 23
MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
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 the Company's
former foreign-flagged shipping businesses, and continues to operate those
businesses as OMI Corporation ("New OMI") under the Company's previous
management. A condensed summary of UBC's unaudited results of operations for the
years ended December 31, 1997 and 1996, and for the period from January 1, 1998
through June 17, 1998 and a condensed summary of the assets and liabilities of
UBC at June 17, 1998 and December 31, 1997 are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD FROM FOR THE YEARS ENDED
JANUARY 1, DECEMBER 31,
1998 THROUGH --------------------
JUNE 17, 1998 1997 1996
------------------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Results of Operations:
Revenues............................. $71,506 $141,985 $111,292
Operating income..................... 5,816 20,178 14,699
Net income........................... 44,333 16,922 3,693
</TABLE>
<TABLE>
<CAPTION>
JUNE 17, DECEMBER 31,
1998 1997
-------- ------------
<S> <C> <C>
Net Assets
Current assets..................................... $ 27,287 $ 49,520
Vessels and other property -- net.................. 393,155 343,028
Investments in and advances to joint ventures...... 29,876 27,810
Other non-current assets........................... 11,122 8,587
Goodwill........................................... 16,966 11,763
-------- --------
Total assets....................................... 478,406 440,708
Less:
Current liabilities................................ 77,001 21,062
Long-term debt..................................... 143,879 48,424
Other non-current liabilities...................... 2,992 87,664
-------- --------
Total liabilities.................................... 223,872 157,150
-------- --------
Shareholder's equity................................. $254,534 $283,558
======== ========
</TABLE>
Prior to 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 the
consideration described in Note 2 (the "Acquisition"). The Company is currently
managed by certain former officers and 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
consolidated financial statements include the results of UBC through June 17,
1998, and the results of MTL subsequent to June 17, 1998. Immediately following
the Acquisition and the Distribution, the Company completed a one-for-ten
reverse stock split. All share and per share amounts have been retroactively
restated to reflect the reverse stock split.
22
<PAGE> 24
MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. ACQUISITION AND DISTRIBUTION
As consideration for the Acquisition: (a) the Company issued common stock
of OMI Corp. with a market value of $5,000,000 to the shareholders of MTL; (b)
the Company issued a certain number of shares of newly-issued common stock to
the shareholders of MTL; and (c) shareholders of MTL became entitled to
additional shares of the Company's newly-issued common stock, to be determined
by the outcome of certain post-transaction calculations. The Acquisition was
valued at approximately $11,886,000 representing the Company's estimate of the
fair value of MTL at the date the transaction was completed plus the fair value
of additional shares issued as a purchase price adjustment for working capital
amounts in excess of pre-established levels per the Acquisition Agreement. The
Acquisition has been accounted for as a purchase.
The unaudited pro forma results of operations for the years ended December
31, 1998 and 1997, assuming consummation of the Acquisition and Distribution as
of January 1, 1997 are as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Revenues............................................... $126,942 $119,862
Vessel and voyage expense.............................. 120,528 119,502
General and administrative expense..................... 16,073 18,136
Loss before other income (expense), income taxes, and
cumulative effect of change in accounting
principle............................................ (9,659) (17,776)
Loss before cumulative effect of change in accounting
principle............................................ (8,564) (13,172)
Net loss............................................... $ (8,564) $ (9,437)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997
---------- ------------
<S> <C> <C>
Basic and diluted loss per common share:
Loss before cumulative effect of change in
accounting principle.............................. $(1.63) $(3.07)
Net loss............................................ $(1.63) $(2.20)
</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 assets
and liabilities of OMI Corp. with MTC and the foreign-related assets and
liabilities with New OMI. New OMI, however, assumed the obligations of the
Company with respect to the outstanding 10.25 percent senior notes due November
1, 2003 in exchange for a note in the amount of $6.4 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 their 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.
23
<PAGE> 25
MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 procedures for responding to tax audits and other matters. 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. The Tax Cooperation
Agreement, though valid between the parties thereto, 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 MTL based on working capital amounts, as
defined, as of the date of the closing as compared to certain pre-established
levels. In December 1998, MTC issued approximately 312,000 additional shares of
its common stock to former MTL shareholders pursuant to this provision.
On March 9, 1998, the Company paid $2,600,000 to acquire the remaining 9.29
percent interest in MTL Petrolink Corp. ("Petrolink", formerly OMI Petrolink
Corporation) to make it a wholly-owned subsidiary.
3. ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Marine
Transport Corporation and its majority-owned subsidiaries. All material
intercompany accounts and transactions have been eliminated. Investments in
subsidiaries and partnerships for which the Company owns more than 20% but less
than a majority interest are accounted for using the equity method.
RECLASSIFICATIONS OF PRIOR YEAR FINANCIAL STATEMENTS
Certain prior year balances have been reclassified to conform to the
current year presentation.
CASH EQUIVALENTS
The Company considers all highly-liquid financial instruments with a
maturity of three months or less when purchased to be cash equivalents.
Restricted cash represents cash advanced to the Company by certain customers
under agreements which restrict the use of such cash.
MARKETABLE SECURITIES AND CASH HELD IN CAPITAL CONSTRUCTION FUND
Marketable securities and cash held in capital construction fund are
restricted to provide for the replacement of vessels, additional vessels, or
improvement of vessels within strict guidelines established by the U.S. Maritime
Administration for use of these funds. Any withdrawals of funds for purposes
other than those permitted will result in a taxable event, equivalent to the
statutory tax rate (see Note 9).
VESSELS
Vessels are recorded at cost and depreciated on the straight-line method
over their estimated remaining useful lives to their estimated salvage values.
Expenditures for maintenance, and repairs are expensed. Major expenditures,
which are expected to extend useful lives or reduce future operating expenses,
are capitalized. Salvage value is based upon a vessel's lightweight tonnage
multiplied by an estimated scrap value per ton.
Interest costs incurred during the construction of vessels (until the
vessel is substantially complete and ready for its intended use) are
capitalized. Interest capitalized was $1,721,000 in 1998, $2,207,000 in 1997 and
$71,000 in 1996.
24
<PAGE> 26
MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CHANGE IN METHOD OF ACCOUNTING FOR DRYDOCKING
Drydocking inspections are required every two to three years for insurance
and regulatory purposes to demonstrate that a vessel meets standards established
by the U.S. Coast Guard and the American Bureau of Shipping. Effective January
1, 1997 the Company changed its method of accounting for special survey and
drydock expenses from the accrual method to the deferral method. Special survey
and drydock expenses had been accrued and charged to operating expenses over the
vessel's survey cycle, which is generally a two to three year period. Under the
deferral method, survey and drydock expenses are capitalized and amortized over
the period until the next survey cycle. 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 as of January 1, 1997 is shown separately in the 1997
consolidated statement of operations and resulted in income of $13,797,000 (net
of income tax expense of $7,429,000), or $3.21 per share.
The cumulative effect of this change in accounting principle as of January
1, 1997 on the Company's balance sheet was to increase total assets by
$11,318,000, decrease total liabilities by $2,479,000 and increase total
shareholder's equity by $13,797,000.
Assuming the deferral method had been applied retroactively, pro forma
income before extraordinary loss and net loss for the year ended December 31,
1996 would have been $224,000, or $0.10 per basic and diluted share, and
$(2,548,000), or $(0.80) per basic and diluted share, respectively.
COMPUTERS, FURNITURE, AND LEASEHOLD IMPROVEMENTS
Computers and furniture are recorded at cost and depreciated on the
straight-line method over their estimated useful lives. Leasehold improvements
are recorded at cost and are amortized on the straight-line method over the
shorter of their estimated useful lives or lease term.
GOODWILL
Goodwill recognized in the Acquisition is being amortized over 20 years
using the straight-line method. At December 31, 1998, goodwill is net of
accumulated amortization of $321,000.
Included in goodwill at December 31, 1997, was $16,966,000 net of
accumulated amortization of $5,203,000, which was distributed with UBC.
ASSET IMPAIRMENT
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121"),
which requires impairment losses to be recorded on long-lived assets when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. The
Company adopted SFAS 121 effective January 1, 1995.
REVENUE AND EXPENSE RECOGNITION
Voyage and charter revenues and expenses are recognized ratably over the
duration of the voyages and the lives of the charters. Estimated losses are
provided at the time such losses become evident.
STOCK-BASED COMPENSATION
As permitted by Statement of Financial Accounting Standard No. 123 ("SFAS
123"), "Accounting for Stock Based Compensation", the Company has chosen to
continue to account for stock-based compensation
25
<PAGE> 27
MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
arrangements using the intrinsic value method prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees".
EARNINGS (LOSS) PER COMMON SHARE
In 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per Share", which
the Company adopted for both interim and annual reports. SFAS 128 specifies the
computation, presentation, and disclosure requirements for earnings per share
("EPS"). It replaces the presentation of primary and fully diluted EPS with
basic and diluted EPS. Basic EPS excludes the dilutive effect of stock options.
It is based upon the weighted average number of common shares outstanding during
the period. Diluted EPS reflects the potential dilution that would occur if
securities or other contracts to issue common stock were exercised or converted
into common stock.
Basic income (loss) per common share is based on 5,241,000, 4,291,000, and
3,344,000 weighted average number of common shares outstanding during 1998, 1997
and 1996, respectively. Diluted income (loss) per share, which gives effect to
the assumed exercise of dilutive stock options using the treasury stock method,
is based on 5,241,000, 4,291,000, and 3,389,000 weighted average number of
shares during 1998, 1997, and 1996, respectively. Options have not been included
in the computation of diluted income (loss) per share except in 1996 since their
effect thereon would be anti-dilutive.
INTEREST RATE SWAP AGREEMENTS
Amounts receivable or payable under interest rate swaps (designated as
hedges against increases in interest rates associated with certain existing debt
obligations) are accrued and reflected as adjustments of interest expense. Any
gain or loss realized upon the early termination of an interest rate swap is
recognized as an adjustment of interest expense over the remaining term of the
hedged debt.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and the
accompanying notes. Actual results could differ from those estimates.
NEWLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). The Company expects to adopt SFAS 133
effective January 1, 2000. SFAS 133 will require the Company to recognize all
derivatives on the balance sheet at fair value. The Company does not believe
that the adoption of SFAS 133 will have a significant effect on its results of
operations or financial position.
4. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
Prior to the Distribution (see Note 1), the Company had investments in
certain shipping joint ventures with ownership interests ranging from 25 percent
to 50 percent. A condensed summary of the results of operations of these joint
ventures for the years ended December 31, 1997 and 1996, and for the period from
26
<PAGE> 28
MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
January 1, 1998 through the date of the Distribution, and a condensed summary of
the combined assets and liabilities at December 31, 1997, is as follows (in
thousands):
<TABLE>
<CAPTION>
FOR THE PERIOD FROM FOR THE YEARS ENDED
JANUARY 1, DECEMBER 31,
1998 THROUGH --------------------
JUNE 17, 1998 1997 1996
------------------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Results of Operations:
Revenues....................................... $28,893 $41,804 $94,938
Operating income............................... 4,878 10,762 13,446
(Loss) gain on disposal of assets -- net....... -- (8,765) (254)
Cumulative effect of change in accounting
principle.................................... -- 1,196 --
Net income..................................... 3,940 2,502 6,187
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
<S> <C>
Net Assets
Current assets............................................ $ 21,757
Vessels and other property -- net......................... 75,382
Other assets.............................................. 3,091
--------
Total assets................................................ 100,230
Less:
Current liabilities....................................... 9,184
Long-term debt............................................ 37,159
Other liabilities......................................... 191
--------
Total liabilities........................................... 46,534
========
Shareholder's and partners equity........................... $ 53,696
========
</TABLE>
During 1996, an unrelated party's interest in one of the joint ventures was
reacquired by the venture for net assets with a book value of $46,449,000
consisting of one vessel, a vessel under construction, cash and other assets,
long-term debt of $27,340,000, and certain other liabilities. As a result, the
affiliate became a 100 percent owned subsidiary of the Company. The excess of
the carrying value of net assets transferred to the third party over the book
value of its equity interest in the venture was charged to capital surplus in
1996 and 1997.
In September 1997, one of the joint ventures sold a vessel to one of its
joint venture partners (the majority shareholder) at a loss, of which the
Company's proportionate share was $5,244,000. On December 10, 1997, the joint
venture acquired that shareholder's interest in the venture for cash of
$32,332,000 and 50.1 percent of the stock in one of its subsidiaries, with a
book value of $3,501,535, and the joint venture became a 100 percent owned
subsidiary of the Company.
From January 1, 1996 to August 14, 1996, the Company chartered three
vessels to one of its joint ventures for $15,814,000. This amount is included in
revenues of the Company as the operations of the joint venture were not
consolidated.
During 1997 and 1996, the Company received dividends from one of its joint
ventures of $735,000 and $368,000, respectively.
At the time of the Acquisition, MTL held a 50 percent interest in Marine
Car Carriers, Inc. (M.I.), ("MCCMI") which MTL accounted for under the equity
method through November 12, 1998, at which time MCCMI redeemed the common stock
from the other 50 percent owners
27
<PAGE> 29
MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
for its respective book value (approximately $8,109,000). Equity in the net
income of MCCMI from June 18, 1998 through November 12, 1998 (the date at which
MCCMI became a wholly owned subsidiary of the Company) were approximately
$519,000.
5. DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1997
------- --------
(IN THOUSANDS)
<S> <C> <C>
Term loan............................................... $18,740 $ --
Mortgage notes.......................................... -- 53,999
Revolving credit facility............................... 1,800 --
Loans under bank credit agreements...................... -- 99,090
10.25% unsecured senior notes due 2003.................. -- 6,827
Subordinated debt due to New OMI........................ 6,268 --
7% convertible note due 2004............................ -- 3,000
Promissory note due to New OMI.......................... 337 --
------- --------
Total debt.............................................. 27,145 162,916
Less current portion.................................... 3,034 16,575
------- --------
Long-term portion....................................... $24,111 $146,341
======= ========
</TABLE>
All debt at December 31, 1998 was created or amended concurrently with the
Acquisition. The term loan and revolving credit facilities of the Company accrue
interest at a floating rate based on LIBOR plus a margin determined by certain
financial ratios (spreads at December 31, 1998 ranged from 1.25% to 2.25%). The
Company pays a commitment fee each quarter on the unused and available portion
of the revolving credit facilities. At December 31, 1998, the available
revolving credit facility totaled $3 million, of which $1.2 million was unused.
The subordinated debt bears interest at a fixed dollar amount payable
semi-annually over the term of the note resulting in an average annual interest
rate of 12.71 percent per annum. The principal is payable in semi-annual
installments of $175,000 through May 1, 2003 and a final installment of
$4,693,000 on November 1, 2003. The promissory note bears interest at 8 percent
per annum and is payable in semi-annual installments of principal and interest
equal to approximately $37,000 through May 1, 2003.
The Company uses interest rate swap agreements to manage interest costs and
the risk associated with changing interest rates. At December 31, 1998, the
Company had outstanding an interest rate swap, with a notional amount of
$19,453,993, which fixed the interest rate on the Company's term loans at 4.75
percent for a three-year period. At December 31, 1997, the Company had
outstanding interest rate swap agreements, covering notional amounts of
$32,700,000, which converted its exposure on floating rate loans to a fixed rate
of 8.475 percent.
The term loan is payable in eighteen quarterly installments through June
18, 2003; the first and second installments total $522,605 and $424,564,
respectively; the next fifteen installments total $830,814 each; and the final
installment totals $5,330,805. The revolving credit facility reduces to
$2,000,000 on June 18, 2001 and expires completely on June 18, 2003.
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
28
<PAGE> 30
MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
In January 1996, the Company repurchased $14,050,000 of its outstanding
notes. On July 12, 1996, the Company completed its cash tender offer for the
purchase, at par, of its outstanding notes. Of the $136,950,000 outstanding
aggregate amount of its notes, $130,123,000 were tendered for payment pursuant
to the offer and $6,827,000 remained outstanding. An extraordinary loss of
$2,772,000 (net of an income tax benefit of $1,493,000) or $.90 per share was
recorded for the early extinguishment of debt.
At December 31, 1998, scheduled debt maturities are as follows (in
thousands):
<TABLE>
<S> <C>
1999..................................................... $ 3,034
2000..................................................... 3,748
2001..................................................... 3,748
2002..................................................... 4,548
2003..................................................... 12,067
-------
Total.................................................... $27,145
=======
</TABLE>
During the years ended December 31, 1998, 1997 and 1996, the Company paid
interest of approximately $8,478,000, $16,423,000 and $23,791,000, respectively.
At December 31, 1998 and 1997 accrued interest of $153,000 and $1,528,000,
respectively is included in accrued liabilities.
In connection with the 1997 sale and leaseback of the vessel MARINE
COLUMBIA, the Company has unconditionally guaranteed the charter payments as
primary obligor. Minimum charter payments to be made subsequent to December 31,
1998 are:
<TABLE>
<S> <C>
1999.................................................. $ 9,408,994
2000.................................................. 9,400,005
2001.................................................. 6,400,377
2002.................................................. 11,179,708
-----------
$36,389,084
===========
</TABLE>
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments are as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------
1998 1997
-------------------- ----------------------
CARRYING FAIR CARRYING FAIR
VALUES VALUES VALUES VALUES
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Financial assets (liabilities):
Cash and cash equivalents..................... $ 8,652 $ 8,652 $ 32,489 $ 32,489
Capital construction fund..................... $ 4,069 $ 4,069 $ 10,969 $ 10,969
Debt obligations.............................. $(27,145) $(26,790) $(162,916) $(163,903)
Unrecognized financial instruments:
Interest rate swaps........................... -- -- -- $ (1,058)
</TABLE>
The fair value of long-term debt obligations is estimated based on the
current rates offered to the Company for similar debt of the same remaining
maturities. The fair value of interest rate swaps (used for purposes other than
trading) is the estimated amount the Company would receive or pay to terminate
swap agreements at the reporting date, taking into account current interest
rates and the current credit-worthiness of
29
<PAGE> 31
MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the swap counterparties. Because of the recent issuance of the interest-rate
swap, management estimates that the Company could terminate the instrument
without cost.
Securities available-for-sale included in marketable securities and cash
held in capital construction fund consist of the following components (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------
1998 1997
---------------------- ----------------------
CARRYING UNREALIZED CARRYING UNREALIZED
VALUE LOSS VALUE LOSS
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Capital construction fund:
Cash equivalents................................ $3,118 $ 299
Preferred stocks................................ 951 $(69) 3,070 $(33)
Time deposit.................................... -- 7,600
------ ---- ------- ----
Total............................................. $4,069 (69) $10,969 (33)
====== =======
Deferred income taxes............................. 18 11
---- ----
Unrealized loss on security -- net................ $(51) $(22)
==== ====
</TABLE>
7. DEFERRED GAIN ON SALE AND LEASEBACK
On January 31, 1997, the Company sold the vessel MARINE COLUMBIA for
$40,000,000 in cash and a note receivable of $9,000,000 that bears interest at
8.172 percent and leased it back under a time charter agreement terminating
December 31, 2002. The Company has the option to purchase the vessel for
$9,500,000 at or before the expiration of the lease. The gain on the sale of
$24,700,000 has been deferred and is being credited to income as an adjustment
to operating lease expense over the term of the lease.
On June 4, 1997, Marine Car Carriers, Inc. (M.I.) ("MCCMI"), then a fifty
percent owned subsidiary of MTL, sold its only vessel, the MARINE RELIANCE, for
$18,900,000. Under the terms of the sale agreement, MCCMI had the option to
lease back the vessel for a four year period. MCCMI exercised the option on June
21, 1997. The Company has deferred the gain ($2,690,000) on the sale transaction
and it is being credited to income over four years.
8. LEASES
OPERATING LEASES
Certain vessels are chartered out according to non-cancelable agreements
accounted for as operating leases. The future minimum revenues to be received
subsequent to December 31, 1998 on the chartered-out vessels are as follows (in
thousands):
<TABLE>
<S> <C>
1999..................................................... $25,919
2000..................................................... 26,546
2001..................................................... 23,936
2002..................................................... 21,377
-------
$97,778
=======
</TABLE>
Certain vessels are chartered in according to non-cancelable agreements
accounted for as operating leases. In addition, the Company leases office
facilities under long-term agreements. The future minimum
30
<PAGE> 32
MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
payments to be made subsequent to December 31, 1998 on the chartered-in vessels
and office leases are as follows (in thousands):
<TABLE>
<S> <C>
1999..................................................... $38,343
2000..................................................... 25,393
2001..................................................... 10,892
2002..................................................... 11,626
2003..................................................... 38
-------
$86,292
=======
</TABLE>
The office lease also requires the Company to make additional payments
based on various escalation clauses relating to increases in maintenance costs
or changes in the consumer price index. Charter and rental expense amounted to
approximately $49,793,000, $58,927,000 and $39,899,000 for the years ended
December 31, 1998, 1997 and 1996, respectively.
9. INCOME TAXES
A summary of the components of the benefit (provision) for income taxes on
income excluding the cumulative effect in accounting principle and the
extraordinary loss is as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Current (provision)................................... $(5,550) $(6,804) $ (13)
Deferred tax benefit (provision)...................... 45,535 6,984 (2,258)
------- ------- -------
Benefit (provision) for income taxes.................. $39,985 $ 180 $(2,271)
======= ======= =======
</TABLE>
The benefit (provision) for income taxes varies from the statutory rates
due to the following (in thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Benefit (provision) at statutory rate................. $ 2,420 $ 1,103 $(2,961)
Minority interest in (income) loss of subsidiary...... -- (61) (679)
Equity in (loss) income of unconsolidated joint
ventures net of dividends declared.................. 823 (1,114) 1,148
Decrease (increase) in valuation allowance............ -- -- 525
Net deferred tax liability no longer required as a
result of the Distribution.......................... 38,857 -- --
Non-qualified capital construction fund withdrawal.... (1,851) -- --
Other................................................. (264) 252 (304)
------- ------- -------
Benefit (provision) for income taxes.................. $39,985 $ 180 $(2,271)
======= ======= =======
</TABLE>
31
<PAGE> 33
MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of deferred income taxes relate to the tax effects of
temporary differences as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------
1998 1997
-------- --------
<S> <C> <C>
Deferred tax liabilities:
Difference between book and tax basis in assets........... $17,767 $50,843
Marketable securities and cash held in capital
construction fund...................................... 1,424 3,839
Previously excluded foreign income........................ 1,614 8,105
Vessel drydocking costs................................... 2,600 2,980
------- -------
Total deferred tax liability................................ 23,405 65,767
------- -------
Deferred tax assets:
Unrealized losses on investments.......................... -- (1,673)
Deferred foreign deficits................................. -- (117)
Difference between book and tax basis of investments in
certain unconsolidated joint ventures.................. -- 488
Other..................................................... (503) (201)
------- -------
Total deferred tax assets................................... (503) (1,503)
------- -------
Deferred income taxes....................................... $22,902 $64,264
======= =======
</TABLE>
The Distribution resulted in payment of Federal income taxes of
approximately $3,000,000 on previously excluded foreign ("Subpart F") income and
on the distribution of shares to non-U.S. shareholders. The remaining balance of
deferred income taxes applicable to foreign operations of approximately
$41,000,000 was credited to income.
10. SHAREHOLDERS' EQUITY
The Company has reserved the right to issue up to 650,000 shares of its
common stock for the establishment of stock option, stock appreciation rights
and restricted stock plans for employees.
Accumulated other comprehensive (loss) at December 31, 1998 is $(51,000),
which is comprised of a December 31, 1996 opening balance of $4,868,000, a 1998
and 1997 unrealized loss (gain) on marketable securities of $(29,000) and
$22,000, respectively, and a cumulative foreign currency translation adjustment
of $4,912,000.
11. PENSION PLANS
Prior to the Acquisition and the Distribution, the Company maintained the
OMI Corp. Savings Plan (the "OMI Plan") for salaried employees as a defined
contribution plan. The OMI Plan permitted employees to contribute a specified
percentage of their salary under Section 401(k) of the Internal Revenue Code. In
1997 and 1996, the Company allowed employees to make contributions of up to ten
percent of their annual salaries with the Company matching up to the first six
percent in 1997 and three percent in 1996. From January 1, 1998 to June 18,
1998, the Company allowed employees to make contributions of up to ten percent
of their annual salaries with the Company matching up to the first six percent.
After the Acquisition and Distribution, the Company chose not to adopt the OMI
Plan and made its employees eligible to participate in the Marine Transport
Lines, Inc. Salaried Employees Retirement Income Plan (the "MTL Plan"). Under
the MTL Plan, the Company's minimum annual contribution expense after June 17,
1998 was equal to 3 percent of all individual gross wages not exceeding
$160,000. All salaried employees were eligible for the contribution. The
Company's expense for the years ended December 31, 1998, 1997 and 1996 was
$411,000, $528,000, and $511,000, respectively.
32
<PAGE> 34
MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pursuant to collective bargaining agreements with labor unions representing
seagoing personnel, contributions are also made to various defined benefit and
defined contribution pension and welfare plans, including some multi-employer
plans, in accordance with their terms. Pension expense for all plans covered by
collective bargaining agreements for the years ended December 31, 1998, 1997 and
1996 was approximately $77,961, $200,000 and $531,000, respectively.
The Company also administers, for the benefit of certain seagoing
personnel: a) a defined contribution individual account plan which permits
employees to contribute a specified percentage of their salary under Section
401(k) of the Internal Revenue Code; and b) a money purchase plan. The Company
makes no contributions to the 401(k) plan and contributes to the money purchase
plan in accordance with a contribution formula.
12. STOCK OPTION AND RESTRICTED STOCK PLANS
Prior to June 17, 1998, the Company had five option plans: the 1995 Equity
Incentive Plan (the "1995 Plan"), the 1995 Stock Option Plan for Non-Employee
Directors (the "Directors Plan"), the 1990 Equity Incentive Plan (the "1990
Plan"), the 1986 Non-Qualified Option Plan, and the 1984 Incentive Stock Option
Plan. The plans were terminated upon the Acquisition and Distribution.
The total number of shares that could have been optioned or awarded under
the 1995 Plan was 100,000 shares. No further options could be granted under the
1990 Plan; 43,200 shares were reserved with respect to options granted under
this plan. The 1986 Non-Qualified Stock Option Plan provided for the granting of
up to 50,000 shares. No options could be granted under this plan after April 3,
1996.
Under the 1995 Plan, the Company could grant incentive and non-qualified
stock options, stock appreciation rights ("SARs") and restricted shares. SARs
entitled a recipient the alternative of electing to cancel the related stock
option and to instead receive an amount in cash, stock or a combination of cash
and stock equal to the difference between the option price and the market price
of the Company's stock on the date on which the SARs are exercised. Under all
plans, the option price per share could not be less than the fair market value
of a share at the date of grant.
In 1997 and for the period from January 1, 1998 through June 17, 1998, no
options were awarded. During 1996, the Company awarded options to acquire an
aggregate of 1,000 shares. The options granted were non-qualified stock options
and vested equally over a three-year period from the date of grant. No SARs were
issued in 1996, 1997, or for the period from January 1, 1998 through June 17,
1998. In September 1997, in anticipation of the Acquisition and Distribution,
the Board of Directors amended the 1995 plan to provide immediate vesting of all
outstanding options. During 1997, the Company awarded 5,000 restricted shares
under the 1995 Plan. The restrictions on these shares awarded lapse equally over
a five year period.
The total number of shares that could be optioned under the Directors Plan
was 30,000 shares. Prior to 1996, the Company awarded options to acquire an
aggregate of 15,000 shares under this Plan. Each option permitted the
non-employee director, for a period of up to ten years from the date of grant,
to purchase from the Company 3,000 shares. Options were exercisable equally over
a three year period. The initial option exercise price could not be less than
the fair market value at the date of grant. The option exercise price with
respect to the shares which were exercisable on the second and third anniversary
of the date of grant increased by 15% and 30% respectively, over the initial
option exercise price.
Proceeds received from the exercise of the options are credited to the
capital accounts. Compensation expense relating to SARs is recorded with respect
to the rights based upon the quoted market value of the shares and exercise
provisions. Benefits to net income relating to SARs and/or options for the years
ended December 31, 1996 was $43,000. There was no effect on net income in 1998
or 1997.
Following the Acquisition and the Distribution, the OMI Board of Directors,
at the request of the Compensation Committee of MTC's Board of Directors adopted
the 1998 Stock Option Plan for Non-
33
<PAGE> 35
MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Employee Directors (the "1998 Directors Plan"). The 1998 Directors Plan
authorizes the Company to grant options to purchase 7,500 shares of MTC common
stock automatically to each eligible non-employee director of MTC. Up to 100,000
shares of MTC common stock have been reserved for issuance pursuant to the 1998
Directors Plan.
Following the Acquisition and the Distribution, the OMI Board of Directors,
at the request of the Compensation Committee of MTC's Board of Directors adopted
the 1998 Incentive Equity Plan. (the "1998 Incentive Plan"). The 1998 Incentive
Plan authorizes the Company to grant to its employees qualified stock options,
stock appreciation rights in tandem with such options, and restricted stock or
bonuses payable in stock for up to 550,000 shares of MTC common stock.
Effective June 18, 1998, the Company awarded options to acquire a total of
52,500 shares under the 1998 Directors Plan at a strike price of $4.61, equal to
the average closing price of the Company's common stock for the 10-day trading
period commencing on June 18, 1998. Each option permits the non-employee
director to purchase shares of the Company's common stock for a period of up to
ten years from the date of grant.
On June 29, 1998, the Company awarded options to employees to acquire total
of 282,500 shares under the 1998 Incentive Plan at a strike price of $4.61,
equal to the average closing price of the Company's common stock for the 10-day
trading period commencing on June 18, 1998. On December 1, 1998 the strike price
for such options was reduced to $2.50 for all options except for certain options
awarded to management executives. Each option permits employees to purchase
shares of the Company's common stock for a period of up to ten years from the
date of grant.
A summary of the changes in shares under option for all plans is as follows
(retroactively restated to reflect the one-for-ten reverse stock split):
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF RANGE OF OPTION
OPTIONS OPTIONS PRICES PRICE
--------- ----------------- --------
<S> <C> <C> <C>
Outstanding at December 31, 1995............. 136,200 $ 42.50 to $98.75 $60.40
Granted.................................... 1,000 75.00 75.00
Exercised.................................. (15,000) 42.50 to 63.10 51.60
Forfeited.................................. (4,600) 63.10 to 98.75 66.40
-------
Outstanding at December 31, 1996............. 117,600 45.00 to 98.75 62.30
Exercised.................................. (32,500) 45.00 to 98.75 61.50
Forfeited.................................. (4,000) 63.10 to 98.75 83.00
-------
Outstanding at December 31, 1997............. 81,100 45.00 to 98.75 61.60
Granted.................................... 335,000 2.50 to 4.613 2.83
Exercised.................................. (5,000) 45.00 to 98.75 48.60
Terminated................................. (76,100) 45.00 to 98.75 61.60
-------
Outstanding at December 31, 1998............. 335,000 $ 2.50 to $ 4.613 $ 2.83
=======
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25 and related
Interpretations in accounting for its stock option plans. Accordingly, no
compensation cost has been recognized for its stock option plans. Had
compensation cost for the Company's stock option plans have been determined
based on the fair value at the grant dates for awards under those plans
consistent with the methods recommended by
34
<PAGE> 36
MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SFAS 123, the Company's net income and net income per share for the years ended
December 31, 1998, 1997 and 1996 would have been stated at the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- ------
<S> <C> <C> <C>
Net income
As reported.......................................... $33,072 $10,827 $3,417
Pro forma............................................ $32,951 $10,547 $2,942
Basic and diluted income per common share:
As reported.......................................... $ 6.31 $ 2.52 $ 1.01
Pro forma............................................ $ 6.29 $ 2.46 $ 0.88
</TABLE>
The fair value of these options was estimated at the date of grant using
the using the Black-Scholes model with the following assumptions:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Expected dividend yield..................................... 0 0 0
Expected stock price volatility............................. 100% 36% 36%
Risk-free interest rate..................................... 5.5% n/a 5.5%
Expected life of options in years........................... 4 5 5
</TABLE>
13. COMMITMENTS AND CONTINGENCIES
The Company is a party to a number of litigation and arbitration
proceedings arising from its operations. Such actions are covered by insurance
or, in the opinion of management are of such a nature that the ultimate
liability, if any, would not have a material adverse effect on the operations or
financial position of the Company.
In February 1999, the Company paid $1 million in full settlement of an
income tax indemnity claim by a subsidiary of The Fuji Bank and Trust Company
(the "Bank") in connection with an earlier transaction between a subsidiary of
the Company and the Bank. The settlement amount has been reflected in the
accompanying consolidated financial statements as an adjustment of the purchase
price of MTL, and is included in accrued liabilities at December 31, 1998.
14. FINANCIAL INFORMATION RELATING TO SEGMENTS
The Company has three operating segments:
Ship Management ("Management") -- Technical management of vessels owned by
others, including vessels of the U.S. Maritime Administration ("MARAD").
Transportation Services for Energy and Chemicals ("Energy and
Chemicals") -- Owned and chartered-in U.S.-based vessels operating under time
and voyage charters with customers which are primarily chemical and
oil-production companies.
35
<PAGE> 37
MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Foreign owned and chartered-in vessels in foreign trades operating
short-term and long-term shipping services for third parties. The foreign
segment was distributed to shareholders in June 1998 (see Note 1).
<TABLE>
<CAPTION>
ENERGY AND
MANAGEMENT CHEMICALS FOREIGN TOTAL
---------- ---------- -------- ---------
<S> <C> <C> <C> <C>
1998
Total revenues............................... $12,722 $100,552 $ 71,504 $ 184,778
Vessel and voyage expenses................... (8,729) (89,110) (54,091) (151,930)
Depreciation expense......................... (1,315) (10,466) (10,626) (22,407)
------- -------- -------- ---------
Segment profit............................... $ 2,678 $ 976 $ 6,787 10,441
======= ======== ========
General and administrative expenses.......... (16,396)
Interest expense, net........................ (3,849)
Other income................................. 538
Equity in income of unconsolidated joint
ventures................................... 2,353
---------
Consolidated loss before income taxes........ $ (6,913)
=========
Total assets................................. $ 1,888 $ 84,512 $ -- $ 86,400
======= ======== ======== =========
Expenditures on long-lived assets............ $ -- $ 644 $ -- $ 644
======= ======== ======== =========
1997
Total revenues............................... $ 6,568 $ 82,986 $141,986 $ 231,540
Vessel and voyage expenses................... (3,735) (84,281) (86,347) (174,363)
Depreciation expense......................... (987) (5,282) (22,675) (28,944)
------- -------- -------- ---------
Segment profit............................... $ 1,846 $ (6,577) $ 33,078 28,233
======= ======== ========
General and administrative expenses.......... (23,998)
Interest expense, net........................ (8,992)
Other income................................. 870
Equity in income of unconsolidated joint
ventures................................... 737
---------
Consolidated loss before income taxes and
cumulative effect of change in
accounting principle.................... $ (3,150)
=========
Total assets................................. $ -- $ 94,944 $412,674 $ 507,618
======= ======== ======== =========
Investments in equity investees.............. $ -- $ 345 $ 27,810 $ 28,155
======= ======== ======== =========
Expenditures on long-lived assets............ $ -- $ 3,185 $ 55,285 $ 58,470
======= ======== ======== =========
</TABLE>
36
<PAGE> 38
MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
ENERGY AND
MANAGEMENT CHEMICALS FOREIGN TOTAL
---------- ---------- -------- ---------
<S> <C> <C> <C> <C>
1996
Total revenues............................... $ 6,386 $118,126 $108,110 $ 232,622
Vessel and voyage expenses................... (4,767) (92,336) (70,156) (167,259)
Depreciation expense......................... -- (13,004) (17,444) (30,448)
------- -------- -------- ---------
Segment profit............................... $ 1,619 $ 12,786 $ 20,510 34,915
======= ======== ========
General and administrative expenses.......... (16,438)
Interest expense, net........................ (23,652)
Other income................................. 11,153
Equity in income of unconsolidated joint
ventures................................... 2,482
---------
Consolidated income before income taxes and
extraordinary item......................... $ 8,460
=========
Total assets................................. $ -- $104,138 $437,861 $ 541,999
======= ======== ======== =========
Investment in equity investees............... $ -- $ (85) $ 59,407 $ 59,322
======= ======== ======== =========
Expenditures on long-lived assets............ $ -- $ 38,168 $ 12,602 $ 50,770
======= ======== ======== =========
</TABLE>
Reconciliations of total assets of the segments to amounts included in the
consolidated balance sheets follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Total assets of all segments....................... $ 86,400 $507,618 $541,999
Marketable securities and cash held in capital
construction fund................................ 4,069 10,969 10,283
Other unallocated assets........................... 16,001 -- --
-------- -------- --------
Consolidated total assets.......................... $106,470 $518,587 $552,282
======== ======== ========
</TABLE>
In 1997, revenues from one customer accounted for approximately 11 percent
of voyage revenues. There were no charterers that were considered to be major
customers in the year ending December 31, 1998 or 1996.
15. SUBSEQUENT EVENTS
On January 7, 1999, the Company entered into an agreement to terminate its
time charter with Hydro Agri Ammonia, Inc ("Hydro") for the vessel Amelina. Upon
termination of the charter agreement, rights to the vessel were transferred to
Hydro in exchange for a deemed residual interest in the vessel with an assigned
value of $100,000. There will be no gain or loss on the transaction.
37
<PAGE> 39
MARINE TRANSPORT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SUPPLEMENTARY DATA
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1998 QUARTER ENDED 1997 QUARTER ENDED
-------------------------------------- --------------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31
------- ------- -------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.......................... $62,537 $54,381 $30,428 $37,432 $59,156 $55,610 $54,618 $62,156
Operating income (loss)........... 3,212 (6,027) (4,099) 959 3,438 2,738 878 (2,819)
Cumulative effect of change in
accounting principle, net of
income tax provision............ -- -- -- -- 13,797 -- -- --
Net income (loss)................. $ 2,245 $33,016 $(2,787) $ 598 $15,337 $ 2,410 $(4,931) $(1,989)
======= ======= ======= ======= ======= ======= ======= =======
Basic earnings (loss) per common
share:
Net income (loss) before
extraordinary loss and
cumulative effect of change in
accounting principle.......... $ 0.52 $ 7.20 $ (0.46) $ 0.10 $ 0.36 $ 0.56 $ (1.15) $ (0.46)
Cumulative effect of change in
accounting principle, net of
income tax provision.......... -- -- -- -- 3.23 -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss) per common
share(1)........................ $ 0.52 $ 7.20 $ (0.46) $ 0.10 $ 3.59 $ 0.56 $ (1.15) $ (0.46)
======= ======= ======= ======= ======= ======= ======= =======
Weighted average number of shares
of common stock
outstanding -- basic............ 4,307 4,583 6,049 5,995 4,278 4,286 4,296 4,306
======= ======= ======= ======= ======= ======= ======= =======
Diluted earnings (loss) per common
share:
Net income (loss) before
extraordinary loss and
cumulative effect of change in
accounting principle(1)....... $ 0.52 $ 7.20 $ (0.46) $ 0.10 $ 0.35 $ 0.55 $ (1.15) $ (0.46)
Cumulative effect of change in
accounting principle, net of
income tax provision.......... -- -- -- -- 3.17 -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss) per common
share(1)........................ $ 0.52 $ 7.20 $ (0.46) $ 0.10 $ 3.53 $ 0.55 $ (1.15) $ (0.46)
======= ======= ======= ======= ======= ======= ======= =======
Weighted average number of shares
of common stock outstanding --
diluted......................... 4,307 4,583 6,049 5,995 4,347 4,349 4,296 4,307
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
- ---------------
(1) Earnings per share are based on stand-alone quarters.
38
<PAGE> 40
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
At the annual shareholders meeting held on June 15, 1998, the Company's
shareholders voted to appoint Ernst & Young as the independent accountants of
the Company. The Company's previous accountants, Deloitte & Touche, resigned in
connection with the Distribution of the Company's international businesses and
Deloitte & Touche became the independent accountants for the separate
international business, OMI Corporation. In the past two years there were no
disagreements with either auditors on accounting and financial disclosure, and
there have been no reports from auditors which have been qualified or modified
as to uncertainty, audit scope, or accounting principles, nor has there been an
adverse opinion or a disclaimer of opinion.
PART III
ITEM 10. MANAGEMENT
Pursuant to General Instruction G(3) the information called for by this
item is hereby incorporated by reference from Marine Transport Corporation's
1999 Proxy Statement to be filed with the Securities and Exchange Commission.
Information with respect to the Company's executive officers as of March
15, 1999 follows:
<TABLE>
<CAPTION>
YEAR
APPOINTED
NAME AGE POSITION TO OFFICE
- ---- --- -------- ---------
<S> <C> <C> <C>
Richard T. du Moulin.......... 52 Chief Executive Officer and June 1998
President
Mark L. Filanowski............ 44 Senior Vice President, Chief June 1998
Financial Officer and Treasurer
Peter N. Popov................ 47 Vice President, General Counsel June 1998
and Secretary
Jeffrey M. Miller............. 44 Vice President Marketing June 1998
</TABLE>
Richard T. du Moulin became Chief Executive Officer and President of the
Company in June 1998. Mr. du Moulin was Chief Executive Officer of Marine
Transport Lines, Inc., from 1989 until it was purchased by the Company in June
1998.
Mark L. Filanowski became Senior Vice President, Chief Financial Officer
and Treasurer in June 1998. From 1989 to June 1998 Mr. Filanowski held similar
positions at Marine Transport Lines, Inc.
Peter N. Popov became Vice President, General Counsel and Secretary in June
1998. From 1989 to June 1998 Mr. Popov was General Counsel at Marine Transport
Lines, Inc.
Jeffrey M. Miller became Vice President Marketing in June 1998. From 1994
to June 1998 Mr. Miller was employed by Marine Transport Lines, Inc. in a
similar capacity.
There is no family relationship by blood, marriage or adoption between any
of the above individuals and any executive officer or MTC director. The term of
office of each of the above individuals is determined by contractual
relationship between the Company and the individuals. The contracts have one
year terms. There is no other arrangement or understanding between the above
individuals and any other person pursuant to which they have been or will be
selected as a director or nominee.
ITEM 11. EXECUTIVE COMPENSATION
Pursuant to General Instruction G(3) the information called for by this
item is hereby incorporated by reference from Marine Transport Corporation's
1999 Proxy Statement to be filed with the Securities and Exchange Commission.
39
<PAGE> 41
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Pursuant to General Instruction G(3) the information called for by this
item is hereby incorporated by reference from Marine Transport Corporation's
1999 Proxy Statement to be filed with the Securities and Exchange Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G(3) the information called for by this
item is hereby incorporated by reference from Marine Transport Corporation's
1999 Proxy Statement to be filed with the Securities and Exchange Commission.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) and (2) Financial Statements and Schedules are presented in Item 8
of this report.
(a)(3) List of Exhibits (separate page)
(b) There were no reports on Form 8-K filed during the fourth quarter of
1998.
(c) Exhibits are filed as a separate section of this report.
(d) Financial Statement Schedules are presented in Item 8 of this report.
40
<PAGE> 42
EXHIBITS
<TABLE>
<CAPTION>
NUMBER INCORPORATED BY REFERENCE TO DESCRIPTION OF EXHIBIT
- ------ ---------------------------- ----------------------
<C> <S> <C>
3.1 Exhibit 3.1 to 1990 Form 10-K Report of Certificate of Incorporation as amended
the Company and Exhibit A to the and restated
Company's Proxy Statement dated May 15,
1998
3.2 Exhibit 3.2 to 1990 Form 10-K Report of By-laws as amended
the Company
4.1 Exhibit 4.1 to 1989 Form 10-K Report of Form of Common Stock Certificate
the Company (Domestic)
4.2 Exhibit 4.2 to 1989 Form 10-K Report of Form of Common Stock Certificate
the Company (Foreign)
4.3 Promissory Note dated June 17, 1998 made
by the Company and payable to the order
of OMI Corporation
4.4 Promissory Note dated June 16, 1998 made
by the Company and payable to the order
of OMI Corporation
10.1 Exhibit B to the Company's Proxy 1998 Stock Option Plan for Non-Employee
Statement dated May 15, 1998 Directors
10.2 Exhibit C to the Company's Proxy 1998 Incentive Equity Plan
Statement dated May 15, 1998
10.3 Employment Agreement dated as of June 18,
1998 between the Company and Richard du
Moulin
10.4 Employment Agreement dated as of June 18,
1998 between the Company and Mark
Filanowski
10.5 Employment Agreement dated as of June 18,
1998 between the Company and Peter Popov
10.6 Employment Agreement dated as of June 18,
1998 between the Company and Jeffrey
Miller
10.7 Exhibit 10.8 to the Company's 10-Q Report Consulting Agreement dated as of June 18,
for the Quarter Ended June 30, 1998 1998 between the Company and Paul Gridley
10.8 Employment Agreement dated as of January
1, 1998 between the Company and Anthony
Naccarato
10.9 Employment Agreement dated as of
September 1, 1997 between the Company and
William Hogg
10.10 Exhibit 10.7 to the Company's 10-Q Report Form of Employment Agreement for
for the Quarter Ended June 30, 1998 Executive Officers
10.11 Amended and Restated Term Loan and
Revolving Credit Facility Agreement dated
as of June 17, 1998 among Marine
Transport Lines, Inc., the financial
institutions listed on Schedule 1 thereto
and Den norske Bank ASA
10.12 Term Loan and Revolving Credit Facility
Agreement dated as of June 17, 1998 among
the Company, the financial institutions
listed on Schedule 1 thereto and Den
norske Bank ASA
10.13 Exhibit G to the Company's Proxy Acquisition Agreement dated as of
Statement dated May 15, 1998 September 15, 1997 by and among OMI
Corp., Universal Bulk Carriers, Inc.,
Marine Transport Lines, Inc. and the
persons set forth on Exhibit A thereof
</TABLE>
41
<PAGE> 43
<TABLE>
<CAPTION>
NUMBER INCORPORATED BY REFERENCE TO DESCRIPTION OF EXHIBIT
- ------ ---------------------------- ----------------------
<C> <S> <C>
10.14 Exhibit 10.2 to the Company's Form 8-K Amendment No. 1 to Acquisition Agreement
Report filed July 6, 1998
10.15 Exhibit 10.4 to the Company's Form 8-K Tax Cooperation Agreement dated as of
Report filed July 6, 1998 June 15, 1998 between OMI Corp. and OMI
Corporation
10.16 Exhibit 10.3 to the Company's Form 8-K Distribution Agreement dated as of June
Report filed July 6, 1998 15, 1998 between OMI Corp. and OMI
Corporation
10.17 Salaried Employees Retirement Income Plan
21 Subsidiaries of the Company
27.1 Financial Data Schedule
</TABLE>
42
<PAGE> 44
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MARINE TRANSPORT CORPORATION
By /s/ RICHARD T. DU MOULIN
------------------------------------
Richard T. du Moulin
Chairman of the Board of Directors,
Chief Executive Officer and
President
March 30, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ RICHARD T. DU MOULIN Chairman of the Board of March 30, 1999
- --------------------------------------------------- Directors, Chief Executive
Richard T. du Moulin Officer and President
/s/ MARK L. FILANOWSKI Senior Vice President, Chief March 30, 1999
- --------------------------------------------------- Financial Officer, Treasurer
Mark L. Filanowski and Director
/s/ JONATHAN BLANK Director March 30, 1999
- ---------------------------------------------------
Jonathan Blank
/s/ ELAINE L. CHAO Director March 30, 1999
- ---------------------------------------------------
Elaine L. Chao
/s/ PAUL B. GRIDLEY Director March 30, 1999
- ---------------------------------------------------
Paul B. Gridley
/s/ WILLIAM M. KEARNS, JR. Director March 30, 1999
- ---------------------------------------------------
William M. Kearns, Jr.
/s/ MICHAEL KLEBANOFF Director March 30, 1999
- ---------------------------------------------------
Michael Klebanoff
/s/ STANLEY B. RICH Director March 30, 1999
- ---------------------------------------------------
Stanley B. Rich
/s/ JEROME SHELBY Director March 30, 1999
- ---------------------------------------------------
Jerome Shelby
</TABLE>
43
<PAGE> 1
Exhibit 3.1
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
OMI CORP.
-------------------------------------------------
Pursuant to Section 242 of the General
Corporation law of the State of Delaware
-------------------------------------------------
OMI Corp., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), hereby certifies
as follows:
1. The Restated Certificate of Incorporation of the Corporation was
filed in the office of the Secretary of State of Delaware on December 12, 1983
and amendments to the Certificate of Incorporation were subsequently duly filed
and recorded (the Restated Certificate of Incorporation together with such
amendments shall be hereinafter referred to as the "Restated Certificate of
Incorporation").
2. The following amendments are to become effective as of June 18,
1998 at 8:00 a.m.
3. ARTICLE FIRST of the Restated Certificate of Incorporation is
amended to read in full as follows:
"FIRST: The name of the corporation is Marine Transport
Corporation."
<PAGE> 2
4. The first paragraph of ARTICLE FOURTH of the Restated Certificate
of Incorporation is amended to read in full as follows:
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is fifteen million seven hundred
fifty thousand (15,750,000) of which stock seven hundred fifty thousand
(750,000) shares of the par value of one dollar ($1.00) each, amounting in
the aggregate to seven hundred fifty thousand dollars ($750,000), shall be
Preferred Stock, and of which fifteen million (15,000,000) shares of the
par value of fifty cents ($.50) each, amounting in the aggregate to seven
million five hundred thousand dollars ($7,500,000), shall be Common Stock.
5. Upon the effectiveness of the foregoing amendment to Article
FOURTH of the Restated Certificate of Incorporation, each share of Common Stock
of the Corporation, having a par value of fifty cents ($.50) per share, issued
and outstanding, or held in the treasury of the Corporation, immediately prior
to the effectiveness of such amendment, shall be changed into and become 0.10
fully paid and nonassessable shares of Common Stock having a par value of fifty
cents ($.50) per share. No fractional interests resulting from such conversion
shall be issued, but in lieu thereof, the Corporation will pay cash for each
currently issued and outstanding share of Common Stock, par value one cent
($.0l) per share, representing such fractional interest.
6. The aforesaid amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to
be affixed hereto and this certificate to be signed by its President and
attested by its Secretary this 16th day of June, 1998.
OMI CORP.
By: /s/ Craig H. Stevenson
------------------------------------
Craig H. Stevenson, Jr.
President
[Corporate Seal]
Attest:
By: /s/ Fredric S. London
------------------------------------
Fredric S. London
Secretary
-3-
<PAGE> 1
Exhibit 4.3
PROMISSORY NOTE
$6,443,000 New York, New York
June 17, 1998
FOR VALUE RECEIVED, the undersigned, OMI Corp., a Delaware Corporation
("Marine"), hereby promises to pay to the order of OMI Corporation ("OMI"), at
its office at One Station Place, Stamford, CT 06902 (or such other place as OMI
may direct from time to time), in lawful money of the United States and in
immediately available funds, the principal amount of six million four hundred
forty three thousand Dollars ($6,443,000) plus, interest on said principal
amount, from the date hereof, payment of such amount to be secured by first
priority mortgages on three work boats owned by OMI Petrolink Corp. and its
subsidiaries and any net proceeds from the sale thereof (the "Collateral")
pursuant to three First Preferred Mortgage Agreements executed by OMI Petrolink
Corp. Nuelink Corp. and Harlink Corp, respectively (collectively, the
"Mortgage Agreements"). Payments of principal and interest shall be made in the
amounts and on the dates set forth on the attached Annex A.
Upon payment of a premium equal to $384,000 (which amount shall be added
to the principal of this Note), Marine may prepay the outstanding principal of
this Note, in whole, but not in part, upon 10 days' prior written notice to the
holder of this Note. Prepayment hereunder shall be accompanied by payment of
accrued interest calculated from the date of the immediately prior installment
payment to the date of the next scheduled payment adjusted, pro rata, to the
date of prepayment.
Upon the completion of a debt (excluding bank borrowings) or equity
offering by Marine, the proceeds of such offering (net of transaction costs)
shall be used to repay this Note in full, and if such repayment constitutes a
prepayment of this Note, such repayment shall be subject to the terms of the
immediately preceding paragraph.
Marine shall pay on demand interest on the outstanding unpaid principal
amount of this Note that is not paid within 5 business days of when due and on
the unpaid amount of all interest fees and other amounts then due and payable
hereunder that is not paid within 5 business days of when due from the due date
thereof to the date paid, at a rate per annum equal to 3% per annum above the
rate of interest per annum borne by this Note.
Marine is a duly organized and validly existing corporation, and is in
good standing under the laws of Delaware and has the corporate power and
authority to execute, deliver and carry out the terms and provisions of this
Note and has taken all necessary corporate action to authorize the execution,
delivery and performance of this Note. This Note constitutes the legal, valid
and binding obligation of Marine enforceable in accordance with its terms,
except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
generally affecting creditors' rights and by equitable principles (regardless of
whether enforcement is sought in equity or at law).
<PAGE> 2
Neither the execution, delivery or performance by Marine of this Note, nor
compliance by it with the terms and provisions hereof, (i) will contravene any
applicable provision of any law, statute, rule or regulation, or any order,
writ, injunction or decree of any court or governmental instrumentality, (ii)
will conflict or be inconsistent with or result in any breach of, any of the
terms, covenants, conditions or provisions of, or constitute a default under, or
result in the creation or imposition of (or the obligation to create or impose)
any Lien upon any of the property or assets of Marine pursuant to the terms of
any indenture, mortgage, deed of trust, credit agreement or loan agreement, or
any other material agreement, contract or instrument to which Marine is a party
or by which it or any of its property or assets are bound or to which it may be
subject or (iii) will violate any provision of the certificate or articles of
incorporation or by-laws (or equivalent organizational documents), as the case
may be, of Marine.
Upon the occurrence of any of the following specified events (each an
"Event of Default"):
1. Marine shall fail to pay any of the principal of this Note on the
date when due or fail to pay any of the interest on this Note within
5 business days of the date when due; or
2. The Mortgage Agreements or any provision thereof shall cease to be
in full force and effect, or shall cease to give OMI first priority
mortgages on the Collateral, and other rights, powers and privileges
purported to be created thereby, or Marine shall default in the due
performance or observance of any term, covenant or agreement on its
part to be performed or observed pursuant to the Mortgage
Agreements.
3. Marine shall (i) default in any payment of principal of or interest
on any indebtedness or contingent obligation (other than its
obligation under this Note) or (ii) default in the observance or
performance of any agreement or condition relating to any
indebtedness or contingent obligation (other than this Note) or
contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur, the effect of
which is to permit such indebtedness or contingent obligation to be
declared due and payable or such indebtedness or contingent
obligation shall otherwise become due or required to be prepaid
prior to its stated maturity (determined without regard to whether
any notice is required); provided, that is shall not constitute an
Event of Default pursuant to clause (i) or (ii) above unless the
aggregate principal amount of all such indebtedness or contingent
obligations as described in clauses (i) and (ii), inclusive, exceeds
$100,000 at any one time; or
4. (a) Marine shall (i) commence any case, proceeding or other action
under any existing or fixture law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization, or
relief of debtors, seeking to have an order for relief entered with
respect to it, or seeking to adjudicate it a bankrupt or insolvent,
or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition, or other relief with respect
to it or its debts, or (ii) com-
-2-
<PAGE> 3
mence any case, proceeding, or other action seeking appointment of a
receiver, trustee, custodian, or other similar official for it or
for all or any substantial part of its assets, or (iii) make a
general assignment for the benefit of its creditors; (b) there shall
be commenced against Marine any case, proceeding or other action of
a nature referred to in clause (a) above that (i) results in the
entry of an order for relief or any such adjudication or
appointment, or (ii) remains undismissed, undischarged, or unbonded
for a period of sixty (60) days; (c) there shall be commenced
against Marine any case, proceeding or other action seeking issuance
of a warrant of attachment, execution, distraint, or similar process
against all or any substantial part of its assets that results in
the entry of an order for any such relief that shall not have been
vacated, discharged, or stayed or bonded pending appeal within sixty
(60) days from the entry thereof; (d) Marine shall take any action
in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (a), (b), or
(c) previously; or (e) Marine shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts
as they become due; or
5. One or more final judgments or decrees shall be entered against
Marine involving a liability not paid or fully covered by insurance
in excess of $100,000 for all such judgments and decrees and all
such judgments or decrees shall not have been vacated, discharged,
or stayed or bonded pending appeal within sixty (60) days from the
entry thereof.
THEN, the holder hereof may declare the outstanding principal balance hereof
immediately due and payable and Marine shall immediately pay to the holder all
such amounts, with interest accrued but unpaid thereon to the date of payment in
full at the applicable rate provided herein.
Marine, for itself, its successors and assigns, hereby waives diligence,
presentment, protest, and demand and notice of protest, demand, dishonor, and
nonpayment of this Note.
Neither acceptance by the holder hereof of partial or delinquent payment
nor any failure on the part of the holder to exercise, or any delay in
exercising, any right under this Note shall operate as a waiver of any
obligation of Marine or any right of the holder, and no single or partial
exercise of any right under this Note shall preclude any other or farther
exercise thereof or the exercise of any other right. No waiver, amendment,
alteration or other modification of any provision of this Note shall in any
event be effective unless the same shall be in writing and signed by the holder.
The remedies provided in this Note are cumulative and not exclusive of any
remedies provided by law. All of the covenants, provisions, and conditions
herein contained are made on behalf of, and shall apply to and bind the
respective distributees, personal representatives, successors, and assigns of
Marine, jointly and severally. Marine agrees to pay all collection expenses,
court costs, and reasonable attorney fees and disbursements (whether or not
litigation is commenced) that may be incurred in connection with the collection
or enforcement of this Note.
-3-
<PAGE> 4
This Note shall be governed by and construed in accordance with the laws
of the State of New York, without giving effect to conflicts of laws or
principles thereof.
OMI CORP.
a Delaware Corporation
By /s/ V. de Sostca
-------------------------------------
Name: Vincent de Sostca
Title: S.V.P.
-4-
<PAGE> 5
ANNEX A
<TABLE>
<CAPTION>
Total Payment
Outstanding Principal Due (Interest
Payment Date Principal Payment Interest Payment Plus Principal)
- ------------ --------- ------- ---------------- ---------------
<C> <C> <C> <C> <C>
16 June 1998 6,443,000 0
01 November 1998 6,443,000 175,000 268,333 443,333
01 May 1999 6,268,000 175,000 350,000 525,000
01 November 1999 6,093,000 175,000 350,000 525,000
01 May 2000 5,918,000 175,000 350,000 525,000
01 November 2000 5,743,000 175,000 350,000 525,000
01 May 2001 5,568,000 175,000 350,000 525,000
01 November 2001 5,393,000 175,000 350,000 525,000
01 May 2002 5,218,000 175,000 350,000 525,000
01 November 2002 5,043,000 175,000 350,000 525,000
01 May 2003 4,868,000 175,000 350,000 525,000
01 November 2003 4,693,000 4,693,000 350,000 5,043,000
--------- --------- ----------
Total: 6,443,000 3,768,333 10,211,333
</TABLE>
<PAGE> 1
Exhibit 4.4
PROMISSORY NOTE
$373,845.00 New York, New York
June 16, 1998
FOR VALUE RECEIVED, the undersigned, OMI Corp., a Delaware Corporation
("Marine"), hereby promises to pay to the order of OMI Corporation ("OMI"), at
its office at One Station Place, Stamford, CT 06902 (or such other place as OMI
may direct from time to time), in lawful money of the United States and in
immediately available funds, the principal amount of three hundred seventy three
thousand eight hundred forty five Dollars ($373,845.00) plus, interest on said
principal amount, from the date hereof. Payments of principal and interest shall
be made in the amounts and on the dates set forth on the attached Annex A.
Marine may prepay the outstanding principal of this Note, in whole, but
not in part, upon 10 days' prior written notice to the holder of this Note.
Prepayment hereunder shall be accompanied by payment of accrued interest
calculated from the date of the immediately prior installment payment to the
date of the next scheduled payment adjusted, pro rata, to the date of
prepayment.
Marine shall pay on demand interest on the outstanding unpaid principal
amount of this Note that is not paid within 5 business days of when due and on
the unpaid amount of all interest fees and other amounts then due and payable
hereunder that is not paid within 5 business days of when due from the due date
thereof to the date paid, at a rate per annum equal to 3% per annum above the
rate of interest per annum borne by this Note.
Marine is a duly organized and validly existing corporation, and is in
good standing under the laws of Delaware and has the corporate power and
authority to execute, deliver and carry out the terms and provisions of this
Note and has taken all necessary corporate action to authorize the execution,
delivery and performance of this Note. This Note constitutes the legal, valid
and binding obligation of Marine enforceable in accordance with its terms,
except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
generally affecting creditors' rights and by equitable principles (regardless of
whether enforcement is sought in equity or at law).
Neither the execution, delivery or performance by Marine of this Note, nor
compliance by it with the terms and provisions hereof, (i) will contravene any
applicable provision of any law, statute, rule or regulation, or any order,
writ, injunction or decree of any court or governmental instrumentality, (ii)
will conflict or be inconsistent with or result in any breach of, any of the
terms, covenants, conditions or provisions of, or constitute a default under, or
result in the creation or imposition of (or the obligation to create or impose)
any Lien upon any of the property or assets of Marine pursuant to the terms of
any indenture, mortgage, deed of trust, credit agreement or loan agreement, or
any other material agreement, contact or instrument to which Marine is a party
or by which it or any of its property or assets are bound or to which it may be
subject or
<PAGE> 2
(iii) will violate any provision of the certificate or articles of incorporation
or by-laws (or equivalent organizational documents), as the case may be, of
Marine.
Upon the occurrence of any of the following specified events (each an
"Event of Default"):
1. Marine shall fail to pay any of the principal of this Note on the
date when due or fail to pay any of the interest on this Note within
5 business days of the date when due; or
2. Marine shall (i) default in any payment of principal of or interest
on any indebtedness or contingent obligation (other than its
obligation under this Note) or (ii) default in the observance or
performance of any agreement or condition relating to any
indebtedness or contingent obligation (other than this Note) or
contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur, the effect of
which is to permit such indebtedness or contingent obligation to be
declared due and payable or such indebtedness or contingent
obligation shall otherwise become due or required to be prepaid
prior to its stated maturity (determined without regard to whether
any notice is required); provided, that is shall not constitute an
Event of Default pursuant to clause (i) or (ii) above unless the
aggregate principal amount of all such indebtedness or contingent
obligations as described in clauses (i) and (ii), inclusive, exceeds
$100,000 at any one time; or
3. (a) Marine shall (i) commence any case, proceeding or other action
under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization, or
relief of debtors, seeking to have an order for relief entered with
respect to it, or seeking to adjudicate it a bankrupt or insolvent,
or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition, or other relief with respect
to it or its debts, or (ii) commence any case, proceeding, or other
action seeking appointment of a receiver, trustee, custodian, or
other similar official for it or for all or any substantial part of
its assets, or (iii) make a general assignment for the benefit of
its creditors; (b) there shall be commenced against Marine any case,
proceeding or other action of a nature referred to in clause (a)
above that (i) results in the entry of an order for relief or any
such adjudication or appointment, or (ii) remains undismissed,
undischarged, or unbonded for a period of sixty (60) days; (c) there
shall be commenced against Marine any case, proceeding or other
action seeking issuance of a warrant of attachment, execution,
distraint, or similar process against all or any substantial part of
its assets that results in the entry of an order for any such relief
that shall not have been vacated, discharged, or stayed or bonded
pending appeal within sixty (60) days from the entry thereof; (d)
Marine shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set
forth in clause (a), (b), or (c) previously; or (e) Marine shall
generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; or
-2-
<PAGE> 3
4. One or more final judgments or decrees shall be entered against
Marine involving a liability not paid or fully covered by insurance
in excess of $100,000 for all such judgments and decrees and all
such judgments or decrees shall not have been vacated, discharged,
or stayed or bonded pending appeal within sixty (60) days from the
entry thereof.
THEN, the holder hereof may declare the outstanding principal balance hereof
immediately due and payable and Marine shall immediately pay to the holder all
such amounts, with interest accrued but unpaid thereon to the date of payment in
full at the applicable rate provided herein.
Marine, for itself, its successors and assigns, hereby waives diligence,
presentment, protest, and demand and notice of protest, demand, dishonor, and
nonpayment of this Note.
Neither acceptance by the holder hereof of partial or delinquent payment
nor any failure on the part of the holder to exercise, or any delay in
exercising, any right under this Note shall operate as a waiver of any
obligation of Marine or any right of the holder, and no single or partial
exercise of any right under this Note shall preclude any other or further
exercise thereof or the exercise of any other right. No waiver, amendment,
alteration or other modification of any provision of this Note shall in any
event be effective unless the same shall be in writing and signed by the holder.
The remedies provided in this Note are cumulative and not exclusive of any
remedies provided by law. All of the covenants, provisions, and conditions
herein contained are made on behalf of, and shall apply to and bind the
respective distributees, personal representatives, successors, and assigns of
Marine, jointly and severally. Marine agrees to pay all collection expenses,
court costs, and reasonable attorney fees and disbursements (whether or not
litigation is commenced) that may be incurred in connection with the collection
or enforcement of this Note.
This Note shall be governed by and construed in accordance with the laws
of the State of New York, without giving effect to conflicts of laws or
principles thereof.
OMI CORP.
a Delaware Corporation
By: /s/ V. de Sostca
-------------------------------------
Name: Vincent de Sostca
Title: S.V.P.
-3-
<PAGE> 4
ANNEX A
<TABLE>
<CAPTION>
Total Payment
Outstanding Principal Due (Interest
Payment Date Principal Payment Interest Payment Plus Principal)
- ------------ --------- ------- ---------------- ---------------
<C> <C> <C> <C> <C>
l6 June 1998 373,845.00 0
01 November 1998 373,845.00 37,384.50 14,954.00 52,338.50
01 May 1999 336,460.50 37,384.50 13,458.00 50,842.50
01 November 1999 299,076.00 37,384.50 11,963.00 49,347.50
01 May 2000 261,691.50 37,384.50 10,468.00 47,852.50
01 November 2000 224,307.00 37,384.50 8,972.00 46,356.50
01 May 2001 186,922.50 37,384.50 7,477.00 44,861.50
01 November 2001 149,538.00 37,384.50 5,982.00 43,366.50
01 May 2002 112,153.50 37,384.50 4,486.00 41,870.50
01 November 2002 74,769.00 37,384.50 2,991.00 40,375.50
01 May 2003 37,384.50 37,384.50 1,495.00 38,879.50
----------- ----------- -------- -----------
Total: $373,845.00 $82,246.00 $456,091.00
</TABLE>
<PAGE> 1
Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of June 18,
1998, is by and between Marine Transport Corporation, a Delaware corporation
(the "Company") and Richard T. du Moulin ("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
President and Chief Executive Officer 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 President and Chief Executive
Officer of the Company upon the terms and conditions herein, for the period
commencing as of June 17, 1998, and ending on June 16, 1999, subject to
termination as hereinafter provided (the period from June 17, 1998 through June
16, 1999, 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 President and Chief Executive Officer of the Company and shall report to the
Board of Directors (the "Board") 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 Board.
(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 Board.
(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 $295,000. 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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<PAGE> 3
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.
-3-
<PAGE> 4
(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.
-4-
<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.
-5-
<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 position, authority, duties or responsibilities as
provided in Section 2, including, without limitation, termination of his
position as Chairman of the Board, President and Chief Executive Officer of the
Company 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 300% of (A) 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
-7-
<PAGE> 8
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, 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.
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
-8-
<PAGE> 9
in Section 3 shall not be adversely affected, the Company may assign or
otherwise transfer this 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:
Richard T. du Moulin
Marine Transport Corporation
1200 Harbor Boulevard
Weehawken, NJ 07087
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
-9-
<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
-10-
<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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<PAGE> 12
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:
-------------------------------------
Richard T. du Moulin
-12-
<PAGE> 1
Exhibit 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of June 18,
1998, is by and between Marine Transport Corporation, a Delaware corporation
(the "Company") and Mark L. Filanowski ("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
Senior Vice President and Chief Financial Officer 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 Senior Vice President and Chief
Financial Officer of the Company upon the terms and conditions herein, for the
period commencing as of June 17, 1998, and ending on June 16, 1999, subject to
termination as hereinafter provided (the period from June 17, 1998 through June
16, 1999, 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 Senior Vice President and Chief Financial Officer 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 $225,000. The Compensation Committee of the Board of
Directors of the Company (the "Compensation Committee") 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.
(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.
(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
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<PAGE> 3
Salary, Bonus, or other payments, and the Company shall reasonably cooperate
with the 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
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<PAGE> 4
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.
(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
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<PAGE> 5
the parties consent and agree that such scope or wording may be accordingly
judicially modified in any proceeding brought to enforce such restrictions.
(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
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<PAGE> 6
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.
(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.
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<PAGE> 7
(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 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 position, authority, duties or responsibilities as provided in
Section 2, including, without limitation, termination of his position as a
Director, Senior Vice President and Chief Financial Officer of the Company or
(iii) a reduction in Base Salary in which cases 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 300% of (A) 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:
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<PAGE> 8
"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, 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.
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<PAGE> 9
(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 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:
Mark L. Filanowski
Marine Transport Corporation
1200 Harbor Boulevard
Weehawken, NJ 07087
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
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<PAGE> 10
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 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
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<PAGE> 11
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 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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<PAGE> 12
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:
-------------------------------------
Mark L. Filanowski
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<PAGE> 1
Exhibit 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of June 18,
1998, is by and between Marine Transport Corporation, a Delaware corporation
(the "Company") and Peter N. Popov ("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
Vice President, Secretary and General Counsel 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 Vice President, Secretary and
General Counsel of the Company upon the terms and conditions herein, for the
period commencing as of June 17, 1998, and ending on June 16, 1999, subject to
termination as hereinafter provided (the period from June 17, 1998 through June
16, 1999, 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 Vice President, Secretary and General Counsel of the Company and shall report
to the Chief Executive Officer (the "CEO") of the Company, or other senior
officer of the Company as the CEO may direct. 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 $175,000. The Compensation Committee of the Board of
Directors of the Company (the "Compensation Committee") 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.
(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.
(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
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<PAGE> 3
Salary, Bonus, or other payments, and the Company shall reasonably cooperate
with the 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
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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.
(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
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the parties consent and agree that such scope or wording may be accordingly
judicially modified in any proceeding brought to enforce such restrictions.
(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 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 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
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the Company in its sole discretion upon its own initiative or upon request of
the Executive or a person acting on his behalf.
(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.
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(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 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 position, authority, duties or responsibilities as provided in
Section 2, including, without limitation, termination of his position as Vice
President, Secretary and General Counsel of the Company 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 300% of (A) 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:
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<PAGE> 8
"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, 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.
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<PAGE> 9
(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 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:
Peter N. Popov
Marine Transport Corporation
1200 Harbor Boulevard
Weehawken, NJ 07087
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
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<PAGE> 10
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 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
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<PAGE> 11
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 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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<PAGE> 12
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:
-------------------------------------
Peter N. Popov
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<PAGE> 1
Exhibit 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of June 18,
1998, is by and between Marine Transport Corporation, a Delaware corporation
(the "Company") and Jeffrey M. Miller ("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
Vice President, Marketing 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 Vice President, Marketing of the
Company upon the terms and conditions herein, for the period commencing as of
June 17, 1998, and ending on June 16, 1999, subject to termination as
hereinafter provided (the period from June 17, 1998 through June 16, 1999, 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 Vice President, Marketing of the Company and shall report to the Chief
Executive Officer (the "CEO") of the Company, or other senior officer of the
Company as the CEO may direct. 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 $135,000. The Compensation Committee of the Board of
Directors of the Company (the "Compensation Committee") 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.
(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.
(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
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<PAGE> 3
Salary, Bonus, or other payments, and the Company shall reasonably cooperate
with the 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
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<PAGE> 4
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.
(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
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<PAGE> 5
the parties consent and agree that such scope or wording may be accordingly
judicially modified in any proceeding brought to enforce such restrictions.
(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 50% 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 50% 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
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<PAGE> 6
the Company in its sole discretion upon its own initiative or upon request of
the Executive or a person acting on his behalf.
(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.
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<PAGE> 7
(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 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 position, authority, duties or responsibilities as provided in
Section 2 or (iii) a reduction in Base Salary in which cases 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 300 % of (A) 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:
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<PAGE> 8
"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, 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.
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<PAGE> 9
(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 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:
Jeffrey M. Miller
Marine Transport Corporation
1200 Harbor Boulevard
Weehawken, NJ 07087
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
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<PAGE> 10
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 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
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<PAGE> 11
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 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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<PAGE> 12
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:
-------------------------------------
Jeffrey Miller
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<PAGE> 1
CONSULTING AGREEMENT
This CONSULTING AGREEMENT (the "AGREEMENT") is made and entered into by
and between F. ANTHONY NACCARATO ("CONSULTANT"), and OMI CORP., a corporation
organized and existing under the laws of the State of Delaware and having its
principal place of business at 90 Park Avenue, New York, New York 10016 ("OMI").
W I T N E S S E T H
WHEREAS, CONSULTANT was employed by OMI for nearly 30 years; and
WHEREAS, OMI is willing to retain CONSULTANT as an independent consultant
to provide certain labor relations services to OMI upon the terms and conditions
set forth herein;
NOW, THEREFORE, in consideration of the premises and mutual promises
herein contained, it is agreed as follows:
1. OMI hereby engages CONSULTANT, and CONSULTANT hereby agrees to serve,
as a consultant to OMI to provide such labor relations services as OMI may
request of CONSULTANT, provided, however, that CONSULTANT may not be required to
perform services at OMI's offices more than 60 days per year. As used in this
AGREEMENT, "labor relations services" shall mean, but not be limited to,
consultation and advice on wages, hours and terms and conditions of employment,
1
<PAGE> 2
negotiation of union contracts and agreements, meetings with union officials,
business agents, port agents, personnel and members and administration of the
grievance procedures.
2. The term of this AGREEMENT shall commence as of January 1, 1998 and
shall expire on December 31, 2000 unless otherwise terminated prior to the
expiration of its term pursuant to Paragraph 11 of this AGREEMENT. However, OMI
may call upon CONSULTANT to perform labor relations services prior to such
commencement date and CONSULTANT will perform such services at no additional
charge to OMI. Upon the expiration of the term of this AGREEMENT, this AGREEMENT
may be renewed only upon the written consent and agreement of both parties.
3. During the term of this AGREEMENT, OMI agrees to pay CONSULTANT as
compensation for his services the sum of $92,500 per annum, payable in equal
monthly installments. OMI agrees that it will continue to make the payments due
hereunder in the event CONSULTANT dies or becomes disabled.
4. In addition, OMI shall reimburse CONSULTANT for all reasonable and
necessary travel (except commutation to and from OMI's office), entertainment,
telephone and postage expenses incurred on behalf of OMI, provided, however, (i)
such expenses are incurred in accordance with OMI's expense policy and (ii)
CONSULTANT submits such receipts and other documentation as may be required by
OMI. In the event that this AGREEMENT is terminated pursuant to Paragraph 11
2
<PAGE> 3
hereof, OMI shall reimburse CONSULTANT for all reasonable and necessary expenses
incurred by him up to the date of termination as specified in this Paragraph.
5. This AGREEMENT does not constitute an employment contract, end OMI
shall have no obligation to provide CONSULTANT with medical insurance, life,
accident, health, disability or workman's compensation insurance or other
employee benefits of any kind. OMI will provide CONSULTANT with general business
support at OMI's office location, including office and support space, furniture,
telephone, secretarial, word processing and photocopying services and such other
support services as the parties may agree upon to enable CONSULTANT to complete
the agreed upon assignments pursuant to this AGREEMENT.
6. OMI shall not be responsible for any payroll related taxes and Federal,
state or local deductions. CONSULTANT certifies that he is an independent
contractor and, as such, will prepare and file all tax information, forms and
returns with the appropriate Federal, state and local government agencies or
authorities as required by law.
7. (a) CONSULTANT represents and warrants that he is not under any
obligation, contractual or otherwise, to any person or entity which would
prohibit or impede him from performing the services and that he is free to enter
into and perform the terms of this AGREEMENT. CONSULTANT hereby represents and
warrants that he has full power to perform his obligations hereunder, and that
this AGREEMENT constitutes a legal, valid and binding obligation of CONSULTANT,
enforceable against CONSULTANT in accordance with his terms, except as
3
<PAGE> 4
enforcement may be limited by bankruptcy, insolvency moratorium or other laws
affecting the enforcement of creditors' rights generally.
(b) OMI represents and warrants that it is not under any obligation,
contractual or otherwise, to any person or entity which would prohibit or impede
CONSULTANT from performing the services contemplated under this AGREEMENT. OMI
hereby represents and warrants that it has full power, authority and capacity to
execute and deliver this AGREEMENT and perform its obligations hereunder, and
that this AGREEMENT constitutes a legal, valid and binding obligation of OMI,
enforceable against OMI in accordance with his terms, except as enforcement may
be limited by bankruptcy, insolvency moratorium or other laws affecting the
enforcement of creditors' rights generally.
8. (a) OMI agrees to indemnify and hold harmless CONSULTANT from and
against any losses, claims, damages or liabilities (including the costs,
expenses and legal fees) related to or arising out of activities performed or
services furnished by CONSULTANT pursuant to this AGREEMENT other than any loss,
claim, damage or liability (or action or proceeding in respect thereof)
determined by a final judgment of a court of competent jurisdiction to have been
caused, in whole or in part, by the willful misconduct, bad faith or gross
negligence of CONSULTANT.
(b) CONSULTANT agrees to indemnify and hold harmless OMI and OMI's
affiliates, directors, officers, agents and employees from and against any
losses, claims, damages or liabilities (including costs, expenses and legal
fees) which are determined by a final judgment of a court of competent
jurisdiction to have resulted
4
<PAGE> 5
solely from wilful misconduct, bad-faith or gross negligence of CONSULTANT.
Notwithstanding the foregoing, CONSULTANT shall indemnify OMI only to the extent
of the aggregate amount of Consulting Fees received by CONSULTANT.
9. CONSULTANT shall not disclose, duplicate, copy, or use for any purpose
other than the performance of this AGREEMENT and shall treat as confidential and
as proprietary to OMI all information which relates to OMI's client information,
systems, trade secrets or business affairs; and which CONSULTANT has obtained
from OMI under this AGREEMENT provided, however, the obligation to treat as
proprietary and confidential shall not apply to information which shall be
publicly available or shall be obtained rightfully from third parties.
10. This AGREEMENT may be terminated at any time for "cause" by either
party. The term "cause" shall mean (i) any material breach by either party or
any provision of this AGREEMENT and (ii) any disloyal or dishonest act or
conduct by either party to the other.
11. Any activities performed by CONSULTANT pursuant to this AGREEMENT will
be done as an independent contractor and CONSULTANT will at no time make any
representation or statement, verbal or in writing, that he is employed by OMI.
Nothing contained herein shall be construed to constitute a principal-agent
relationship between CONSULTANT and OMI, nor shall this AGREEMENT be deemed to
confer upon CONSULTANT any authority, express or implied, to bind OMI or
represent to anyone that it is acting either as a representative of, or in any
other capacity for OMI except as set forth in this AGREEMENT.
5
<PAGE> 6
12. This AGREEMENT shall inure to the benefit of OMI's successors and
assigns. This AGREEMENT may not be assigned by CONSULTANT without the prior
written consent of OMI.
13. The validity, interpretation, construction and performance of this
AGREEMENT shall be governed by the laws of the State of New York.
14. All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed duly given when delivered, either by
hand, by facsimile or by overnight courier or by certified mail, return receipt
requested as follows:
if to OMI, to:
Fredric S. London, Esq.
OMI Corp.
90 Park Avenue
New York, New York 10016
if to CONSULTANT, to:
F. Anthony Naccarato
7 Lawrence Court
Syosset, New York 11791-2632
or to such other address as either party shall have designated by like notice to
the other party hereto.
15. No provision of this AGREEMENT may be modified, altered, waived or
discharged unless such modification, waiver, discharge or alteration is agreed
to in writing and signed by OMI and CONSULTANT. No waiver by either party hereto
of or compliance with any condition or provision of this AGREEMENT to be
performed by such other party shall be deemed a waiver of similar of dissimilar
provisions or
6
<PAGE> 7
conditions at the same or at any prior or subsequent time.
16. This AGREEMENT sets forth the entire agreement between the parties
with respect to the matters contained herein. There are no other agreements or
understandings with respect to the subject matter of this AGREEMENT. Any and all
prior discussions, agreements or understandings, whether oral or written, are
merged into and subsumed by this AGREEMENT.
IN WITNESS WHEREOF, the parties have executed this AGREEMENT on August
___, 1997.
WITNESS:
/s/ F. Anthony Naccarato
- ------------------------------- -----------------------------------------
F. ANTHONY NACCARATO
WITNESS: OMI CORP.
/s/ [ILLEGIBLE] By: /s/ Frederic S. London
- ------------------------------- -------------------------------------
FREDERIC S. LONDON
STATE OF NEW YORK )
) ss.:
COUNTY OF NASSAU )
On Sept. 11, 1997 F. ANTHONY NACCARATO personally came to me known, and
known to me to be the individual described in, and who executed the foregoing
Agreement and duly acknowledged to me that she executed the same.
/s/ Robert Sereno
-----------------------------------------
NOTARY PUBLIC
ROBERT SERENO
Notary Public, State of New York
No. 01SE065092
Qualified in Nassau County
Commission Expires September 3, 1998
7
<PAGE> 8
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On August 12, 1997, FREDRIC S. LONDON, ESQ., Senior Vice-President and
General Counsel of OMI Corp., personally came to me known, and known to me to be
the individual described in, and who executed the foregoing Agreement in behalf
of OMI Corp., and duly acknowledged to me that he had authority to and that he
executed the same.
/s/ Monique Henderson
-----------------------------------------
NOTARY PUBLIC
MONIQUE HENDERSON
Notary Public, State at New York
No. 01HE5076668
Qualified in New York County
Commission Expires April 28, 1999
8
<PAGE> 1
Exhibit 10.9
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") dated as of September 1, 1997
between OMI Corp., a Delaware corporation (the "Company") and William A.G. Hogg
(the "Executive").
W I T N E S S E T H
WHEREAS, the Company desires to continue to employ the Executive; and
WHEREAS, the Executive is willing to continue to be employed by the
Company, as a senior executive 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, at the discretion of the Company, as President or
Senior Vice President of OMI Ship Management, Inc. ("OSM"), or any successor
thereof upon the terms and conditions herein, for the period commencing on the
date the Company acquires Marine Transport Lines, Inc. (the "Commencement Date")
and terminating on the third anniversary of the Commencement Date subject to
termination as hereinafter provided (such period, as such period may be extended
as described in this paragraph, being herein referred to as the "Employment
Period"). The Executive term of employment shall be automatically extended for
an additional period of one year unless written notice of termination is given
by either party no later than the second anniversary of the Commencement Date.
If, upon expiration of this Agreement, the Company desires to continue to employ
the Executive and the Executive desires to continue in the employ of the
Company, such employment shall be continued on terms and conditions which the
Company and the Executive find mutually satisfactory and which are consistent
with the employment policies of the Company.
2. Duties
(a) Throughout the Employment Period, the Executive shall be President or
Senior Vice President of OSM and shall report to the person or position
designated by the Chief Executive Officer of the Company. The Executive shall at
all times comply with Company policies as established by the Chief Executive
Officer.
(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,
<PAGE> 2
subject to change (other than diminution in position, authority, duties or
responsibilities) from time to time by the Chief Executive Officer.
(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.
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") for the
annual periods following the Commencement date (a) Year 1: $110,000; (b) Year 2:
$115,000; (c) Year 3: $120,000 and (d) Additional Year: $125,000. The Base
Salary due the Executive hereunder shall be payable in equal installments at the
times other executives are paid 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 9(e).
(b) Bonus
The Executive shall be eligible to receive bonuses (each a "Bonus") at the
discretion, in the amount and at the times determined by the Board of Directors
of the Company (the "Board").
(c) Long Term Incentives
The Executive shall be entitled to receive grants of restricted stock,
stock options and other stock awards at the discretion of the Compensation
Committee of the Board of Directors of the Company 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.
(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
welfare and benefit plans (including, but not limited to, retirement security,
life insurance, medical, dental, disability, and savings plans) established by
the Company from time to time for the general and overall benefit of executives
of the Company.
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<PAGE> 3
(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 or her Base Salary, Bonus, or other payments, and
the Company shall reasonably cooperate with the 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.
In the event the Company (but not the Executive) (i) gives the notice of
termination described in Section 1 above or (ii) terminates the employment of
the Executive at any time after the Employment Period (as the same may be
extended), the Company shall pay to the Executive promptly upon the termination
of employment an amount equal to 50% of the Executive's then applicable Base
Salary, less the amounts required to be withheld as described in Section 3(a).
No amount shall be payable in the event the Executive terminates employment
hereunder.
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 goods and 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
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<PAGE> 4
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 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.
(c) During the Employment Period and during any Severance Period (as
hereinafter defined), 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 as a creditor, 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 during any Severance Period (as
hereinafter defined), the Executive shall not either for his 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.
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<PAGE> 5
(f) The Executive hereby agrees to provide reasonable cooperation to the
Company, its subsidiaries and affiliates during the Employment Period and any
Severance Period (as hereinafter defined) 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.
(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, the Company shall
give a written notice to the Executive of such termination stating that a
severance period (the "Severance Period") will commence upon receipt of such
notice by the Executive. The Severance Period shall be for the balance of the
then current term of this Agreement or, unless the Executive shall have given
the notice described in Section 1, twelve months, whichever is greater. Upon
receipt of such notice by the Executive, the Employment Period shall terminate
(and the Executive shall have no further duties under Section 2 hereof). During
the entire Severance Period, the Executive shall continue to receive all salary,
compensation, payments and benefits under Sections 3(a) and 3(d) of this
Agreement (including, to the extent allowable under applicable law, the accrual
of additional service credits or Company contributions under pension and thrift
plans, and any benefits under the Company's
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<PAGE> 6
long term disability and life insurance plans) available upon the date of the
commencement of the Severance Period as if the Employment Period continued
throughout the Severance Period. The Executive agrees that the payments
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
Severance Period or during the period when payments are being made pursuant to
Section 6(c), 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
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 Severance Period described in Section 6(a)
hereof shall immediately commence. The duties, rights, benefits and other
matters during the Severance Period shall be as set forth in Section 6(a), and
the Executive (and his or her heirs, beneficiaries and estate) shall be entitled
to all compensation, payments and benefits during the Severance Period without
any offset or reduction except by such amounts, if any, as are paid to the
Executive in lieu of compensation for services under any applicable insurance
policies of the Company (or by the Company under any self insurance plan). 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 180 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. If
the Executive becomes Disabled during a Severance Period, he shall continue to
receive the compensation, payments and benefits of this Agreement during the
entire Severance Period without any offset or reduction, except by such amounts,
if any, as are paid to the Executive in lieu of compensation for services under
any applicable insurance policies of the Company (or by the Company under any
self insurance plan).
(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"):
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<PAGE> 7
(i) The Executive's breach in respect of his duties under this
Agreement, such breach continuing unremedied for thirty days after
written notice thereof from the Company to the Executive specifying
the acts constituting the breach and requesting that they be
remedied; or
(ii) Any misconduct, dishonesty, insubordination or other act by the
Executive materially detrimental to the 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 convicted of
a felony during the Employment Period, provided such conviction has
resulted or is likely to result in substantial detriment to the
Company, its subsidiaries and/or affiliates.
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 such voluntary termination
occurs within ninety days of (i) a relocation of the OSM'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
in which cases the provisions of Section 6(a) shall apply.
7. Conflicting Agreements
The Executive hereby represents and warrants to the Company that he is
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
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<PAGE> 8
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 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:
(a) if to the Company:
President
Marine Transport Lines, Inc.
1200 Harbor Boulevard
Weehawken, NJ 07087
(b) if to the Executive:
67-11 166th Street
Flushing, NY 11365
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 parry 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
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<PAGE> 9
rights, powers or remedies under or relating to this Agreement shall 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 attorney's
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 the meaning
hereof. This Agreement and the rights and obligations of the parties hereunder
shall be construed in accordance
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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.
11. Condition Precedent
In the event that the Company does not acquire Marine Transport
Lines, Inc. on or before December 31, 1998, this Agreement shall be null and
void and neither party shall have any rights hereunder.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
By
-------------------------------------
William A.G. Hogg
OMI CORP.
By
-------------------------------------
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<PAGE> 1
Exhibit 10.11
AMENDED AND RESTATED
TERM LOAN AND REVOLVING CREDIT FACILITY AGREEMENT
- --------------------------------------------------------------------------------
MARINE TRANSPORT LINES, INC.
Borrower
The Financial Institutions Listed on Schedule 1,
Lenders
and
DEN NORSKE BANK ASA,
Agent
- --------------------------------------------------------------------------------
as of June 17, 1998
<PAGE> 2
INDEX
PAGE
----
SECTION 1 DEFINITIONS...................................................... 1
1.1 Defined Terms........................................ 1
1.2 Construction......................................... 23
1.3 Accounting Terms..................................... 23
SECTION 2 REPRESENTATIONS AND WARRANTIES................................... 23
2.1(a) Due Organization and Power........................... 23
2.1(b) Authorization and Consents........................... 23
2.1(c) Binding Obligations.................................. 24
2.1(d) No Violation......................................... 24
2.1(e) Litigation........................................... 24
2.1(f) No Default........................................... 24
2.1(g) Vessels.............................................. 24
2.1(h) Insurance............................................ 25
2.1(i) Citizenship and Qualification
as Owner.......................................... 25
2.1(j) Financial Information................................ 25
2.1(k) Tax Returns.......................................... 26
2.1(l) ERISA................................................ 26
2.1(m) Chief Executive Office............................... 26
2.1(n) Foreign Trade Control Regulations.................... 26
2.1(o) Equity Ownership..................................... 27
2.1(p) Environmental Matters................................ 27
2.1(q) Pending, Threatened or Potential
Environmental Claims.............................. 28
2.1(r) Compliance with ISM Code............................. 28
2.1(s) Threatened Withdrawal of DOC or SMC.................. 28
2.1(t) Year 2000 Issue...................................... 28
SECTION 3 ADVANCES......................................................... 28
3.1 Purposes............................................. 28
3.2 Term Loan Advances................................... 29
3.3 Revolving Credit Facility Advances................... 29
3.4 Drawdown Notice...................................... 29
3.5 Effect of Drawdown Notices........................... 29
3.6 Notation of Advances................................. 30
i
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SECTION 4 CONDITIONS....................................................... 30
4.1 Conditions to Restructure the Term Loan
and Revolving Credit Facility..................... 30
4.2 Further Conditions Precedent......................... 35
4.3 Satisfaction After Drawdown.......................... 36
4.4 Breakfunding Costs................................... 36
SECTION 5 REPAYMENT, PREPAYMENT AND
REDUCTION OF FACILITY............................. 36
5.1 Repayment of Term Loan............................... 36
5.2 Revolving Credit Facility............................ 36
5.3 Voluntary Prepayment of Term Loan.................... 37
5.4 Mandatory Prepayment of Term Loan.................... 37
5.5 Prepay Term Loans Pro Rata........................... 37
5.6 Application of Prepayments........................... 37
5.7 Voluntary Reduction of Revolving
Credit Facility................................... 37
SECTION 6 INTEREST AND RATE................................................ 38
6.1 Term Loan Applicable Rate
and Default Rate.................................. 38
6.2 Revolving Credit Facility Applicable
Rate and Default Rate............................. 38
6.3 Determination of Applicable Margin................... 38
6.4 Determination of LIBOR............................... 38
6.5 Interest Periods..................................... 39
6.6 Interest Payments.................................... 39
6.7 Payment on Banking Day............................... 39
6.8 Calculation of Interest.............................. 39
SECTION 7 PAYMENTS......................................................... 39
7.1 Place of Payments, No Set Off........................ 39
7.2 Tax Credits.......................................... 40
SECTION 8 EVENTS OF DEFAULT................................................ 40
8.1(a) Non-Payment of Principal............................. 40
8.1(b) Non-Payment of Interest or
Other Amounts..................................... 40
8.1(c) Representations...................................... 40
8.1(d) Covenants............................................ 40
8.1(e) Indebtedness......................................... 41
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<PAGE> 4
8.1(f) Change of Control; Ownership or
Management of Other Security Parties.............. 41
8.1(g) U.S. Citizenship..................................... 41
8.1(h) Bankruptcy........................................... 41
8.1(i) Termination of Operations;
Sale of Assets.................................... 42
8.1(j) Judgments............................................ 42
8.1(k) Inability to Pay Debts............................... 42
8.1(l) Change in Financial Position......................... 42
8.1(m) Relevant Contracts................................... 42
8.1(n) Key Management Agreements............................ 42
8.1(o) Related Credit Agreement; OMI COLUMBIA Loan
Documents and Mortgage Securing OMI Debt............. 42
8.2 Indemnification...................................... 43
8.3 Application of Moneys................................ 43
SECTION 9 COVENANTS........................................................ 44
9.1(A)(i) Performance of Agreements............................ 44
9.1(A)(ii) Notice of Default; Litigation
and Adverse Change................................ 44
9.1(A)(iii) Obtain Consents...................................... 45
9.1(A)(iv) Financial Information................................ 45
9.1(A)(v) U.S. Citizenship; Qualification
to Own Foreign Flag Vessels....................... 46
9.1(A)(vi) Corporate Existence.................................. 46
9.1(A)(vii) Books and Records.................................... 46
9.1(A)(viii) Taxes and Assessments................................ 46
9.1(A)(ix) Inspection........................................... 46
9.1(A)(x) Compliance with Statutes, etc........................ 46
9.1(A)(xi) Environmental Matters................................ 47
9.1(A)(xii) ERISA................................................ 47
9.1(A)(xiii) Vessel Management.................................... 47
9.1(A)(xiv) Cash................................................. 47
9.1(A)(xv) Working Capital...................................... 48
9.1(A)(xvi) Debt Service Coverage Ratio.......................... 48
9.1(A)(xvii) Total Debt to EBITDA................................. 48
9.1(A)(xviii) Brokerage Commissions, etc........................... 48
9.1(A)(xix) Deposit Accounts; Assignment......................... 48
9.1(A)(xx) Proceeds of Marine Car Carriers (MI)................. 49
9.1(A)(xxi) Year 2000 Issue...................................... 49
9.1(A)(xxii) ISM Code Matter...................................... 49
9.1(A)(xxiii) OMI COLUMBIA......................................... 49
9.1(B)(i) Liens................................................ 50
9.1(B)(ii) Loans, Advances and Investments...................... 51
9.1(B)(iii) Indebtedness ........................................ 51
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9.1(B)(iv) Permitted Third Party Debt........................... 51
9.1(B)(v) Guarantees, etc...................................... 52
9.1(B)(vi) Changes in Business.................................. 52
9.1(B)(vii) Use of Corporate Funds............................... 52
9.1(B)(viii) Issuance of Shares................................... 52
9.1(B)(ix) Sale of Shares....................................... 52
9.1(B)(x) Sale of Assets....................................... 52
9.1(B)(xi) Capital Expenditures................................. 52
9.1(B)(xii) Changes in Offices or Names.......................... 52
9.1(B)(xiii) Changes in Management................................ 53
9.1(B)(xiv) Consolidation and Merger............................. 53
9.1(B)(xv) Chartering-in of Vessels............................. 53
9.1(B)(xvi) Dividends ........................................ 53
9.1(B)(xvii) Loan From Marine Car Carriers (MI)................... 53
9.2 Vessel Valuations........................................... 53
9.3 Asset Maintenance........................................... 53
9.4 Inspection and Survey Reports............................... 54
SECTION 10 ASSIGNMENT...................................................... 54
SECTION 11 ILLEGALITY, INCREASED COST,
NON-AVAILABILITY, ETC............................... 55
11.1 Illegality ........................................ 55
11.2 Increased Cost....................................... 55
11.3 Nonavailability of Funds............................. 56
11.4 Agent's Certificate Conclusive....................... 56
11.5 Compensation for Losses.............................. 56
SECTION 12 CURRENCY INDEMNITY.............................................. 58
12.1 Currency Conversion.................................. 58
12.2 Change in Exchange Rate.............................. 58
12.3 Additional Debt Due.................................. 58
12.4 Rate of Exchange..................................... 58
SECTION 13 FEES AND EXPENSES............................................... 58
13.1 Commitment Fee....................................... 58
13.2 Facility Fee......................................... 58
13.3 Other Fees........................................... 59
13.4 Expenses............................................. 59
SECTION 14 APPLICABLE LAW, JURISDICTION AND WAIVER......................... 59
14.1 Applicable Law....................................... 59
iv
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14.2 Jurisdiction ........................................ 59
14.3 Waiver Of Jury Trial................................. 60
SECTION 15 THE AGENT....................................................... 60
15.1(a) Appointment of Agent................................. 60
15.1(b) Appointment of Security Trustee...................... 60
15.2 Distribution of Payments............................. 61
15.3 Holder of Interest in Note........................... 61
15.4 No Duty to Examine, Etc.............................. 61
15.5 Agent as Lender...................................... 61
15.6(a) Obligations of Agent................................. 61
15.6(b) No Duty to Investigate............................... 61
15.7(a) Discretion of Agent.................................. 61
15.7(b) Instructions of Majority Lenders..................... 61
15.8 Assumption re Event of Default....................... 62
15.9 No Liability of Agent or Lenders..................... 62
15.10 Indemnification of Agent............................. 62
15.11 Consultation with Counsel............................ 63
15.12 Resignation ........................................ 63
15.13 Representations of Lenders........................... 63
15.14 Notification of Event of Default..................... 63
SECTION 16 NOTICES AND DEMANDS............................................. 63
16.1 Notices in Writing................................... 63
16.2 Addresses for Notice................................. 64
16.3 Notices Deemed Received.............................. 64
SECTION 17 MISCELLANEOUS................................................... 64
17.1 Time of Essence...................................... 64
17.2 Unenforceable, etc., Provisions -
Effect............................................ 64
17.3 Indemnification...................................... 65
17.4 References........................................... 65
17.5 Further Assurances................................... 65
17.6 Prior Agreements, Merger............................. 65
17.7 Entire Agreement, Amendments......................... 66
17.8 Headings............................................. 66
CONSENT AND AGREEMENT AND ACCOUNT ASSIGNMENT................................ 67
v
<PAGE> 7
SCHEDULES
1 LENDERS
2 GUARANTORS
3 OTHER SUBSIDIARIES
4 MORTGAGED VESSELS
5 OTHER VESSELS
6 MANAGEMENT AGREEMENTS
7 LITIGATION, SUITS, PROCEEDINGS AND
ENVIRONMENTAL CLAIMS
EXHIBITS
1 AMENDED AND RESTATED TERM LOAN NOTE
2 AMENDED AND RESTATED REVOLVING CREDIT FACILITY NOTE
3 AMENDED AND RESTATED GUARANTY
4 U.S. MORTGAGE
5 U.S. MORTGAGE AMENDMENT
6 LIBERIAN MORTGAGE
7 LIBERIAN MORTGAGE AMENDMENT
8 EARNINGS ASSIGNMENTS
9 INSURANCES ASSIGNMENTS
10 GENERAL SECURITY AGREEMENT
11 ASSIGNMENT OF VESSEL MANAGEMENT RECEIVABLES
12 ASSIGNMENT OF JOINT VENTURE PROCEEDS
13 ASSIGNMENT OF GOVERNMENT RECEIVABLES
vi
<PAGE> 8
14 NEGATIVE PLEDGE
15 DRAWDOWN NOTICE
16 COMPLIANCE CERTIFICATE
17 ASSIGNMENT AND ASSUMPTION AGREEMENT
18 WESTHAMPTON INDENTURE
vii
<PAGE> 9
AMENDED AND RESTATED
TERM LOAN AND REVOLVING CREDIT FACILITY AGREEMENT
THIS AMENDED AND RESTATED TERM LOAN AND REVOLVING CREDIT FACILITY
AGREEMENT (this "Agreement") is made as of the day of June, 1998, by and between
(1) MARINE TRANSPORT LINES, INC., a corporation incorporated under the laws of
the State of Delaware with offices at 1200 Harbour Boulevard, 9th Floor,
Weehawken, New Jersey (the "Borrower"), (2) the financial institutions listed on
Schedule 1 hereto (together with their respective successors and assigns
hereinafter called the "Lenders") and (3) DEN NORSKE BANK ASA, acting through
its New York branch, with offices at 200 Park Avenue, New York, New York 10166
(the "Agent") and amends and restates that certain term loan and revolving
credit facility agreement, dated as of July 23, 1996 (the "Original Credit
Agreement"), among the parties.
WITNESSETH THAT:
WHEREAS:
A. Pursuant to the terms and conditions of the Original Credit
Agreement, the Lenders made (1) the Term Loan to the Borrower in respect of
which, as of the date hereof, the principal amount of Twelve Million One Hundred
Thirteen Thousand Dollars ($12,113,000) remains outstanding and (2) the
Revolving Credit Facility available to the Borrower; and
B. The Borrower has requested and the Lender, subject to the terms
and conditions hereof, has agreed to restructure the Term Loan and the Revolving
Credit Facility
NOW, THEREFORE, in consideration of the premises and of other good
and valuable consideration, the receipt and adequacy whereof are hereby
acknowledged, the parties agree as follows:
1. DEFINITIONS
1.1 Defined Terms. The words and expressions specified in this Agreement shall,
except where the context otherwise requires, have the meanings attributed to
them below:
"Acceptable Accounting Firm" Ernst & Young, or such other
recognized international accounting
firm as shall be approved by the
Agent, such approval not to be
unreasonably withheld;
"Acquisition Agreement" that certain acquisition agreement,
dated as of September 15, 1997,
among OMI Corp.,
<PAGE> 10
Universal Bulk Carriers, Inc., the
Borrower and the persons set forth
on Exhibit A attached thereto,
together with any and all
amendments, modifications or
waivers of provisions thereof and
supplements thereto;
"Advance" each Term Loan Advance and each
Revolving Credit Facility Advance;
"Affiliate" as to any Person, any other Person
that, directly or indirectly,
controls or is controlled by or is
under common control with such
Person. (For purposes of this
definition, the term "control",
including the terms "controlling",
"controlled by" and "under common
control with", of a Person means
the possession, direct or indirect,
of the power to vote 5% or more of
the securities having ordinary
voting power for the election of
directors of such Person or to
direct or cause the direction of
the management and policies of such
Person, whether through the
ownership of voting securities, by
contract or otherwise);
"AMELINA" that certain 10,922 dwt Liberian
flag ammonia tanker named AMELINA,
Official No. 2015 documented under
the laws and flag of the Republic
of Liberia in the name of Oswego
Chemical Carriers Corporation;
"Argosy" Argosy Ventures Ltd., a Delaware
not-for-profit corporation
"Assignment and Assumption the Assignment and Assumption
Agreement(s)" Agreement(s) executed pursuant to
Section 10 substantially in the
form of Exhibit 17;
"Assignment Notices" notices for the (a) Earnings
Assignments substantially in the
form set out in Exhibit 1 thereto
or in such other form as the Agent
may agree;
2
<PAGE> 11
(b) Insurances Assignments
substantially in the form set out
in Exhibit 3 thereto or in such
other form as the Agent may agree;
(c) Assignments of Vessel
Management Receivables
substantially in the form set out
in Exhibit 1 thereto or in such
other form as the Agent may agree;
(d) Assignment of Joint Venture
Proceeds substantially in the form
set out in Exhibit 1 thereto or in
such other form as the Agent may
agree; and
(e) Assignments of Government
Receivables substantially in the
forms set out in Exhibits 1 and 2
thereto or in such other form as
the Agent may agree;
"Assignment of Government the assignments of receivables
Receivables" payable to the Borrower or Intrepid
Ship Management, Inc., as the case
may be, for their respective
contracts with MARAD executed or to
be executed by the Borrower in
favor of the Agent pursuant to, in
the case of the Borrower, the
Original Credit Agreement and, in
the case of Intrepid Ship
Management, Inc., Section 4.1 of
this Agreement, substantially in
the form of Exhibit 13 or in such
other form as the Agent may agree;
"Assignment of Joint Venture the assignment of those proceeds to
Proceeds" which Marine Car Carriers (Del) is
entitled based upon its shares in
Marine Car Carriers (MI) to be
executed by Marine Car Carriers
(Del) in favor of the Agent
pursuant to Section 4.1 of this
Agreement in the form set out in
Exhibit 12 or in such other form as
the Agent may agree;
"Assignment of Vessel the assignments executed or to be
Management Receivables" executed by Marine Transport
Management and Intrepid Ship
Management, Inc. in favor of the
Agent of
3
<PAGE> 12
all right, title and interest of
such Guarantors in their respective
receivables pursuant to, in the
case of Marine Transport
Management, the Original Credit
Agreement and, in the case of
Intrepid Ship Management, Inc.,
Section 4.1 of this Agreement,
substantially in the form set out
in Exhibit 11 or in such other form
as the Agent may require;
"Assignments" the Earnings Assignments, the
Insurances Assignments, the
Assignments of Government
Receivables, the General Security
Agreements, the Assignments of
Vessel Management Receivables and
the Assignment of Joint Venture
Proceeds;
"Banking Day(s)" day(s) on which banks are open for
the transaction of business of the
nature required by this Agreement
or any other documents executed in
connection herewith in London,
England and New York, New York;
"CALINA" that certain 15,661 dwt Liberian
flag ammonia tanker named CALINA,
Official No. 2774 documented under
the laws and flag of the Republic
of Liberia in the name of Oswego
Chemical Carriers Corporation;
"Cash Equivalents" (i) securities issued or directly
and fully guaranteed or insured by
the United States of America or any
agency or instrumentality thereof
(provided that the full faith and
credit of the United States of
America is pledged in support
thereof) having maturities of not
more than ninety (90) days from the
date of acquisition, (ii) time
deposits and certificates of
deposit, denominated in Dollars, of
the Agent, of any Lender or of any
commercial bank of recognized
standing organized under the laws
of any country which is a member of
the Organization of Economic
Cooperation and Development or any
governmental subdivision or taxing
authority of any such
4
<PAGE> 13
country having capital and surplus
in excess of Five Hundred Million
Dollars ($500,000,000) or its
equivalent in such country's
currency, (any such commercial
bank, a "Qualified Bank"), (iii)
repurchase obligations with a term
of not more than seven (7) days for
underlying securities of the types
described in (i) above entered into
with the Agent, any Lender or any
Qualified Bank, and (iv) commercial
paper, denominated in Dollars,
issued by the Agent, any Lender or
by the parent corporation of any
Qualified Bank, and commercial
paper rated at least A-1 or the
equivalent thereof by Standard &
Poor's Corporation or at least P-1
or the equivalent thereof by
Moody's Investor Services, Inc.,
and in each case maturing within
ninety (90) days after the date of
acquisition;
"Code" the Internal Revenue Code of 1986,
as amended, and any successor
statute and regulations promulgated
thereunder;
"Collateral Vessel Value" the aggregate, as calculated from
time to time in the manner provided
in Sections 9.2 and 9.3, of (a) the
FMVs of each of the Vessels then
mortgaged to secure obligations
owed to the Lenders under or in
connection with either this
Agreement or the Related Credit
Agreement and (b) the value of the
OMI COLUMBIA;
"Commitment(s)" that portion of the Term Loan and
the Revolving Credit Facility set
out opposite a Lender's name in
Schedule 1 hereto or, as the case
may be, in any relevant Assignment
and Assumption Agreement, as
reduced from time to time pursuant
to the terms of this Agreement;
"Compliance Certificate" a certificate of the Chief
Financial Officer of Marine
Transport Corporation certifying
the compliance with all of the
covenants of the Borrower and
Marine Transport
5
<PAGE> 14
Corporation contained herein,
delivered to the Agent from time to
time pursuant to Section 9.1(A)(iv)
hereof in the form set out in
Exhibit 16, or in such other form
as the Agent may require;
"Consents and Agreements" such third party consents as may be
required under any contract to
which a Security Party is a party
in order for a Security Party to
grant a security interest pursuant
to any Security Document;
"COURIER" that certain 1977 built 35,662 dwt
product tanker named COURIER,
Official No. 578746, documented
under the laws and flag of the
United States in the name of
Courier Transport, Inc.;
"DOC" means a document of compliance
issued to an Operator in accordance
with rule 13 of the ISM Code;
"Dollars" and the sign "$" the legal currency, at any relevant
time hereunder, of the United
States of America and, for all
payments hereunder, in same day
funds settled through the New York
Clearing House Interbank Payments
system (or such other Dollar funds
as may be determined by the Agent
to be customary for the settlement
in New York City of banking
transactions of the type herein
involved);
"Drawdown Date" each Term Loan Drawdown Date and
each Revolving Credit Facility
Drawdown Date;
"Drawdown Notice" the meaning ascribed thereto in
Section 3.4;
"Earnings Assignments" assignments of the earnings of the
Mortgaged Vessels executed or to be
executed by the appropriate
Shipowning Guarantor or OMI
Challenger Transport, in favor of
the Agent pursuant to, in the case
of Existing Guarantors, the
Original Credit Agreement as
amended and restated
6
<PAGE> 15
hereby and, in the case of New
Guarantors, Section 4.1
substantially in the form set out
in Exhibit 8 or in such other form
as the Agent may require;
"EBITDA" means, on a consolidated basis,
Marine Transport Corporation's
earnings before interest, taxes,
depreciation and amortization
(calculated in accordance with
GAAP) less income from 50% or less,
directly or indirectly, owned
affiliates, based on the preceding
twelve (12) months actual operating
income (for purposes of calculating
EBITDA for the period commencing
from the date hereof and ending on
the first anniversary of the date
hereof, the results for each
quarterly reporting period shall be
annualized);
"Environmental Affiliate" any person or entity liable for
Environmental Claims, which claims
any Security Party may have assumed
by contract or operation of law;
"Environmental Approvals" the meaning ascribed thereto in
Section 2.1(p);
"Environmental Claim" the meaning ascribed thereto in
Section 2.1(p);
"Environmental Laws" the meaning ascribed thereto in
Section 2.1(p);
"ERISA" the Employee Retirement Income
Security Act of 1974, as amended;
"ERISA Affiliate" a trade or business (whether or not
incorporated) which is under common
control with, or part of a
controlled group of corporations
with, any Security Party within the
meaning of Sections 414(b), (c),
(m) or (o) of the Code;
"Events of Default" any of the events set out in
Section 8.1;
7
<PAGE> 16
"Existing Guarantors" each of the companies listed on
Part A of Schedule 2;
"Final Payment Date" June ____, 2003, or if such day is
not a Banking Day, the next
following Banking Day unless such
next following Banking Day falls in
the following month, in which case
the Final Payment Date shall be the
immediately preceding Banking Day;
"Financing Documents" this Agreement, the Notes, the
Guaranty and the Security
Documents;
"FMV" with respect to a Vessel, fair
market value as determined in
accordance with Section 9.2 hereof;
"FNBM" The First National Bank of
Maryland, a bank organized and
existing under the laws of the
United States of America;
"Former Lenders" FNBM, Harrowston and Wolfson;
"Former Lenders Indebtedness: the indebtedness of the Borrower
and/or its Affiliates formerly owed
to the Former Lenders in the
aggregate principal amount of
Twelve Million Five Hundred Twenty
Eight Thousand Dollars
($12,528,000), plus accrued and
unpaid interest thereon;
"GAAP" the meaning ascribed thereto in
Section 1.3;
"General Security Agreements" general security agreements to be
executed by each of the New
Guarantors which does not own a
Mortgaged Vessel in favor of the
Agent pursuant to Section 4.1
substantially in the form set out
in Exhibit 10 or in such other form
as the Agent may require;
"Guarantor(s)" each of the Existing Guarantors and
the New Guarantors;
"Guaranty" the amended and restated guaranty
of the obligations of the Borrower
under this
8
<PAGE> 17
Agreement and under the Notes to be
executed by each Guarantor in favor
of the Agent pursuant to Section
4.l substantially in the form set
out in Exhibit 3 or in such other
form as the Agent may require;
"Harrowston" Harrowston Corporation, a company
organized under the laws of Canada;
"Indebtedness" for any Person at any date of
determination (without
duplication), all (i) indebtedness
of such Person for borrowed money,
(ii) obligations of such Person
evidenced by bonds, debentures,
notes or other similar instruments,
(iii) obligations of such Person
arising from letters of credit or
other similar instruments
(including reimbursement
obligations with respect thereto),
(iv) except trade payables,
obligations of such Person to pay
the deferred and unpaid purchase
price of property or services,
which purchase price is due more
than six (6) months after the date
of placing such property in service
or taking delivery thereof or the
completion of such services, (v)
obligations on account of principal
of such Person as lessee under
capitalized leases, (vi)
indebtedness of other Persons
secured by a lien on any asset of
such Person, whether or not such
indebtedness is assumed by such
Person; provided that the amount of
such indebtedness shall be the
lesser of (a) the fair market value
of such asset at such date of
determination and (b) the amount of
such indebtedness, and (vii)
indebtedness of other Persons
guaranteed by such Person to the
extent such indebtedness is so
guaranteed. The amount of
Indebtedness of any Person at any
date shall be the outstanding
balance at such date of all
unconditional obligations as
described above and, with respect
to contingent obligations, the
maximum liability upon the
occurrence of the contingency
giving rise to the obligation,
9
<PAGE> 18
provided that the amount
outstanding at any time of any
indebtedness issued with original
issue discount is the face amount
of such indebtedness less the
remaining unamortized portion of
the original issue discount of such
indebtedness at such time as
determined in conformity with GAAP;
and provided further that
Indebtedness shall not include any
liability for federal, state, local
or other taxes;
"Insurances Assignments" assignments of the insurances of
the Mortgaged Vessels to be
executed by the appropriate
Shipowning Guarantor in favor of
the Agent or the Westhampton
Trustee, as the case may be,
pursuant to in the case of Existing
Guarantors, the Original Credit
Agreement as amended and restated
hereby and, in the case of the New
Guarantors, Section 4.1
substantially in the form set out
in Exhibit 9 or in such other form
as the Agent may require;
"Interest Notice" a notice delivered to the Agent
pursuant to Section 6.5 specifying
the duration of any relevant
Interest Period;
"Interest Period(s)" period(s) of one (1), two (2),
three (3) or six (6) months
selected by the Borrower or such
other period(s) as may be agreed
between the Borrower and the
Lenders;
"Intrepid Ship Management, Inc." Intrepid Ship Management, Inc., a
corporation organized and existing
under the laws of the State of
Delaware;
"ISM Code" means the International Safety
Management Code for the Safe
Operating of Ships and for
Pollution Prevention constituted
pursuant to Resolution A.741(18)
of the International Maritime
Organization and incorporated into
the Safety of Life at Sea
Convention including any amendments
or extensions thereto and any
regulation issued pursuant thereto;
10
<PAGE> 19
"Key Management Agreements" a) that certain vessel operating
agreement between Marine Transport
Management and Union Carbide
Corporation, dated as of January 1,
1996, for the United States flag
vessel CHEMICAL PIONEER (Official
No. 661060) and any renewals or
extensions thereof,
b) that certain operating
agreement, dated December 18, 1979
between Marine Alaska and Marine
Transport Management, relating to
the United States flag vessel B.T.
ALASKA (Official No. 590208) and
any renewals or extensions thereof,
c) that certain vessel management
agreement between .Marine Transport
Corporation and OMI Challenger
Transport, dated as of January 29,
1997, as amended, for the OMI
COLUMBIA and any renewals or
extensions thereof ,
d) that certain contract No.
DTMA98-98-C-00004, awarded June 12,
1998, between the Borrower and
MARAD relating to the United States
flag vessels CAPE COD and CAPE
CHALMERS and any renewals or
extensions thereof,
e) that certain contract No.
DTMA98-98-C-00009, awarded June 12,
1998, between the Borrower and
MARAD relating to the United States
flag vessels CAPE EDMONT and CAPE
DUCATO and any renewals or
extensions thereof,
f) that certain contract No.
DTMA98-98-C-00010, awarded June 12,
1998, between the Borrower and
MARAD relating to the United States
flag vessels CAPE DECISION and CAPE
DOUGLAS and any renewals or
extensions thereof,
11
<PAGE> 20
g) that certain contract No.
DTMA98-98-C-00011, awarded June 12,
1998, between the Borrower and
MARAD relating to the United States
flag vessels CAPE DIAMOND, and CAPE
DOMINGO and any renewals or
extensions thereof, and
h) that certain contract NO:
DTMA98-98-C-00033, awarded June 12,
1998, between the Borrower and
MARAD relating to the United States
flag vessels CAPE BON and NORTHERN
LIGHT and any renewals or
extensions thereof;
"Liberian Mortgages" those first preferred Liberian ship
mortgages on the each Mortgaged
Vessel registered under the laws
and flag of the Republic of Liberia
to be executed by the appropriate
Shipowning Guarantor in favor of
the Agent pursuant to the Original
Credit Agreement as amended and
restated hereby substantially in
the form set out in Exhibit 6 or in
such other form as the Agent may
require;
"LIBOR" the rate (rounded upward to the
nearest 1/16th of one percent) for
deposits of Dollars for a period
equivalent to the relevant Interest
Period at or about 11:00 a.m.
(London time) on the second London
Banking Day before the first day of
such period as displayed on
Telerate page 3750 (British
Bankers' Association Interest
Settlement Rates) (or such other
page as may replace such page 3750
on such system or on any other
system of the information vendor
for the time being designated by
the British Bankers' Association to
calculate the BBA Interest
Settlement Rate (as defined in the
British Bankers' Association's
Recommended Terms and Conditions
("BBAIRS" terms) dated August
1985)), provided that if on such
date no such rate is so displayed
for the relevant Interest Period,
LIBOR for
12
<PAGE> 21
such period shall be the rate
offered by the Agent for deposits
of Dollars in an amount
approximately equal to the amount
for which LIBOR is to be determined
for a period equivalent to the
relevant Interest Period to prime
banks in the London Interbank
Market at or about 11:00 a.m.
(London time) on the second Banking
Day before the first day of such
period;
"Majority Lenders" Lenders whose Commitments exceed
sixty-seven percent (67%) of the
total Commitments;
"Management Agreements" the management and/or operating
contracts listed on Schedule 6
hereto;
"MARAD" the United States Maritime
Administration:
"Marine Alaska" Marine Alaska, Inc., a Delaware
corporation;
"Marine Car Carriers (Del) " Marine Car Carriers, Inc., a
Delaware corporation;
"Marine Car Carriers (MI) " Marine Car Carriers, Inc. (M.I.), a
Marshall Islands corporation;
"Marine Transport Corporation" Marine Transport Corporation, a
corporation incorporated under the
laws of the State Delaware and
formerly named OMI Corp.;
"Marine Transport Management" Marine Transport Management, Inc.,
a corporation incorporated under
the laws of the State of Delaware;
"Margin" the meaning ascribed thereto in
Section 6.3;
"MARINE CHEMIST" that certain 1970 built 36,526 dwt
chemical tanker named MARINE
CHEMIST, Official No. 529399,
documented under the laws and flag
of the United States in the name of
Marine Chemical Navigation
Corporation;
13
<PAGE> 22
"MARINE DUVAL" that certain 1970 rebuilt 25,131
dwt molten sulphur carrier named
MARINE DUVAL, Official No. 245851,
documented under the laws and flag
of the United States in the name of
Marine Sulphur Shipping
Corporation;
"Materials of Environmental Concern" the meaning ascribed thereto in
Section 2.1(p);
"MCCMI Shareholders Agreement" that certain shareholders agreement
among the shareholders of Marine
Car Carriers (MI) dated as of March
1, 1995;
"Mortgage Amendments" those certain amendments to the
Mortgages to be executed by each of
the Shipowning Guarantors in
respect of its Mortgaged Vessel in
the forms set out in Exhibits 5 and
7 or in such other form as the
Agent may agree;
"Mortgaged Vessels" the Vessels identified on Schedule
4;
"Mortgages" the U.S. Mortgages and the Liberian
Mortgages as amended by the
Mortgage Amendments, and the
Mortgages over the New Mortgaged
Vessels;
"Mortgages Securing the those certain first preferred ship
OMI Debt" mortgages over the Workboats in
favor of the OMI and securing the
OMI Debt;
"Negative Pledge" the negative pledge by OMI
Challenger Transport of any of its
interest in the OMI COLUMBIA or any
Vessel Agreement relating to such
Vessel substantially in the form of
Exhibit 16.
"New Guarantors" each of the companies listed on
Part B of Schedule 2;
"New Mortgaged Vessels" the COURIER, PATRIOT, ROVER, OMS
MAVERICK and OMS TRAVIS;
14
<PAGE> 23
"Notes" the Term Loan Note and the
Revolving Credit Facility Note;
"OMI" OMI Corporation, a corporation
incorporated under the laws of the
Marshall Islands;
"OMI Challenger Transport" OMI Challenger Transport, Inc., a
corporation incorporated under the
laws of the State of Delaware;
"OMI COLUMBIA" that certain 1974 built 138,698 dwt
oil tanker named OMI COLUMBIA,
Official No. 663428, documented
under the laws and flag of the
United States in the name of
Argosy;
"OMI Debt" Indebtedness of Marine Transport
Corporation to OMI in the original
principal amount of Six Million
Four Hundred Forty-Three Thousand
Dollars ($6,443,000);
"OMI COLUMBIA Loan Documents" that certain credit agreement dated
as of January 29, 1997 among
Citicorp North American, Inc., as
agent, the Lenders (as defined
therein), Argosy, et al, and any
documents executed in connection
therewith or securing any
obligation owing thereunder;
"OMS MAVERICK" the United States flag vessel OMS
MAVERICK, Official No. 517406,
registered in the name of OMI
Petrolink Corp.;
"OMS TRAVIS" the United States flag vessel OMS
TRAVIS, Official No. 587445,
registered in the name of OMI
Petrolink Corp.;
"Operator" means any Person approved by the
Agent who is from, time to time
during the Security Period,
concerned with the operation of a
Vessel and falls within the
15
<PAGE> 24
definition of "Company" set out in
rule 1.1.2 of the ISM Code;
"Other Vessels" the vessels identified on Schedule
5;
"PATRIOT" that certain 1976 built 35,662 dwt
product tanker named PATRIOT,
Official No. 571049, documented
under the laws and flag of the
United States in the name of
Patriot Transport, Inc.;
"Permitted Indebtedness" collectively, the Indebtedness
incurred under this Agreement, the
Related Indebtedness, the OMI
Indebtedness and Permitted Third
Party Debt;
"Permitted Liens" the meaning ascribed thereto in
Section 9.1(B)(i);
"Permitted Third Party Debt" Indebtedness, incurred with
recourse to any Security Party or
any other party owned directly or
indirectly by Marine Transport
Corporation and for the purposes of
acquiring new assets or supporting
MARAD vessel management contracts,
not to exceed, in the aggregate,
the principal amount of Twenty
Million Dollars ($20,000,000)
outstanding at any time;
"Person" means any individual, sole
proprietorship, corporation,
partnership (general or limited),
business trust, bank, trust
company, joint venture,
association, joint stock company,
trust or other unincorporated
organization, whether or not a
legal entity, or any government or
agency or political subdivision
thereof;
"Plan" any employee benefit plan covered
by Title IV of ERISA;
"Related Credit Agreement" that certain term loan and
revolving credit agreement of even
date herewith among Marine
Transport Corporation, as borrower,
the Lenders and the Agent, as
16
<PAGE> 25
the same may hereafter be amended
or supplemented;
"Related Indebtedness" the Indebtedness of the Security
Parties owed under and in
connection with the Related Credit
Agreement;
"Related Security Documents" the "Security Documents" as defined
in the Related Credit Agreement;
"Related Term Loan" the "Term Loan" as defined in the
Related Credit Agreement;
"Relevant Contracts" a) that certain time charter, dated
April 31, 1982, of the MARINE DUVAL
to Freeport MacMoran Resource
Partners, Limited Partnership and
any renewals or extensions thereof;
b) the contract of affreightment,
dated as of January 1, 1996, with
Shell Oil Company for the MARINE
CHEMIST and any renewals or
extensions thereof;
c) the contract of affreightment,
dated September 24, 1994, with PPG
Industries, Inc. for the MARINE
CHEMIST and any renewals or
extensions thereof;
d) the contract of affreightment,
dated as of July 1, 1996, with ARCO
Products Company for the MARINE
CHEMIST and any renewals or
extensions thereof;
e) that certain bareboat charter
dated on or about July 29, 1965, of
the CALINA between Oswego Chemical
Carriers Corporation, as owner, and
Oswego Corporation, as charterer
and any renewals or extensions
thereof;
f) that certain time charter, dated
as of March 14, 1978 between Marine
Alaska, Inc. and BP Oil Shipping
Company, USA, for the United States
flag vessel B.T.
17
<PAGE> 26
ALASKA (Official No. 590208) and
any renewals or extensions thereof;
g) that certain time charter, dated
as of June 1, 1994 between OMI
Challenger Transport and BP Oil
Shipping Company, USA for the OMI
COLUMBIA, and
h) that certain time charter, dated
as of January 29, 1997 between
Argosy and OMI Challenger Transport
in respect of the OMI COLUMBIA and
any renewals or extensions thereof;
"Revolving Credit Facility" the sums heretofore advanced and
still outstanding and hereafter to
be advanced by the Lenders to the
Borrower in an aggregate amount not
to exceed at any one time
outstanding One Million Dollars
($1,000,000) pursuant to Section
3.3;
"Revolving Credit Facility Advance" any amount advanced to the Borrower
under the Revolving Credit Facility
on any Revolving Credit Facility
Drawdown Date;
"Revolving Credit Facility Applicable Rate" any rate of interest on the
Revolving Credit Facility Balance
from time to time prescribed by
Section 6.2;
"Revolving Credit Facility Balance" the outstanding Dollar amount of
the Revolving Credit Facility
Advances at any relevant time;
"Revolving Credit Facility Default Rate" has the meaning ascribed thereto in
Section 6.2;
"Revolving Credit Facility Drawdown Date" each date which is a Banking Day
not later than May ____, 2003, upon
which the Borrower has requested
any Revolving Credit Facility
Advance as provided in Section 3.3;
"Revolving Credit Facility Note" the amended and restated promissory
note, amending and restating the
"Revolving Credit Facility Note"
(as defined in the
18
<PAGE> 27
Original Credit Agreement) to be
executed by the Borrower to the
order of the Lenders to evidence
the Revolving Credit Facility
substantially in the form set out
in Exhibit 2 or in such other form
as the Agent may require;
"ROVER" that certain 1977 built 35,662 dwt
product tanker named ROVER,
Official No. 577241, documented
under the laws and flag of the
United States in the name of Rover
Transport, Inc.;
"SAVONETTA" that certain 10,947 dwt Liberian
flag ammonia tanker named
SAVONETTA, Official No. 2129,
documented under the laws and flag
of the Republic of Liberia in the
name of Oswego Chemical Carriers
Corporation;
"Security Documents" the Mortgages, the Assignments, the
Assignment Notices, the Consents
and Agreements, the Negative Pledge
and any other documents that may be
executed as security for the Term
Loan and/or the Revolving Credit
Facility and the Borrower's
obligations arising therefrom;
"Security Parties" the Borrower and each Guarantor;
"Security Period" the period from the initial
Drawdown Date of the initial Term
Loan Advance to the date upon which
all amounts owing under the Term
Loan and the Revolving Credit
Facility and all other amounts due
to the Lenders, the Agent and the
Westhampton Trustee pursuant to the
Financing Documents are prepaid in
full or become repayable and are
repaid in full and no further
Revolving Credit Facility Advances
are available;
"Shipowning Guarantors" each of the Guarantors which owns a
Mortgaged Vessel;
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<PAGE> 28
"SMC" means a safety management
certificate issued for a Vessel in
accordance with rule 13 of the ISM
Code;
7
"Taxes" any present or future income or
other taxes, levies, duties,
charges, fees, deductions, or
withholdings of any nature now or
hereafter imposed, levied,
collected, withheld or assessed by
any taxing authority whatsoever,
except for taxes on or measured by
the income of the Agent or any
Lender imposed by the Agent's or
such Lender's jurisdiction of
organization, the jurisdiction of
the principal place of business of
the Agent or such Lender, the
United States of America, the State
or City of New York or any
governmental subdivision or taxing
authority of any of them or by any
other jurisdiction or taxing
authority having jurisdiction over
the Agent or such Lender (unless
such jurisdiction is asserted by
reason of the activities of the
Security Parties or any of them);
"Term Loan" the sum advanced by the Lenders
pursuant to the Original Credit
Agreement in the current
outstanding principal amount of
Twelve Million One Hundred Thirteen
Thousand Dollars ($12,113,000);
"Term Loan Advance" the amount advanced to the Borrower
pursuant to Section 3.2 on a Term
Loan Drawdown Date;
"Term Loan Applicable Rate" any rate of interest on the Term
Loan Balance from time to time
applicable pursuant to Section 6.1;
"Term Loan Balance" the Dollar amount of the Term Loan
at any relevant time as reduced by
payments pursuant to the terms of
this Agreement;
"Term Loan Default Rate" has the meaning ascribed thereto in
Section 6.1;
20
<PAGE> 29
"Term Loan Drawdown Date" each date, which is a Banking Day
not later than August 15, 1996,
upon which the Borrower has
requested that a Term Loan Advance
be made available to the Borrower
as provided in Section 3.2;
"Term Loan Note" the amended and restated promissory
note, amending and restating "Term
Loan Note A" (as defined in the
Original Credit Agreement) to be
executed by the Borrower to the
order of the Lenders to evidence
the Term Loan substantially in the
form set out in Exhibit 1 or in
such other form as the Agent may
require;
"Term Loan Payment Dates" (i) September ____, 1998 and (ii)
each of the dates falling at
intervals of three (3) months after
such date up to and including the
Final Payment Date, provided,
however, that if any such day is
not a Banking Day, the next
following Banking Day, unless such
next following Banking Day falls in
the following calendar month, in
which case the relevant Term Loan
Payment Date shall be the
immediately preceding Banking Day;
"Total Debt" the Indebtedness of Marine
Transport Corporation on a
consolidated basis;
"Total Loss" the actual, agreed, arranged or
compromised total loss of any
Vessel;
"Unrestricted Cash and Cash
Equivalents" cash or Cash Equivalents
(excluding, however, undrawn
amounts available under the
Revolving Credit Facility or under
the Related Credit Agreement) which
are free of liens and unencumbered
to any party other than the Agent,
the Lenders and the Westhampton
Trustee in connection herewith;
"U.S. Mortgages" the first preferred United States
ship mortgages on each Mortgaged
Vessel registered under the laws
and flag of the
21
<PAGE> 30
United States of America to be
executed by the appropriate
Shipowning Guarantor in favor of
the Westhampton Trustee pursuant
to, in the case of Existing
Guarantors, the Original Credit
Agreement as amended and restated
and, in the case of New Guarantors,
Section 4.1 substantially in the
form set out in Exhibit 4 or in
such other form as the Agent may
require;
"Vessel Agreements" a) the Relevant Contracts;
b) that certain time charter, dated
January 1, 1985 (as amended), of
the SAVONETTA to Hydro Agri
Ammonia, Inc.;
c) that certain time charter, dated
September 16, 1987 (as amended), of
the CALINA to Hydro Agri Ammonia,
Inc.;
d) that certain time charter, dated
January 1, 1985 (as amended), of
the AMELINA to Hydro Agri Ammonia,
Inc.;
e) the Mortgage(s) securing the OMI
Debt; and
f) the OMI COLUMBIA Loan Documents.
"Vessels" the Mortgaged Vessels and the Other
Vessels;
"Westhampton Trustee" Fleet National Bank, a national
banking association, as trustee
pursuant to the Westhampton
Indenture;
"Westhampton Indenture" the Trust Indenture, dated as of
July 23, 1996, between the Lenders
and the Westhampton Trustee
pursuant to the Original Credit
Agreement substantially in the form
set out in Exhibit 18 or in such
other form as the Agent may
require;
22
<PAGE> 31
"Wolfson" The Wolfson Descendants' 1983
Trust, a grantor trust established
under the laws of New Jersey; and
"Work Boats" the United States flag vessels
OMS HARRIS (Official No. 650997),
OMS NUECES (Official No. 570688),
OMS LIBERTY (Official No. 602050)
and
OMS SHELBY (Official No. 603076)
"Year 2000 Issue" the failure of computer software,
hardware and firmware systems and
equipment containing embedded
computer chips properly to receive,
transmit or in any other way
utilize data and information due to
the occurrence of the year 2000 or
the inclusion of dates on or after
January 1, 2000.
1.2 Construction. Words importing the singular number only shall include the
plural and vice versa. Words importing persons shall include companies, firms,
corporations, partnerships, unincorporated associations and their respective
successors and assigns.
1.3 Accounting Terms. All accounting terms not specifically defined herein shall
be construed in accordance with generally accepted accounting principles as in
effect from time to time in the United States of America consistently applied
("GAAP") and all financial statements submitted pursuant to this Agreement shall
be prepared in accordance with, and all historical financial data submitted
pursuant hereto shall be derived from financial statements prepared in
accordance with, GAAP.
2. REPRESENTATIONS AND WARRANTIES
2.1 In order to induce the Agent and the Lenders to amend and restate the
Original Credit Agreement as provided herein and to continue to maintain the
Term Loan and the availability of the Revolving Credit Facility, the Borrower
hereby represents and warrants to the Agent and the Lenders (which
representations and warranties shall survive the execution and delivery of this
Agreement and the Notes and the making of such advances) that:
(a) Due Organization and Power. Each of the Security Parties is duly
formed and is validly existing in good standing under the laws of its
jurisdiction of incorporation, has full power to carry on its business as now
being conducted and to enter into and perform its obligations under those
Financing Documents to which is or is to be a party pursuant to this Agreement,
and has complied with all (i) statutory, regulatory and other requirements
relative to such business; and (ii) such agreements which if not
23
<PAGE> 32
complied with, could reasonably be expected to have a material adverse effect on
its business, assets or operations, financial or otherwise;
(b) Authorization and Consents. All necessary corporate action has
been taken to authorize, and all necessary consents and authorities have been
obtained and remain in full force and effect to permit, each Security Party to
enter into and perform its obligations under those Financing Documents to which
it is or is to be a party pursuant to this Agreement and, in the case of the
Borrower, to borrow, service and repay the Term Loan and the Revolving Credit
Facility and, as of the date of this Agreement, no further consents or
authorities are necessary for the borrowing, service and repayment of the Term
Loan and/or the Revolving Credit Facility or any part thereof;
(c) Binding Obligations. Each of the Financing Documents constitutes
or, when executed will constitute, the legal, valid and binding obligation of
each Security Party which is a party thereto enforceable against such Security
Party in accordance with its terms, except to the extent that such enforcement
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting generally the enforcement of creditors' rights;
(d) No Violation. The execution and delivery of, and the performance
of the provisions of, each Financing Document by each Security Party which is a
party thereto do not, and will not during the Security Period, contravene any
applicable law or regulation existing at the date hereof or any contractual
restriction binding on such Security Party or its certificate of incorporation,
by-laws or equivalent documents;
(e) Litigation. Except as set forth on Schedule 7 hereto, no action,
suit or proceeding is pending or threatened against any Security Party before
any court, board of arbitration or administrative agency which (after taking
into account the benefits of any applicable insurance which can reasonably be
expected to be recovered by the relevant Security Party, as the case may be)
could or might result in any material adverse change in the business or
condition (financial or otherwise) of any thereof;
(f) No Default. No Security Party or Marine Car Carriers (MI) is in
default under any material agreement by which it is bound, or is in default in
respect of any material financial commitment or obligation;
(g) Vessels. As of the date hereof:
(i) each of the Mortgaged Vessels is in the sole and
absolute ownership of the respective Guarantor, as
listed opposite its name in Schedule 4, unencumbered,
save and except for, the respective Mortgage recorded
thereagainst, the relevant Related Security Documents
and the respective Vessel Agreements, and duly
registered in the name of such Guarantor under the
respective flag as set forth in Schedule 4;
24
<PAGE> 33
(ii) each of the Other Vessels is in the sole and absolute
ownership of an Affiliate of the Borrower or, in the
case of OMI COLUMBIA, Argosy, as listed opposite its
name in Schedule 5, unencumbered, save and except for,
the respective Vessel Agreements, and duly registered in
the name of such Affiliate of the Borrower under the
respective flag as set forth in Schedule 5;
(iii) each Vessel will be classed in the highest
classification and rating for vessels of the same age
and type with the respective classification society as
set forth in Schedules 4 and 5 without any material
outstanding recommendations;
(v) each Vessel will be operationally seaworthy and in all
material respects fit for its intended service;
(v) each of the Mortgaged Vessels will be insured in
accordance with the provisions of the governing Mortgage
in favor of the Agent or the Westhampton Trustee, as the
case may be, and the requirements thereof for such
insurances will have been complied with and each of the
Other Vessels will be insured against such risks, in
such amounts and with such insurance companies as would
a reasonably prudent shipowner engaged in the same
trades; and
(vi) each Vessel subject to a charter or other contract of
carriage constituting a Vessel Agreement has been
accepted by its respective charterer and is in service
under such Vessel Agreement;
(h) Insurance. Each of the Security Parties has insured its
properties and assets against such risks and in such amounts as are customary
for companies engaged in similar businesses;
(i) Citizenship and Qualification as Owner. Each Security Party or
other Affiliate of the Borrower owning a United States flag Vessel is a United
States citizen within the meaning of Section 2 of the United States Shipping
Act, 1916, as amended (46 U.S.C. ss.802), qualified to own and operate vessels
in the coastwise trade of the United States of America and each Security Party
or other Affiliate of the Borrower which is the registered owner of a Vessel
registered under a flag other than the United States of America is duly
qualified under the laws of such flag to be the registered owner and operator of
a vessel registered under such flag;
25
<PAGE> 34
(j) Financial Information. Except as otherwise disclosed in writing
to the Agent on or prior to the date hereof, all financial statements,
information and other data furnished by the Borrower to the Agent are complete
and correct, and such financial statements have been prepared in accordance with
GAAP and accurately and fairly present the financial condition of the parties
covered thereby as of the respective dates thereof and the results of the
operations thereof for the period or respective periods covered by such
financial statements and since such date or dates, there has been no material
adverse change in the financial condition or results of the operations of any of
such parties and none thereof has any contingent obligations, liabilities for
taxes or other outstanding financial obligations which are material in the
aggregate except as disclosed in (a) such statements, information and data or
(b) in Schedule 7 prepared pursuant to Section 2.1(e) of this Agreement;
(k) Tax Returns. Except as previously advised to the Lender in
writing, each Security Party has filed all tax returns required to be filed
thereby and has paid all taxes payable thereby which have become due, other than
those (a) not yet delinquent or the nonpayment of which would not have a
material adverse effect on such Security Party; and (b) being contested in good
faith and by appropriate proceedings or other acts and for which adequate
reserves have been set aside on its books;
(l) ERISA. The execution and delivery of this Agreement and the
consummation of the transactions hereunder will not involve any prohibited
transaction within the meaning of ERISA or Section 4975 of the Code and no
condition exists or event or transaction has occurred in connection with any
Plan maintained or contributed to by any Security Party or any ERISA Affiliate
(as such term is hereinafter defined) resulting from the failure of any such
party to comply with ERISA insofar as ERISA applies thereto which is reasonably
likely to result in such Security Party or any ERISA Affiliate incurring any
liability, fine or penalty which individually or in the aggregate would have a
material adverse effect on such Security Party or ERISA Affiliate. As used
herein the term "ERISA Affiliate" means a trade or business (whether or not
incorporated) which is under common control with the Security Party in question
within the meaning of Sections 414(b), (c), (m) or (o) of the Code. Prior to the
date hereof, the Borrower has delivered to the Agent a list of all the employee
benefit plans to which each Security Party or any ERISA Affiliate is a "party in
interest" (within the meaning of Section 3(14) of ERISA) or a "disqualified
person" (within the meaning of Section 4975(e)(2) of the Code);
(m) Chief Executive Office. Each Security Party's chief executive
office and chief place of business and the office in which the records relating
to the earnings and other receivables of such Security Party are kept is, and
will continue to be, located at 1200 Harbour Boulevard, 9th Floor, Weehawken,
New Jersey or, in the case of OMI Petrolink Corp. and its Subsidiaries, 4606 FM
1960 West Suite 200, Houston, Texas and. in the case of Intrepid Ship Management
Inc., 370 Seventh Avenue, 11th Floor, New York, New York;
26
<PAGE> 35
(n) Foreign Trade Control Regulations. None of the transactions
contemplated herein will violate any of the provisions of the Foreign Assets
Control Regulations of the United States of America (Title 31, Code of Federal
Regulations, Chapter V, Part 500, as amended), any of the provisions of the
Cuban Assets Control Regulations of the United States of America (Title 31, Code
of Federal Regulations, Chapter V, Part 515, as amended), any of the provisions
of the Libyan Assets Control Regulations of the United States of America (Title
31, Code of Federal Regulations, Chapter V, Part 550, as amended), any of the
provisions of the Iraqi Sanctions Regulations (Title 31, Code of Federal
Regulations, Chapter V, Part 575, as amended), any of the provisions of the
Iranian Transactions Regulations of the United States of America (Title 31, Code
of Federal Regulations, Chapter V, part 560, as amended), any of the provisions
of the Federal Republic of Yugoslavia (Serbia and Montenegro) Assets Control
Regulations (Title 31, Code of Federal Regulations, Chapter V, Part 585 as
amended) or any of the provisions of the Regulations of the United States of
America Governing Transactions in Foreign Shipping of Merchandise (Title 31,
Code of Federal Regulations, Chapter V, Part 505, as amended);
(o) Equity Ownership. Each of the Security Parties (other than
Marine Transport Corporation) is a direct or indirect wholly-owned subsidiary of
the Marine Transport Corporation. As of the date hereof, Marine Transport
Corporation will not own any shares of capital stock, partnership interest or
any other direct or indirect equity interest in any corporation, partnership or
other entity except the Security Parties and the companies listed on Schedule 3;
(p) Environmental Matters. Except as heretofore disclosed on
Schedule 7, (i) each of the Security Parties and their Environmental Affiliates
will, when required, be in full compliance with all applicable United States
federal and state, local, foreign and international laws, regulations,
conventions and agreements relating to pollution prevention or protection of
human health or the environment (including, without limitation, ambient air,
surface water, ground water, navigable waters, waters of the contiguous zone,
ocean waters and international waters), including, without limitation, laws,
regulations, conventions and agreements relating to (1) emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, wastes,
toxic substances, hazardous materials, oil, hazardous substances, petroleum and
petroleum products and by-products ("Materials of Environmental Concern"), or
(2) the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern
("Environmental Laws"); (ii) each of the Security Parties and their
Environmental Affiliates will, when required, have all permits, licenses,
approvals, rulings, variances, exemptions, clearances, consents or other
authorizations required under applicable Environmental Laws ("Environmental
Approvals") and will, when required, be in full compliance with all
Environmental Approvals required to operate their business as then being
conducted; (iii) none of the Security Parties or their Environmental Affiliates
has received any notice of any claim, action, cause of action, investigation or
demand by any person, entity, enterprise or government, or any political
subdivision, intergovernmental body or agency, department or instrumentality
thereof, alleging potential liability for, or a requirement to incur,
27
<PAGE> 36
investigatory costs, cleanup costs, response and/or remedial costs (whether
incurred by a governmental entity or otherwise), natural resources damages,
property damages, personal injuries, attorneys' fees and expenses, or fines or
penalties, in each case arising out of, based on or resulting from (1) the
presence, or release or threat of release into the environment, of any Materials
of Environmental Concern at any location, whether or not owned by such person,
or (2) circumstances forming the basis of any violation, or alleged violation,
of any Environmental Law or Environmental Approval ("Environmental Claim")
(other than Environmental Claims that have been fully and finally adjudicated or
otherwise determined and all fines, penalties and other costs, if any, payable
by the Security Parties or any Environmental Affiliate any thereof in respect
thereof have been paid in full or are fully covered by insurance (including
permitted deductibles)); and (iv) there are no circumstances existing as of the
date hereof that may prevent or interfere with such full compliance in the
future;
(q) Pending, Threatened or Potential Environmental Claims. Except as
heretofore disclosed on Schedule 7 there are no (1) Environmental Claims pending
or threatened against any Security Party or its Environmental Affiliates and (2)
past or present actions, activities, circumstances, conditions, events or
incidents, including, without limitation, the release, emission, discharge or
disposal of any Materials of Environmental Concern, that could form the basis of
any Environmental Claim against any Security Party or its Environmental
Affiliates;
(r) Compliance with ISM Code. Each Vessel and any Operator complies
with the requirements of the ISM Code, including (but not limited to) the
maintenance and renewal of valid certificates pursuant thereto;
(s) Threatened Withdrawal of DOC or SMC. There is no threatened or
actual withdrawal of any Operator's DOC or the SMC in respect of any Vessel; and
(t) Year 2000 Issue. The Borrower and each of the guarantors have
reviewed the effect of the Year 2000 Issue on the computer software, hardware
and firmware systems and equipment containing embedded microchips owned or
operated by or for the Borrower and the Guarantors or used or relied upon in the
conduct of their business (including systems and equipment supplied by others or
with which such computer systems of the Borrower and the guarantors interface).
The costs to the Borrower and the Guarantors of any reprogramming required as a
result of the Year 2000 Issue to permit the proper functioning of such systems
and equipment and the proper processing of data, and the testing of such
reprogramming, and of the reasonably foreseeable consequence of the year 2000
Issue to the Borrower or any of the Guarantors (including reprogramming errors
and the failure of systems or equipment supplied by others) are not reasonably
expected to result in a Default or Event of Default or to have a material
adverse effect on the business, assets, operations, prospects or condition
(financial or otherwise) of the Borrower or any of the Guarantors.
28
<PAGE> 37
3. ADVANCES
3.1 Purposes. (a) The proceeds of Term Loan shall be applied solely and
exclusively for the purpose of refinancing the Former Lenders Indebtedness
together with a portion of the indebtedness owed to Harrowston and Wolfson and
previously repaid by the Borrower, on a pro rata basis, to Harrowston and
Wolfson in the principal amount of approximately One Million Three Hundred
Thirty-Five Thousand Dollars ($1,335,000)and
(b) the proceeds of Revolving Credit Facility shall be applied
solely and exclusively for working capital purposes of the Borrower and the
Guarantors.
3.2 Term Loan Advances. Each of the Lenders, relying upon each of the
representations and warranties set out in Section 2, hereby agrees with the
Borrower that, subject to and upon the terms of this Agreement, it will on the
Term Loan Drawdown Dates, make the Term Loan Advances available to the Borrower
in an aggregate amount not to exceed, on a pro rata basis, its Commitment for
its respective portion of the Term Loan, provided, however, that (a) the Term
Loan may only be drawn down in a single Advance and (b) to the extent that any
portion of the Term Loan remains undrawn as of 12:00 noon (New York time) on
October 31, 1996, each Lender's commitment to advance such undrawn portion of
its Commitment thereunder shall expire.
3.3 Revolving Credit Facility Advances. Each of the Lenders, relying upon each
of the representations and warranties set out in Section 2, hereby agrees with
the Borrower that, subject to the terms of this Agreement, it will on or before
12:00 noon New York time on the Revolving Credit Facility Drawdown Dates make
the Revolving Credit Facility Advances available to the Borrower in an aggregate
amount not to exceed, on a pro rata basis, its Commitment for its respective
portion of the Revolving Credit Facility, provided, however, that (a) each such
Advance shall be in the minimum amount of One Hundred Thousand Dollars
($100,000) and (b) the maximum aggregate amount of all Revolving Credit Facility
Advances which may be outstanding under this Agreement is One Million Dollars
($1,000,000), as the same may be reduced pursuant to Section 5.7. Within the
limits of the Revolving Credit Facility and upon the conditions herein provided,
the Borrower may from time to time, and on as many occasions as the Borrower may
deem appropriate, borrow pursuant to this Section 3.3, repay pursuant to Section
5.2 and reborrow pursuant to this Section 3.3.
3.4 Drawdown Notice. The Borrower shall not less than three (3) Banking Days
before any Drawdown Date serve a notice (a "Drawdown Notice") on the Agent,
substantially in the form set out in Exhibit 15 or in such other form as the
Agent may agree, which notice shall (a) be in writing addressed to the Agent,
(b) be effective upon receipt by the Agent as aforesaid, provided it is received
before 11:00 a.m. New York time (otherwise it shall be deemed to have been
received on the next Banking Day), (c) specify the Banking Day on which the
relevant Advance is to be drawn down, (d) specify the initial Interest Period,
(e) specify the disbursement instructions and (f) be irrevocable.
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<PAGE> 38
3.5 Effect of Drawdown Notice. Each Drawdown Notice shall be deemed to
constitute a warranty by the Borrower that (a) the representations and
warranties stated in Section 2 (updated mutatis mutandis) are true and correct
in all material respects on the date of such Drawdown Notice and will be true
and correct in all material respects on such drawdown date as if made on such
date, and (b) that no Event of Default or any event which with the giving of
notice or lapse of time or both would constitute an Event of Default has
occurred and is continuing.
3.6 Notation of Advances. Each Revolving Credit Facility Advance made by the
Lenders to the Borrower may be evidenced by a notation of the same made by the
Agent on the grid attached to the Revolving Credit Facility Note, which
notation, absent manifest error, shall be prima facie evidence of the amount of
the relevant Advance.
4. CONDITIONS
4.1 Conditions to Restructure the Term Loan and Revolving Credit Facility. The
obligation of the Lenders to restructure the Term Loan and the Revolving Credit
Facility as provided in this Agreement is expressly subject to the satisfaction
of the following conditions precedent:
(a) the Agent shall have received the following documents in form
and substance satisfactory to the Agent and its legal advisors:
(i) copies, certified as true and complete by an officer of
each Security Party, of the resolutions of the board of
directors and, in the case of the Guarantors (other than
Marine Transport Corporation), the shareholders thereof
evidencing approval of this Agreement and the other
Financing Documents called for hereby to which such
Security Party is a party and authorizing an appropriate
officer or officers or attorney-in-fact or
attorneys-in-fact to execute the same on its behalf;
(ii) copies, certified as true and complete by an officer of
the Borrower or other party acceptable to the Agent, of
all documents evidencing any other necessary action
(including actions by such parties thereto other than
the Borrower as may be required by the Agent), approvals
or consents with respect to the Financing Documents;
(iii) copies, certified as true and complete by an officer of
the respective Security Party of the certificate of
incorporation and by-laws (or equivalent instruments)
thereof;
(iv) a certificate of the Secretary of the Marine Transport
Corporation certifying that it legally and beneficially,
30
<PAGE> 39
directly or indirectly, owns all of the issued and
outstanding shares of the capital stock of each of the
Borrower and the other Guarantors, in each case, free
and clear of any liens, claims, pledges or other
encumbrances;
(v) a certificate of the Secretary of Marine Car Carriers
(Del) certifying that it legally and beneficially owns
fifty percent (50%) of the issued and outstanding shares
of Marine Car Carriers (MI), free and clear of any
liens, claims, pledges or other encumbrances whatsoever
except for a pledge in favor of the Agent;
(vi) certificate of the Secretary of each Security Party
(other than Marine Transport Corporation) certifying as
to the record ownership of all of its issued and
outstanding capital stock;
(vii) certificates of the jurisdiction of incorporation of
each Security Party as to the good standing of such
corporation;
(viii) copies of each Vessel Agreement, Management Agreement,
the MCCMI Shareholders Agreement, all agreements and
other documents evidencing Permitted Indebtedness and
Permitted Liens outstanding and existing as of the date
hereof and the Acquisition Agreement each certified by
an officer of Marine Transport Corporation to be a true
and complete copy thereof;
(ix) letters, in form and substance satisfactory to the
Agent, from counsel representing the Borrower (or its
relevant Affiliate) in connection with each action, suit
or proceeding listed on Schedule 7 or in connection with
any Environmental Claim disclosed to the Agent,
regarding details of such action, suit, proceeding or
claim including a description of the nature of the
claim, and the Borrower's (or its Affiliate's) potential
liabilities and an opinion as to the likely outcome of
the relevant matter; and
(x) a pro forma consolidated balance sheet for Marine
Transport Corporation, certified to be true and correct
by the chief financial officer of such Guarantor,
demonstrating that, as of the date hereof and after
giving effect to the transactions contemplated hereby
and by the Related Credit Agreement and the Acquisition
Agreement, such Guarantor has Unrestricted Cash and Cash
Equivalents in an amount at least equal to Two Million
Dollars ($2,000,000) (for
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<PAGE> 40
purposes of determining compliance with this condition,
Unrestricted Cash or Cash Equivalents held by Marine Car
Carriers (MI) for the benefit of Marine Car Carriers
(Del) shall be calculated on the basis of the Borrower's
share of such sums after deduction of any taxes that
would be payable (as of the time of determination) upon
the distribution and repatriation of such sums by Marine
Car Carriers (MI) to Marine Car Carriers (Del) or any of
the Affiliate of the Borrower).
(b) the Agent shall have received evidence satisfactory to it and
its legal advisors that:
(i) each of the Mortgaged Vessels is in the sole and
absolute ownership of the respective Guarantors, other
Affiliates of the Borrower as set forth in Schedules 4
and 5 or Argosy save and except for, in the case of the
Mortgaged Vessels, the respective Mortgage recorded
thereagainst and for the respective Vessel Agreements
and Related Security Documents, and duly registered in
the name of such Guarantor or such Affiliate under the
respective flag as set forth in Schedules 4 and 5;
(ii) each Vessel is classed in the highest classification and
rating for vessels of the same age and type with the
respective classification society as set forth in
Schedules 4 and 5 without any material outstanding
recommendations;
(iii) each of the Vessels is operationally seaworthy and in
every material respect fit for its intended service;
(iv) each of the Mortgaged Vessels will be insured in
accordance with the provisions of the Mortgage on her in
favor of the Agent or the Westhampton Trustee, as the
case may be, and the requirements thereof in respect of
such insurances will have been met and each of the Other
Vessels will be insured against such risks, in such
amounts and with such insurance companies as would be
required by a reasonably prudent shipowner engaged in
the same trades;
(v) each Vessel subject to a charter or other contract of
carriage constituting a Vessel Agreement has been
accepted by its respective charterer and is in service
under such Vessel Agreement; and
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<PAGE> 41
(vi) that, except as provided in the Financing Documents,
there are no restrictions or limitations on the
Borrower's ability to withdraw or apply any the funds of
Marine Car Carriers (MI) held for the benefit of Marine
Car Carriers (Del) and payable to the Borrower for such
purposes as the Borrower may deem fit.
(c) the Borrower shall have duly executed and delivered:
(i) this Agreement and
(ii) the Notes;
(d) each Guarantor shall have executed and delivered:
(i) the Guaranty,
(ii) the Consent and Agreement and Account Assignment
provided at the end of this Agreement, and
(iii) Uniform Commercial Code Financing Statements for filing
in New Jersey;
(e) each Shipowning Guarantor shall have duly executed and
delivered:
(i) in the case of Existing Guarantors, its Mortgage
Amendment;
(ii) in the case of New Guarantors:
(A) the Mortgage over its Mortgaged Vessel(s),
(B) an Insurances Assignment with respect to such
Vessel(s),
(C) an Earnings Assignment with respect to such
Vessel(s),
(D) its Assignment Notices, and
(E) Uniform Commercial Code Financing Statements for
filing in New Jersey and, for Guarantors
incorporated in Delaware, Delaware;
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<PAGE> 42
(f) OMI Challenger Transport shall have duly executed and delivered
the Negative Pledge:
(g) the New Guarantors which do not own a Mortgaged Vessel (other
than OMI Challenger Transport) shall have executed and delivered:
(i) its General Security Agreement, and
(ii) Uniform Commercial Code Financing Statements for filing
in New Jersey and in its jurisdiction of incorporation;
(h) Intrepid Ship Management, Inc. shall have executed and
delivered:
(i) its Assignment of Government Receivables,
(ii) its Assignment Notices, and
(iii) Uniform Commercial Code Financing Statements for filing
in New Jersey and in its jurisdiction of incorporation;
(i) Marine Transport Corporation shall have executed and delivered:
(i) its Assignment of Vessel Management Receivables;
(ii) its Assignment Notices and
(iii) Uniform Commercial Code Financing Statements for filing
in New Jersey and in its jurisdiction of incorporation;
(j) the Agent shall have received appraisals, in form and substance
satisfactory to the Agent, from two independent shipbrokers acceptable to the
Agent evidencing that the Borrower is in compliance with Section 9.3, each of
which appraisals shall be dated, and the appraisals contained therein shall be
as of a date, no earlier than ninety (90) days prior to the date hereof;
(k) the Agent shall have received a certificate of the chief
financial officer of each Guarantor (other than Marine Transport Corporation)
confirming the representations and warranties with respect to solvency set forth
in its Guaranty and containing conclusions as to the solvency of such Guarantor;
(l) the Agent shall be satisfied that no Security Party is subject
to any Environmental Claim (except as set forth on Schedule 7) which could have
a material adverse effect on the business, assets or results of operations of
any thereof;
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<PAGE> 43
(m) the Agent shall have received payment in full of all fees and
expenses due to the Agent and the Lenders on or prior to the date thereof under
Section 13;
(n) the Agent shall have received evidence satisfactory to it and to
its legal advisors that, save for the liens created by the Mortgages, the
Assignments, the Related Security Agreements and the Vessel Agreements there are
no liens, charges or encumbrances of any kind whatsoever on any of the Vessels
or on their respective earnings except as permitted hereby or by any of the
Security Documents;
(o) each party which the Agent shall have required to execute a
Consent and Agreement shall have executed a Consent and Agreement, in each case,
in form and substance satisfactory to the Agent;
(p) the Westhampton Trustee shall have duly authorized, executed and
delivered any trust receipts in respect of collateral provided by the New
Guarantors owning Mortgaged Vessels under the Westhampton Indenture and shall
have duly accepted the trust in respect thereof created by the Westhampton
Indenture;
(q) all conditions precedent to the advancement of the term loan
under the Related Credit Agreement shall have been met or waived to the
satisfaction of the Lenders;
(r) the transactions contemplated by the Acquisition Agreement shall
subject only to consummation of this Agreement and the Related Credit Agreement,
have been consummated in accordance with the provisions thereof, and the legal
status and corporate structure of Marine Transport Corporation shall be
satisfactory to the Agent and its legal counsel
(s) the terms and conditions of the Permitted Indebtedness and
Permitted Liens shall be in form and substance acceptable to the Agent; and
(t) the Agent shall have received legal opinions from (i) Peter N.
Popov, Esq., in-house counsel for the Security Parties, (ii) Kaye, Scholer,
Fierman, Hays & Handler, L.L.P., special counsel to the Security Parties (iii)
Shipman & Goodwin, special counsel to the Westhampton Trustee and (iv) Seward &
Kissel, special counsel to the Agent and the Lenders, in each case in such form
as the Agent may require, as well as such other legal opinions as the Agent
shall have required as to all or any matters under the laws of the United States
of America, the States of New York, New Jersey and Texas covering the
representations and conditions which are the subjects of Sections 2 and 4.1.
4.2 Further Conditions Precedent. The obligation of the Lenders to enter into
this Agreement or to make any Advance available to the Borrower shall be
expressly and separately from the foregoing conditional upon, as of the date
hereof and at each Drawdown Date:
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<PAGE> 44
(a) the Agent having received the Drawdown Notice in accordance with
the terms of Section 3.4;
(b) the representations stated in Section 2 (updated mutatis
mutandis to such date) being true and correct as if made on that date;
(c) no Event of Default having occurred and being continuing and no
event having occurred and being continuing which, with the giving of notice or
lapse of time, or both, would constitute such an Event of Default;
(d) the Agent being satisfied that no change in any applicable laws,
regulations, rules or in the interpretation thereof shall have occurred which
make it unlawful for the Borrower or any other of the parties thereto to make
any payment as required under the terms of the Financing Documents or any of
them; and
(e) there having been no material adverse change in the financial
condition of the Security Parties taken as a whole since the date hereof.
4.3 Satisfaction after Drawdown. Without prejudice to any of the terms and
conditions of this Agreement, in the event the Lenders, in their sole
discretion, makes any Advance prior to the satisfaction of all or any of the
conditions precedent set forth in Sections 4.1 and 4.2, the Borrower hereby
covenants and undertakes to satisfy or procure the satisfaction of such
condition or conditions within fourteen (14) days after the relevant Drawdown
Date (or such longer period as the Lenders, in their sole discretion, may
agree).
4.4 Breakfunding Costs. In the event that, on any date specified for the making
of an Advance in any Drawdown Notice, the Lenders shall not be required under
this Agreement to make such advance available under this Agreement, the Borrower
shall indemnify and hold the Lenders fully harmless against any losses which the
Lenders or any thereof may sustain as a result of borrowing or agreeing to
borrow funds to meet the drawdown requirement of the Borrower and the
certificate of the relevant Lender(s) shall, absent manifest error, be
conclusive and binding on the Borrower as to the extent of any such losses.
5. REPAYMENT, PREPAYMENT AND REDUCTION OF FACILITIES.
5.1 Repayment of Term Loan. The Borrower shall repay the principal of the Term
Loan in twenty (20) quarterly installments in Dollars in freely available-same
day funds on the Term Loan Payment Dates, the first four (4) installments shall
each be in the principal amount of Two Hundred Fifty Thousand Dollars
($250,000), the next fifteen (15) of which shall be in the principal amount of
Four Hundred Thirteen Thousand Three Hundred Twelve and 50/100 Dollars
($413,312.50) and twentieth such installment shall be in the amount necessary to
repay the Term Loan in full.
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<PAGE> 45
5.2 Revolving Credit Facility. Subject to the provisions of Section 3.3, any
outstanding Revolving Credit Facility Advances (a) may be repaid (together with
any and all actual costs or expenses incurred by any Lender as the result of any
breaking of funding (as certified by the relevant Lender, which certification
shall, absent any manifest error, be conclusive and binding on the Borrower) on
any Banking Day (in Dollars in freely available-same day funds equal to or
exceeding One Hundred Thousand Dollars ($100,000), each such repayment to be in
an integral multiple of One Hundred Thousand Dollars ($100,000)) and (b) must be
repaid (i) on the last date of then prevailing Interest Period in respect of
such Advance and (ii) on or before the Final Payment Date.
5.3 Voluntary Prepayment of Term Loan. The Borrower may prepay any Term Loan
Advance on any Banking Day, in whole or in part, without penalty or premium (in
Dollars in freely available-same day funds equal to or exceeding One Hundred
Thousand Dollars ($100,000), each such repayment to be in an integral multiple
of One Hundred Thousand Dollars ($100,000)), on any Banking Day upon giving the
Agent not less than five (5) Banking Days prior written notice (which notice
shall be irrevocable and shall specify the amount and date of prepayment).
5.4 Mandatory Prepayment of Term Loan. Upon the sale, disposition or Total Loss
of any Vessel or any other asset (having a fair market value equal or exceeding
One Hundred Thousand Dollars ($100,000) directly or indirectly owned by the
Borrower, the Borrower shall prepay the Term Loan, in part and without penalty,
in amount equal to the proceeds of the sale, disposition or insurance net of
taxes payable as a result of any such sale or disposition.
5.5 Prepay Term Loans Pro Rata. Any prepayment made hereunder (including,
without limitation, those made pursuant to Sections 5.3 and 5.4, but excluding a
prepayment under Section 9.3) or under the Related Credit Agreement shall be
applied against the Term Loan and the Related Term Loan, pro rata.
5.6 Application of Prepayments. Any prepayment of the Term Loan made hereunder
(including, without limitation, those made pursuant to Sections 5.3, 5.4 and
9.3), shall be subject to the condition that:
(a) any partial prepayment made shall be applied in or towards
satisfaction of the repayment installments of the Term Loan in inverse order of
maturity;
(b) any amounts prepaid shall not be available for re-borrowing; and
(c) on the date of prepayment all accrued interest to the date of
such prepayment shall be paid in full with respect to the portion of the
principal being prepaid, together with any and all actual costs or expenses
incurred by any Lender as the result of any breaking of funding (as certified by
the relevant Lender, which certification shall, absent any manifest error, be
conclusive and binding on the Borrower).
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<PAGE> 46
5.7 Voluntary Reduction of Revolving Credit Facility. The Borrower shall have
the right, at any time and from time to time, upon giving to the Agent not less
than five (5) Banking Days prior written notice (which notice shall be
irrevocable) to terminate in whole, or reduce the available unused portion of,
the Revolving Credit Facility; provided, however, that each partial reduction
shall be equal to or shall exceed One Hundred Thousand Dollars ($100,000) and
shall be an integral multiple of One Hundred Thousand Dollars ($100,000). Upon
any reduction of the Revolving Credit Facility as provided in this Section, each
Lender's Commitment to make Revolving Credit Facility Advances shall be reduced
pro rata.
6. INTEREST AND RATE
6.1 Term Loan Applicable Rate and Default Rate. The Term Loan Balance shall bear
interest at the Term Loan Applicable Rate which shall be the rate per annum
which is equal to the aggregate of (a) LIBOR for the applicable Interest Period
(determined in accordance with Section 6.5) plus (b) the then prevailing Margin.
Any principal payment with respect to the Term Loan not paid when due, whether
on a Term Loan Payment Date or by acceleration, shall bear interest thereafter
at a rate per annum of two percent (2.0%) over the Term Loan Applicable Rate in
effect with respect to such payment at the time of such default (the "Term Loan
Default Rate").
6.2 Revolving Credit Facility Applicable Rate and Default Rate. The Revolving
Credit Facility Balance shall bear interest at the Revolving Credit Facility
Applicable Rate which shall be equal to the aggregate of (a) LIBOR for the
applicable Interest Period (determined in accordance with Section 6.5) plus (b)
the then prevailing Margin plus (c) one quarter of one percent (0.25%) per
annum. Any principal payment with respect to the Revolving Credit Facility not
paid when due, whether by acceleration or otherwise, shall bear interest
thereafter at a rate per annum of two percent (2.0%) over the Revolving Credit
Facility Applicable Rate in effect with respect to such payment at the time of
such default (the "Revolving Credit Facility Default Rate").
6.3 Determination of Applicable Margin. The Margin shall be determined by the
Agent two (2) Banking Days prior to the first day of the relevant Interest
Period. Prior to the day falling two (2) Banking Days after the date on which
Marine Transport Corporation delivers its first quarterly financial report to
the Agent in accordance with Section 9.1(A)(iv), the Margin shall be equal to
one and three quarters of one percent (1.75%) per annum. Thereafter, the Margin
shall be based upon the then prevailing ratio of Marine Transport Corporation's
Total Debt to EBITDA, as determined in accordance with Section 9.1(A)(xvii) as
follows:
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<PAGE> 47
<TABLE>
<CAPTION>
Applicable Margin Total Debt to EBITDA
----------------- --------------------
<S> <C>
2.25% > 3.0x
2.00% <=3.0x but >2.5x
1.75% <=2.5x but >2.0x
1.50% <=2.0x but >=1.0x
1.25% <1.0x
</TABLE>
6.4 Determination of LIBOR. LIBOR shall be determined by the Agent two (2)
Banking Days prior to the first day of the relevant Interest Period and together
with any and all actual costs or expenses incurred by any Lender as the result
of any breaking of funding (as certified by the relevant Lender, which
certification shall, absent any manifest error, be conclusive and binding on the
Borrower). The Borrower shall be promptly notified in writing of such
determination of the Term Loan Applicable Rate and the Revolving Credit Facility
Applicable Rate, as the case may be. Absent manifest error, such determination
shall be conclusive and binding upon the Borrower.
6.5 Interest Periods. For purposes of funding any Advance, the Borrower may
select Interest Periods of one (1), two (2), three (3) or six (6) months (or for
such longer periods as the Lenders may, in their sole discretion agree),
provided, however, that (a) at all times the Borrower must select an Interest
Period for a portion of each Advance so that sufficient deposits shall mature on
each Payment Date to cover the principal installments due on such dates and (b)
no more than two (2) Interest Periods may be running simultaneously for the
entire Term Loan Balance and no more than three (3) Interest Periods may be
running at any one time for the entire Revolving Credit Facility Balance. No
Interest Period may extend beyond the Final Payment Date. The Borrower shall
give the Agent an Interest Notice specifying the Interest Period selected at
least three (3) Banking Days prior to the end of any then existing Interest
Period. If at the end of any then existing Interest Period the Borrower fails to
give an Interest Notice, the relevant Interest Period shall be three (3) months.
The Borrower's right to select an Interest Period shall be subject to the
restriction that no selection of an Interest Period shall be effective unless
the Lenders are satisfied that the necessary funds will be available to the
Lenders for such period and that no Event of Default or event which, with the
giving of notice or lapse of time, or both, would constitute an Event of Default
shall have occurred and be continuing.
6.6 Interest Payments. The Borrower agrees to pay interest on each Advance on
the last day of each Interest Period applicable to such Advance and at such
other times as interest is required to be paid by each Lender on the deposits
acquired thereby to fund the relevant Advance, or any portion thereof, as the
case may be, and, in the event any Interest Period shall extend beyond three (3)
months, three (3) months after the commencement of such Interest Period and each
three (3) month anniversary thereafter until the end of the Interest Period; and
6.7 Payment on Banking Day. If interest would, under Section 6.6, be payable on
a day which is not a Banking Day, it shall then be payable on the next following
Banking
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<PAGE> 48
Day, unless such next following Banking Day falls in the following month in
which case it shall be payable on the Banking Day immediately preceding the day
on which such interest would otherwise be payable.
6.8 Calculation of Interest. All interest shall accrue and be calculated on the
actual number of days elapsed and on the basis of a three hundred sixty (360)
day year.
7. PAYMENTS
7.1 Place of Payments, No Set Off. All payments to be made hereunder by the
Borrower shall be made to the Agent, not later than 11 a.m. New York time (any
payment received after 11 a.m. New York time shall be deemed to have been paid
on the next Banking Day) on the due date of such payment, at its office located
at 200 Park Avenue, New York, New York 10166 or to such other office of the
Agent as the Agent may direct, without set-off or counterclaim and free from,
clear of, and without deduction for, any Taxes, provided, however, that if the
Borrower shall at any time be compelled by law to withhold or deduct any Taxes
from any amounts payable to the Agent or the Lenders hereunder, then the
Borrower shall pay such additional amounts in Dollars as may be necessary in
order that the net amounts received after any such withholding or deduction
shall equal the amounts which would have been received if such withholding or
deduction were not required and, in the event any withholding or deduction is
made, whether for Taxes or otherwise, the Borrower shall promptly send to the
Agent and the Lenders such documentary evidence for such withholding or
deduction as may be required from time to time by the Agent or the relevant
Lender, as the case may be.
7.2 Tax Credits. If any Lender obtains the benefit of a credit against the
liability thereof for federal income taxes imposed by any taxing authority for
all or part of the Taxes as to which the Borrower has paid additional amounts as
aforesaid (and such Lender agrees to use its best efforts to obtain the benefit
of any such credit which may be available to it, provided it has knowledge that
such credit is in fact available to it), then such Lender shall reimburse the
Borrower for the amount of the credit so obtained. Each Lender agrees that in
the event that Taxes are imposed on account of the situs of its loans hereunder,
such Lender, upon acquiring knowledge of such event, shall, if commercially
reasonable, shift such loans on its books to another office of such Lender so as
to avoid the imposition of such Taxes.
8. EVENTS OF DEFAULT
8.1 In the event that any of the following events shall occur and be continuing:
(a) Non-Payment of Principal. Any principal of the Term Loan or the
Revolving Credit Facility is not paid on the due date; or
(b) Non-Payment of Interest or Other Amounts. Any interest on the
Term Loan, the Revolving Credit Facility or any other amount becoming payable to
the Agent, the Lenders or the Westhampton Trustee under any Financing Document
is not
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<PAGE> 49
paid on the due date or date of demand (as the case may be), and such default
continues unremedied for a period of five (5) Banking Days; or
(c) Representations. Any representation, warranty or other statement
made by any Security Party in any Financing Document or in any other instrument,
document or other agreement delivered in connection with any thereof proves to
have been untrue or misleading in any material respect as of the date when made
or confirmed; or
(d) Covenants. Any Security Party defaults in the due and punctual
observance or performance of any other term, covenant or agreement contained in
any Financing Document or in any other instrument, document or other agreement
delivered in connection herewith or therewith, or it becomes impossible or
unlawful for any Security Party to fulfill any such term, covenant or agreement
or there occurs any other event which constitutes a default under any Financing
Document, in each case other than an Event of Default referred to elsewhere in
this Section 8.1, and such default, impossibility and/or unlawfulness, in the
reasonable opinion of the Majority Lenders, would be likely to have a material
adverse effect on the rights of the Lenders, the Agent or the Westhampton
Trustee under any Financing Document or on the rights of the Lenders, the Agent
or the Westhampton Trustee to enforce any Financing Document, and continues
unremedied or unchanged, as the case may be, for a period of thirty (30) days;
or
(e) Indebtedness. Any Security Party, Marine Car Carriers (MI) or
any wholly owned subsidiary of any such party shall default in the payment when
due (subject to any applicable grace period) of any Indebtedness in an amount in
excess of Two Hundred Fifty Thousand Dollars ($250,000) or such Indebtedness is,
or by reason of such default is subject to being, accelerated or any party
becomes entitled to enforce the security for any such Indebtedness and such
party takes steps to enforce the same, unless such default or enforcement is
being contested in good faith and by appropriate proceedings or other acts and
the Security Party, Marine Car Carriers (MI) or subsidiary, as the case may be,
shall set side on its books adequate reserves with respect thereto; or
(f) Change of Control; Ownership or Management of Other Security
Parties. There is a change of control of any Security Party and the Lenders have
not prior thereto consented in writing to such change. As used herein, "change
of control" means (i) with respect to Marine Transport Corporation, (A) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 (the "Exchange Act")) is or becomes the beneficial owner
(as defined in Rules 13d-3 and 13d-5 promulgated pursuant to the Exchange Act),
directly or indirectly, of more than fifty percent (50%) of the total voting
power of the voting stock of Marine Transport Corporation or (B) the Board of
Directors of Marine Transport Corporation ceases to consist of a majority of the
existing directors or directors elected by the existing directors (as used
herein, "existing director" means each of the Directors of Marine Transport
Corporation as of the date immediately following consummation of the
transactions contemplated by the Acquisition Agreement) or (ii), with respect to
any other Security
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<PAGE> 50
Party, any material change in the beneficial stock ownership, voting control or
senior management of any of the Security Parties; or
(g) US Citizenship. Any Security Party owning a United States flag
Vessel ceases to be a United States of America citizen within the meaning of
Section 2 of the United States Shipping Act of 1916, as amended, qualified to
operate vessels in the coastwise trade; or
(h) Bankruptcy. Any Security Party or Marine Car Carriers (MI)
commences any proceeding under any reorganization, arrangement or readjustment
of debt, dissolution, winding up, adjustment, composition, bankruptcy or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect ("Proceeding"), or there is commenced against any thereof any Proceeding
and such Proceeding remains undismissed or unstayed for a period of thirty (30)
days or any receiver, trustee, liquidator or sequestrator of, or for, any
thereof or any substantial portion of the property of any thereof is appointed
and is not discharged within a period of thirty (30) days or any thereof by any
act indicates consent to or approval of or acquiescence in any Proceeding or the
appointment of any receiver, trustee, liquidator or sequestrator of, or for,
itself or of, or for, any substantial portion of its property; or
(i) Termination of Operations; Sale of Assets. Without the Agent's
prior written consent, any Security Party ceases its operations or sells or
otherwise disposes of all or substantially all of its assets or all or
substantially all of the assets of the any Security Party are seized or
otherwise appropriated; or
(j) Judgments. Any judgment or order is made which would render
ineffective or invalid any Financing Documents; or
(k) Inability to Pay Debts. Any Security Party or Marine Car
Carriers (MI) is unable to pay or admits its inability to pay its debts as they
fall due or a moratorium shall be declared in respect of any material
indebtedness of any Security Party or Marine Car Carriers (MI); or
(l) Change in Financial Position. Any change in the financial
position of the Security Parties (taken as a whole) which, in the reasonable
opinion of the Majority Lenders, shall have a material adverse effect on the
ability of any Security Parties to perform its respective material obligations
under any Financing Document; or
(m) Relevant Contracts. Any of the Relevant Contracts or the MCCMI
Shareholders Agreement is terminated or is materially amended or modified
without the prior written consent of the Majority Lenders, or any party to a
Relevant Contract defaults or ceases to perform under such agreement for any
reason whatsoever and, with regard to any such termination, default or
nonperformance of a Relevant Contract, the relevant Vessel shall not be engaged
in an alternative employment, acceptable to the Lenders, under a contract,
acceptable to the Lenders, within ninety (90) days of such termination, default
or nonperformance; or
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<PAGE> 51
(n) Key Management Agreements. Any of the Key Management Agreements
(including any extensions or renewals thereof) is terminated prior to its stated
termination date or is materially amended or modified without the prior written
consent of the Majority Lenders, or any party to a Key Management Agreement
defaults or ceases to perform under such agreement for any reason whatsoever
and, as a result of such default or non-performance, the obligor under such
agreement ceases to pay or be obligated to pay to the relevant Security Party,
as the case may be, amounts payable by such obligor under such agreement; or
(o) Related Credit Agreement, OMI COLUMBIA Loan Documents and
Mortgage Securing OMI Debt. An "Event of Default" (as defined in any of the
Related Credit Agreement, the OMI COLUMBIA Loan Documents or the Mortgage
Securing the OMI Debt) shall have occurred and be continuing
then the Lenders' obligation to make any Advances available shall cease and the
Lenders may, by notice to the Borrower, declare the entire unpaid balance of the
Term Loan, accrued interest, the entire Revolving Credit Facility Balance,
accrued interest, and any other sums payable by the Borrower hereunder and under
any other Financing Document due and payable, whereupon, the same shall
forthwith be due and payable without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived; provided that upon the
occurrence of an event specified in subsections (h) or (k) of this Section 8.1,
the Notes shall be immediately due and payable without declaration or other
notice to the Borrower. In such event, the Lenders may proceed to protect and
enforce their rights by action at law, suit in equity or in admiralty or other
appropriate proceeding, whether for specific performance of any covenant
contained in any Financing Document, or in aid of the exercise of any power
granted in any thereof, or the Lenders may proceed to enforce the payment of the
Notes or to enforce any other legal or equitable right of the Lenders, or
proceed to take any action authorized or permitted under the terms of any of the
Security Documents or by applicable law for the collection of all sums due, or
so declared due, on the Notes, including, without limitation, the right to
appropriate and hold, or apply (directly, by way of set-off or otherwise) to the
payment of the obligations of the Borrower to the Lenders, the Agent or the
Westhampton Trustee under any Financing Document (whether or not then due) all
moneys and other amounts of the Borrower then or thereafter in possession of any
Lender, the Agent or the Westhampton Trustee, the balance of any deposit account
(demand or time, matured or unmatured) of the Borrower then or thereafter with
any Lender, the Agent or the Westhampton Trustee and every other claim of the
Borrower then or thereafter against any Lender, the Agent or the Westhampton
Trustee.
8.2 Indemnification. The Borrower agrees to, and shall, indemnify and hold the
Lenders, the Agent and the Westhampton Trustee harmless against any loss
(excluding any consequential damages), as well as against any reasonable costs
or expenses (including reasonable legal fees and expenses), which the Lenders,
the Agent or the Westhampton Trustee sustains or incurs as a consequence of any
default in payment of the principal amount of the Term Loan, the Revolving
Credit Facility, interest accrued
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thereon or any other amount payable under any Financing Document, including, but
not limited to, all actual losses incurred in liquidating or re-employing fixed
deposits made by third parties or funds acquired to effect or maintain the Term
Loan and/or the Revolving Credit Facility and/or any portion of either thereof.
The certification of each Lender, the Agent or the Westhampton Trustee of such
costs and expenses shall, absent any manifest error, be conclusive and binding
on the Borrower.
8.3 Application of Moneys. Except as otherwise provided in any Security
Document, all moneys received by the Lenders, the Agent or the Westhampton
Trustee under or pursuant to this Agreement, any Notes, any Guaranty or any of
the Security Documents after the occurrence and continuation of any Event of
Default (unless cured to the satisfaction of the Lenders) shall be applied by
the Lenders in the following manner:
(a) first, in or towards the payment or reimbursement of any
expenses or liabilities incurred by the Lenders, the Agent or the Westhampton
Trustee in connection with the ascertainment, protection or enforcement of its
rights and remedies under any Financing Documents,
(b) second, in or towards payment of any interest owing on the Term
Loan and the Revolving Credit Facility,
(c) third, in or towards repayment of principal owing in respect of
the Term Loan and the Revolving Credit Facility,
(d) fourth, in or towards payment of all other sums which may be
owing to the Lenders, the Agent or the Westhampton Trustee under any Financing
Document, and
(e) fifth, the surplus (if any) shall be paid to the Borrower or to
whosoever else may be entitled thereto.
9. COVENANTS
9.1 The Borrower and, by their execution of the consent and agreement and
assignment of account provided below, each of the Guarantors hereby covenants
and undertakes with the Lenders and the Agent that, from the date hereof and so
long as any principal, interest or other moneys are owing in respect of the Term
Loan, the Revolving Credit Facility or are otherwise owing under any Financing
Document:
(A) it will, and will procure that each other Security Party will:
(i) Performance of Agreements. Duly perform and observe, and
procure the observance and performance by all other parties thereto (other than
the Lenders, the Agent and the Westhampton Trustee) of, the terms of the
Financing Documents;
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(ii) Notice of Default, Litigation and Adverse Change. Promptly
upon obtaining knowledge thereof, inform the Lenders of the occurrence of any
(a) Event of Default or of any event which, with the giving of notice or lapse
of time, or both, would constitute an Event of Default, (b) their respective
litigation or governmental proceeding pending or threatened against it or
against any of the Security Parties or Marine Car Carriers (MI) which could
reasonably be expected to have a material adverse effect on the business,
assets, operations, property or financial condition of any thereof, and (c)
other event or condition which is reasonably likely to have a material adverse
effect on its ability, or the ability of the Security Parties as a group, to
perform their respective obligations under any Financing Document;
(iii) Obtain Consents. Without prejudice to Section 2.1(b) and this
Section 9.1, obtain every consent and do all other acts and things which may
from time to time be necessary or advisable for the continued due performance of
all its and the other Security Parties' respective obligations under the
Financing Documents;
(iv) Financial Information. At the expense of the Borrower,
deliver to the Agent:
(a) as soon as available but not later than ninety (90) days
after the end of each fiscal year of Marine Transport
Corporation, a complete copy of the 10K report of Marine
Transport Corporation filed with the United States
Securities and Exchange Commission (including audited
annual financial statements of Marine Transport
Corporation together with a report thereon by an
Acceptable Accounting Firm), which shall be prepared by
Marine Transport Corporation and certified by the chief
financial officer of Marine Transport Corporation
together with a Compliance Certificate;
(b) as soon as available but not later than forty-five (45)
days after the end of each quarter of each fiscal year
of Marine Transport Corporation, a copy of the 10Q
report of Marine Transport Corporation filed with the
United States Securities and Exchange Commission which
shall be prepared by Marine Transport Corporation and
certified by the chief financial officer of Marine
Transport Corporation, together, in each instance, with
a Compliance Certificate of such chief financial officer
in such form as the Lender may reasonably require;
(c) as soon as available, copies of all 8K reports filed by
Marine Transport Corporation with the United States
Securities and Exchange Commission;
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(d) as soon as available but not later than thirty (30) days
after the end of each month of each fiscal year of
Marine Transport Corporation, unaudited monthly
operating statements showing actual versus budgeted cash
flow (itemized for each Vessel, Management Agreement and
Vessel Agreement), accounts receivable and accounts
payable balances and cash position for Marine Transport
Corporation and its Subsidiaries, certified to be true
and complete by the Chief Financial Officer of Marine
Transport Corporation; and
(e) such other statements, lists of assets and accounts,
budgets, forecasts, reports and other financial
information with respect to its business as the Agent
may from time to time reasonably request, certified to
be true and complete by the Chief Financial Officer of
Marine Transport Corporation;
(v) U.S. Citizenship; Qualification to Own Foreign Flag Vessels.
Continue to be, and cause each other Security Party or other Affiliate of the
Borrower owning a United States flag Vessel to continue to be, a United States
citizen within the meaning of Section 2 of the United States Shipping Act, 1916,
as amended (46 U.S.C. ss.802), qualified to own and operate vessels in the
coastwise trade of the United States of America and to cause each other Security
Party or other Affiliate of the Borrower which is the registered owner of a
Vessel registered under a flag other than the United States of America to
continue to be duly qualified under the laws of such flag to be the registered
owner and operator of a Vessel registered under such flag;
(vi) Corporate Existence. Do or cause to be done, and procure that
each Security Party shall do or cause to be done, all things necessary to
preserve and keep in full force and effect its corporate existence, and all
licenses, franchises, permits and assets necessary to the conduct of its
business;
(vii) Books and Records. Keep, and cause each other Security Party
to keep, proper books of record and account into which full and correct entries
shall be made in accordance with GAAP throughout the Security Period;
(viii) Taxes and Assessments. Pay and discharge, and cause each
other Security Party to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or property
prior to the date upon which penalties attach thereto; provided, however, that
it shall not be required to pay and discharge, or cause to be paid and
discharged, any such tax, assessment, charge or levy so long as (a) the legality
thereof shall be contested in good faith and by appropriate proceedings or other
acts and it shall set aside on its books adequate reserves with respect thereto
or (b) where such failure to pay or discharge is not reasonably likely to,
individually or in the aggregate, have a material adverse effect on the
business, prospects
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or financial condition of the Marine Transport Corporation and its Subsidiaries
taken as a whole;
(ix) Inspection. Allow, and cause each other Security Party to
allow, any representative or representatives designated by any Lender, subject
to applicable laws and regulations, to visit and inspect any of its properties,
and, on request, to examine its books of account, records, reports and other
papers and to discuss its affairs, finances and accounts with its officers, all
at such reasonable times and as often as any Lender may reasonably request;
(x) Compliance with Statutes, etc. Do or cause to be done, and
cause each other Security Party to do and cause to be done, all things necessary
to comply with all material laws, and the rules and regulations thereunder,
applicable to the Borrower or such other Security Party, including, without
limitation, those laws, rules and regulations relating to employee benefit plans
and environmental matters;
(xi) Environmental Matters. Promptly upon the occurrence of any of
the following conditions, provide to the Agent a certificate of the chief
executive officer thereof, specifying in detail the nature of such condition and
its proposed response or the response of its Environmental Affiliate: (a) its
receipt or the receipt by any other Security Party or any Environmental
Affiliate of the Borrower or any other Security Party of any written
communication whatsoever that alleges that such person is not in compliance with
any applicable environmental law or environmental approval, if such
noncompliance could reasonably be expected to have a material adverse effect on
the business, assets, operations, property or financial condition of the
Borrower or any other Security Party, (b) knowledge by it, or by any other
Security Party or any Environmental Affiliate of the Borrower or any other
Security Party that there exists any Environmental Claim pending or threatened
against any such person, which could reasonably be expected to have a material
adverse effect on the business, assets or operations, property or financial
condition of the Borrower or any other Security Party, or (c) any release,
emission, discharge or disposal of any material that could form the basis of any
Environmental Claim against it, any other Security Party or against any
Environmental Affiliate of the Borrower or any other Security Party, if such
Environmental Claim could reasonably be expected to have a material adverse
effect on the business, assets or operations, property or financial condition of
the Borrower or any other Security Party. Upon the written request by the Agent,
it will submit to the Agent at reasonable intervals, a report providing an
update of the status of any issue or claim identified in any notice or
certificate required pursuant to this subsection;
(xii) ERISA. Forthwith upon learning of the occurrence of any
material liability of the any Security Party or any ERISA Affiliate pursuant to
ERISA in connection with the termination of any Plan or withdrawal or partial
withdrawal of any multi-employer plan (as defined in ERISA) or of a failure to
satisfy the minimum funding standards of Section 412 of the Code or Part 3 of
Title I of ERISA by any Plan for which any Security Party or any ERISA Affiliate
is plan administrator (as defined in ERISA), furnish or cause to be furnished to
the Agent written notice thereof;
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(xiii) Vessel Management. Cause each of the Vessels to be managed by
Marine Transport Corporation, by a wholly-owned subsidiary thereof or by third
party manager reasonably acceptable to the Agent and procure that no agreements
providing or governing the management of such vessels shall be amended or
modified without the prior written consent of the Agent unless (in the case of
management agreements other than Key Management Agreements) such amendment or
modification would not, in the reasonable opinion of the Agent, adversely affect
the economic interests of the Borrower or any other Security Party thereunder;
(xiv) Cash. Maintain at all times on a consolidated basis, readily
available Unrestricted Cash or Cash Equivalents of not less than the greater of
(a) Two Million Dollars ($2,000,000) and (b) ten percent (10%) of the Total Debt
of Marine Transport Corporation (for purposes of determining compliance with
this covenant, Unrestricted Cash or Cash Equivalents held by Marine Car Carriers
(MI) for the benefit of Marine Car Carriers (Del) shall be calculated on the
basis of the Borrower's share of such sums after deduction of any taxes that
would be payable (as of the time of determination) consequent upon the
distribution and repatriation of such sums by Marine Car Carriers (MI) to Marine
Car Carriers (Del));
(xv) Working Capital. Maintain at all times on a consolidated
basis, a positive working capital position (for purposes of determining
compliance with this covenant, Unrestricted Cash or Cash Equivalents held by
Marine Car Carriers (MI) shall be calculated on the basis of the Borrower's
share of such sums after deduction of any taxes that would be payable (as of the
time of determination) consequent upon the distribution and repatriation of such
sums by Marine Car Carriers (MI) to Marine Car Carriers (Del));
(xvi) Debt Service Coverage Ratio. Maintain on a consolidated
basis, a ratio of EBITDA to scheduled payments of principal and interest in
respect of consolidated Indebtedness of not less than, during the period
commencing from the date hereof and ending on the second anniversary of the date
hereof, 1.25 to 1.0, and, thereafter, 1.5 to 1.0, such ratio to be determined
quarterly based on the scheduled principal and interest (assuming the then
prevailing interest rates shall remain in effect for the next twelve (12)
months) payments payable over the next twelve (12) month period;
(xvii) Total Debt to EBITDA. Maintain on a consolidated basis, a
ratio of Total Debt to EBITDA of not greater than, (x) during the period
commencing from the date hereof and ending on the first anniversary of the date
hereof, 3.25 to 1.0, (y) during the period commencing from the first anniversary
of the date hereof and ending on the second anniversary of the date hereof, 3.0
to 1.0 and (z) thereafter, 2.5 to1.0;
(xviii) Brokerage Commissions, etc. Indemnify and hold the Lenders,
the Agent and the Westhampton Trustee harmless from any claim for any
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brokerage commission, fee, or compensation from any broker or third party
resulting from the transactions contemplated hereby;
(xix) Deposit Accounts; Assignment. Throughout the Security Period,
maintain, and procure that each Security Party shall maintain its primary
collection and revenue accounts with the Agent and shall procure, and shall
cause each Security Party to procure that, all earnings of any Vessels shall be
paid (without set-off or counterclaim) into such collection accounts. As
security for the obligations of the Borrower hereunder, the Borrower hereby
pledges, assigns and grants the Agent, on behalf of the Lenders, a security
interest in all the Borrowers' right, title and interest in and to the aforesaid
collection and disbursement accounts and consents that if an Event of Default
shall occur and so long as the same shall be continuing, all moneys held in the
said accounts and all moneys thereafter received by the Agent may be applied as
provided in Section 8.3;
(xx) Proceeds of Marine Car Carriers (MI). Promptly upon the
direct or indirect acquisition, in the aggregate, by the Borrower, the
Guarantors or any affiliate of any thereof of one hundred percent (100%) of the
equity of Marine Car Carriers (MI) or one hundred percent (100%) of the assets
thereof, grant, or procure the grant, to the Agent of a security interest in the
assets of Marine Car Carriers (MI) in form and substance satisfactory to the
Agent, it being hereby agreed by the Agent and the Lenders that, simultaneous
with the investment of the assets of Marine Car Carriers (MI) into a new joint
venture with a third party not affiliated with the Borrower or the Guarantors,
such security interest shall be released and replaced with a negative pledge in
form and substance satisfactory to the Agent;
(xxi) Year 2000 Issue. The Borrower shall take, and shall cause each
of the Guarantors to take, all necessary action to complete in all materials
respects by September, 1999, the reprogramming of computer software, hardware
and firmware systems and equipment containing embedded microchips owned or
operated by or for the Borrower and the guarantors or used or relied upon in the
conduct of their business (including systems and equipment supplied by others or
with which such systems of the Borrower or any of the Guarantors interface)
required as a result of the Year 2000 Issue to permit the proper functioning of
such computer systems and other equipment and the testing of such systems and
equipment, as so reprogrammed. At the request of the Agent, the Borrower shall
provide, and shall cause each of the guarantors to provide, to the Agent
reasonable assurance of its compliance with the preceding sentence; and
(xxii) ISM Code Matters. (a) Procure that the relevant Operator
will, comply with, and ensure that (i) each Vessel will comply with the
requirements of the ISM Code by not later than July 1, 1998, and (ii) any
newly-acquired Vessel will comply with the requirements of the ISM Code within
six (6) months (or such shorter period as may be required by applicable law or
regulation) of its acquisition, including (but not limited to) the maintenance
and renewal of valid certificates pursuant thereto throughout the Security
Period;
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(b) Procure that any Operator will, immediately inform the
Agent if there is any threatened or actual withdrawal of
its, DOC or the SMC in respect of any Vessel; and
(c) Procure that the relevant Operator will, promptly inform
the Agent upon the issuance (i) to such Operator of a
DOC and (ii) to the relevant Vessel of an SMC; and
(xxiii) OMI COLUMBIA. Procure that promptly upon the acquisition of
ownership of OMI COLUMBIA by OMI Challenger Transport (or any other Affiliate of
the Borrower), such Guarantor shall execute and deliver a first preferred
mortgage and assignments of earnings and insurances in respect of such Vessel in
form and substance satisfactory to the Agent.
(B) The Borrower will not, and will procure that no other Security
Party will, without the prior written consent of the Agent:
(i) Liens. Create, assume or permit to exist, any mortgage,
pledge, lien, charge, encumbrance or any security interest whatsoever upon any
of such party's property or other assets, real or personal, tangible or
intangible, whether now owned or hereafter acquired except:
(a) liens for taxes not yet payable for which adequate
reserves have been maintained;
(b) the Financing Documents and other liens granted in
connection herewith in favor of the Lenders, the Agent
or the Westhampton Trustee, as the case may be;
(c) liens, charges and encumbrances against their respective
Vessels except those of the type and amounts permitted
to exist under the terms of the Mortgages;
(d) pledges of certificates of deposit or other cash
collateral securing any Security Party's reimbursement
obligations in connection with letters of credit now or
hereafter issued for the account of such Security Party
in connection with the establishment of the financial
responsibility of the Security Parties under 33 C.F.R.
Part 130 or 46 C.F.R. Part 540, as the case may be, as
the same may be amended or replaced;
(e) pledges or deposits to secure obligations under
workmen's compensation laws or similar legislation,
deposits to secure public or statutory obligations,
warehousemen's or other like liens, or deposits to
obtain the release of such liens and deposits to secure
surety, appeal or customs bonds on
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which any of the Security Parties is the principal, as
to all of the foregoing, only to the extent arising and
continuing in the ordinary course of business;
(f) liens on assets acquired with Permitted Third Party Debt
and securing only the Permitted Third Party Debt
incurred to acquire such assets;
(g) the Mortgages Securing the OMI Debt (and related
assignments of marine insurances for the Vessels subject
to such mortgages);
(h) other liens, charges and encumbrances incidental to the
conduct of the business of each such party, the
ownership of any such party's property and assets and
which do not in the aggregate materially detract from
the value of each such party's property or assets or
materially impair the use thereof in the operation of
its business
(items (a) through (h) are hereinafter collectively referred to as "Permitted
Liens");
(ii) Loans, Advances and Investments. Make any loans or advances
to, or any investments in any Person, firm, corporation, joint venture or other
entity (including, without limitation, any loan or advance to any officer,
director, stockholder, employee or customer of any company affiliated with any
Security Party) except for advances and investments in the ordinary course of
its business and loans or advances to any Security Party;
(iii) Indebtedness. Incur any Indebtedness except Permitted
Indebtedness;
(iv) Permitted Third Party Debt. Incur any Permitted Third Party
Debt, unless in the case of any such indebtedness other than that supporting
MARAD vessel management contracts;
(a) the Borrower and the Security Parties are in compliance
with their covenants set forth in this Agreement,
(b) no Event of Default (or any event or condition which,
with the giving of notice or passage of time or both,
would constitute an Event of Default) shall have
occurred or will occur and be continuing before or after
the incurrence of such Permitted Third Party Debt,
(c) the Borrower demonstrates to the satisfaction of the
Agent, in its sole discretion, that the ratio of (1)
projected EBITDA
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to be generated by the particular asset to be acquired
with such Permitted Third Party Debt to (2) projected
scheduled payments of interest and principal for such
Permitted Third Party Debt shall be at least 1.0 to 1.0
over the entire term of such Permitted Third Party Debt
and
(d) the Borrower demonstrates to the satisfaction of the
Agent, in its sole discretion, that following the
incurrence of such Permitted Third Party Debt, the
Borrower and the Guarantors shall be in compliance with
the financial covenants set forth in Sections
9.1(A)(xiv), (xv), (xvi) and (xvii) (for purposes of the
calculations required by this clause (z), (1) EBITDA
shall include the projected EBITDA to be generated by
the particular asset to be acquired with such Permitted
Third Party Debt, (2) Total Debt shall include the
Permitted Third Party Debt to be incurred and (3)
scheduled payments of interest and principal on Total
Debt shall include projected scheduled payments of
interest and principal for such Permitted Third Party
Debt;
(v) Guarantees, etc. Assume, guarantee or (other than in the
ordinary course of its business) endorse or otherwise become or remain liable,
in connection with any obligation of any person, firm, company or other entity
except for guarantees, in connection herewith, in favor of the Lenders, the
Agent or the Westhampton Trustee or guarantees of Permitted Indebtedness;
(vi) Changes in Business. Change the nature of its business or
engage in any businesses other than domestic and international marine
transportation;
(vii) Use of Corporate Funds. Pay out any funds to any company or
Person except (a) as contemplated by the Acquisition Agreement (b) in the
ordinary course of business in connection with the management of the business of
the Security Parties, including the operation and/or repair of the Vessels and
other vessels owned, managed or operated by such parties and (c) the servicing
of Permitted Indebtedness provided, however, it shall not prepay any such
Permitted Indebtedness (excluding the Indebtedness hereunder and under the
Related Credit Agreement);
(viii) Issuance of Shares. Permit any subsidiaries to issue or
dispose of any shares of its own capital stock to any Person;
(ix) Sale of Shares. Sell, assign, transfer, pledge or otherwise
convey or dispose of any of the shares of the capital stock of any Security
Parties or Marine Car Carriers (MI);
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(x) Sale of Assets. Sell, or otherwise dispose of, any Vessel,
any shares in any subsidiary corporation or any other asset which represents all
or a substantial portion of its assets taken as a whole; or
(xi) Capital Expenditures. Make or commit to make any capital
expenditures provided, however, that in no event shall this subsection (xi)
preclude the Borrower or any other Security Party from undertaking necessary
repairs and improvements to any Vessel the cost of which, for accounting
purposes, is treated by the Borrower as a capital expenditure;
(xii) Changes in Offices or Names. Change the location of the chief
executive office of any Security Party, the office of the chief place of
business of any such parties, the office of the Security Parties in which the
records relating to the earnings or insurances of the Vessels are kept unless
the Agent shall have received thirty (30) days prior written notice of such
change;
(xiii) Changes in Management. Make any material changes in the
existing management of any Security Party;
(xiv) Consolidation and Merger. Consolidate with, or merge into,
any corporation or other entity, or merge any corporation or other entity into
it unless, in the case of the relevant Security Party, such company shall be the
surviving entity;
(xv) Chartering-in of Vessels. Except for the chartering-in of oil
tankers by OMI Petrolink Corp., a Delaware corporation, in connection with the
operation of its lightering business, charter-in any vessel under a charter
having a term (inclusive of all extensions and renewals) of twelve (12) months
or more;
(xvi) Dividends. (x) Declare or make, and procure that no other
Security Party shall declare or make to any party other than another Security
Party, any distributions to its shareholders, by dividend or otherwise, or
otherwise dispose of any assets to its shareholders in cash or in any other
manner or (y) enter into, and procure that no other Security Party shall enter
into, any agreement or arrangement (other than this Agreement and the Related
Credit Agreement) which restricts or limits it or such other Security Party from
making any such distributions to its immediate parent; and
(xvii) Loan from Marine Car Carriers (MI). Procure that Marine Car
Carriers (MI) shall not make any loans or advances to Marine Transport
Corporation or any subsidiary, officer, director, shareholder or Affiliate
thereof.
9.2 Vessel Valuations. At least every twelve (12) months commencing on the day
falling twelve (12) months from the date hereof and in any event upon the
request of the Agent, the Borrower shall obtain, at the Borrower's cost,
valuations of the Vessels OMI COLUMBIA, charter-free, in Dollars from two
independent shipbrokers satisfactory to the Agent. In the event the Borrower
fails or refuses to obtain the valuations requested
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pursuant to this Section 9.2 within ten (10) days of the Agent's request
therefor, the Agent shall be authorized to obtain such valuations, at the
Borrower's cost, from two independent shipbrokers selected by the Agent, which
valuations shall be deemed the equivalent of valuations duly obtained by the
Borrower pursuant to this Section 9.2, but the Agent's actions in doing so shall
not excuse any default of the Borrower under this Section 9.2. The average of
such two (2) valuations shall be the FMV of each Vessel.
9.3 Asset Maintenance. If at any time the Collateral Vessel Value (together with
the value of any additional collateral theretofore provided under this Section)
falls below one hundred fifty percent (150%) (the "Required Percentage") of an
amount (the "Principal Exposure") equal to the aggregate of (a) the Term Loan
Balance, (b) any Revolving Credit Facility Advances then outstanding, (c) any
undrawn amounts then available under the Revolving Credit Facility, (d) the
Related Indebtedness then outstanding and (e) any amounts then available to be
drawn down pursuant to the Related Credit Agreement, the Borrower shall, within
a period of thirty (30) days following receipt by the Borrower of written notice
from the Agent notifying the Borrower of such shortfall and specifying the
amount thereof (which amount shall, in the absence of manifest error, be deemed
to be conclusive and binding on the Borrower), either (a) deliver to the
Lenders, the Agent or the Westhampton Trustee as the case may be, such
additional collateral, as may be satisfactory to the Agent in its sole
discretion, of sufficient value to restore compliance with the Required
Percentage or (b) prepay such part of the Term Loan (together with interest
thereon and other moneys payable in respect of such prepayment pursuant to
Section 5.6) as shall result in the restoration of compliance with the Required
Percentages. Any such prepayment of the Term Loan shall be applied as provided
in Section 5.6. For purposes of calculating the Collateral Vessels Value under
this Section 9.3, the value of the OMI COLUMBIA shall be deemed to be equal to
the product of (1) the lightweight tonnage of such Vessel multiplied by (2)(x)
One Hundred Twenty-Five Dollars or (y) if such Vessel is hereafter subject to
legal restrictions as to the geographic location where such Vessel may be
scrapped, a scrap price, reasonably deemed by the Agent to reflect a
conservative average market scrap price for those jurisdictions in which, in the
Agent's reasonable opinion, such Vessel may be scrapped in a commercially
reasonable manner.
9.4 Inspection and Survey Reports. If the Agent shall so request, the Borrower
shall provide the Agent with copies of all internally generated inspection or
survey reports on the Vessels.
10. ASSIGNMENT
This Agreement shall be binding upon, and inure to the benefit of, the
Borrower, the Lenders, the Agent and the Westhampton Trustee and their
respective successors and assigns, except that the Borrower may not assign any
of its rights or obligations hereunder without the prior written consent of the
Majority Lenders. In giving any consent as aforesaid to any assignment by the
Borrower, the Lenders shall be entitled to impose such conditions as they shall
deem advisable. Each Lender shall be entitled to assign the whole or any part of
its rights or obligations under this Agreement or grant
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participation(s) in the Term Loan and the Revolving Credit Facility to any
subsidiary, holding company or other affiliate of such Lender, to any subsidiary
or other affiliate company of any thereof or to any other bank or financial
institution, and such Lender shall forthwith give notice of any such assignment
or participation to the Borrower provided, that, the relevant Lender assigns or
participates, as the case may be, to its assignee or participant, (a) equal
proportionate shares of such Lender's interest in both the Term Loan and the
Revolving Credit Facility and (b), simultaneously with its assignment or
participation of a share in the Indebtedness provided hereunder, an equal
proportionate share in the Related Indebtedness in accordance with the
provisions of the Related Credit Agreement and, provided, further, that in the
event of any assignment by any Lender, such assignment (but not any
participation) is to be made pursuant to an Assignment and Assumption Agreement.
The Borrower will take all reasonable actions requested by the Agent, on behalf
of such Lender.
11. ILLEGALITY, INCREASED COST, NON-AVAILABILITY, ETC.
11.1 Illegality. In the event that by reason of any change in any applicable
law, regulation or regulatory requirement or in the interpretation thereof (any
such change or interpretation), a Lender has a good faith reasonable basis to
conclude that it has become unlawful for it to maintain or give effect to its
obligations as contemplated by this Agreement, such Lender shall inform the
Borrower to that effect, whereafter the liability of such Lender to make its
portion of the Term Loan and/or the Revolving Credit Facility available shall
forthwith cease and the Borrower shall be required either to repay to such
Lender that portion of the outstanding balance of the Term Loan and/or the
Revolving Credit Facility funded by such Lender immediately or, with respect to
the Term Loan, if the relevant Lender so agrees, to repay such portion of the
Term Loan to such Lender on the last day of any then current Interest Period in
accordance with and subject to the provisions of Section 11.5. In any such
event, but without prejudice to the aforesaid obligations of the Borrower to
repay the Term Loan and/or the Revolving Credit Facility, the Borrower and the
relevant Lender shall negotiate in good faith with a view to agreeing on terms
for making such portion of the Term Loan and/or the Revolving Credit Facility
available from another jurisdiction or otherwise restructuring such portion of
the Term Loan and/or the Revolving Credit Facility on a basis which is not
unlawful.
11.2 Increased Costs. If any change in applicable law, regulation or regulatory
requirement, or in the interpretation or application thereof by any governmental
or other authority, shall:
(i) subject the Agent or any Lender to any Taxes with
respect to its income from the Term Loan and/or the
Revolving Credit Facility, or any part of either
thereof, or
(ii) change the basis of taxation to the Agent or any Lender
of payments of principal or interest or any other
payment due or to become due pursuant to this Agreement
(other than a change in the basis effected by the
jurisdiction of
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organization of the Agent or such Lender, the
jurisdiction of the principal place of business of the
Agent or such Lender, the United States of America, the
State or City of New York or any governmental
subdivision or other taxing authority having
jurisdiction over the Agent or Lender (unless such
jurisdiction is asserted by reason of the activities of
any of the Security Parties) or such other jurisdiction
where the Term Loan and/or the Revolving Credit Facility
may be payable), or
(iii) impose, modify or deem applicable any reserve
requirements or require the making of any special
deposits against or in respect of any assets or
liabilities of, deposits with or for the account of, or
loans by, the Lender, or
(iv) impose on the Agent or any Lender any other condition
affecting the Term Loan and/or the Revolving Credit
Facility or any part of either thereof,
and the result of the foregoing is either to increase the cost to such Lender of
making available or maintaining its Commitment or any part of either thereof or
to reduce the amount of any payment received by the Agent or such Lender, then
and in any such case if such increase or reduction in the opinion of the Agent
or such Lender materially affects the interests of the Agent or such Lender
under or in connection with this Agreement:
(a) the Agent or such Lender, as the case may be, shall notify the
Borrower of the occurrence of such event, and
(b) the Borrower agrees forthwith upon demand to pay to the Agent
or such Lender such amount as the Agent or such Lender
certifies to be necessary to compensate the Agent or such
Lender for such additional cost or such reduction.
11.3 Nonavailability of Funds. If the Agent shall determine that, by reason of
circumstances affecting the London Interbank Market generally, adequate and
reasonable means do not or will not exist for ascertaining the LIBOR for any
Interest Period, the Agent shall give notice of such determination to the
Borrower. The Borrower and the Agent shall then negotiate in good faith in order
to agree upon a mutually satisfactory interest rate and/or Interest Period to be
substituted for LIBOR which would otherwise have applied under this Agreement.
If the Borrower and Agent are unable to agree upon such a substituted interest
rate and/or Interest Period within thirty (30) days of the giving of such
determination notice, the Agent shall set an interest rate and Interest Period
to take effect from the expiration of the Interest Period in effect at the date
of determination, which rate shall be equal to the aggregate of (a) the cost to
each Lender (as certified by such Lender) of funding the relevant Advance, (b)
the then prevailing Margin and (c) in the case of Revolving Credit Facility
Advances, one quarter of one percent (0.25%). In
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the event the state of affairs to which this Section 11.3 refers shall extend
beyond the end of the Interest Period, the foregoing procedure shall continue to
apply until circumstances are such that LIBOR may be determined pursuant to
Section 6.
11.4 Agent's Certificate Conclusive. A certificate or determination notice of
the Agent or any Lender as to any of the matters referred to in this Section 11
shall, absent manifest error, be conclusive and binding on the Borrower.
11.5 Compensation for Losses. Where the Term Loan and/or the Revolving Credit
Facility or a portion of either thereof is to be repaid by the Borrower pursuant
to this Section 11, the Borrower agrees simultaneously with such repayment to
pay to the relevant Lender all accrued interest to the date of actual payment on
the amount repaid and all other sums then payable by the Borrower to the
relevant Lender pursuant to this Agreement together with such amounts as may be
certified by the relevant Lender to be necessary to compensate the Lender for
any actual loss, premium or penalties incurred or to be incurred thereby on
account of funds borrowed to make, fund or maintain its Commitment or such
portion of either thereof for the remainder (if any) of the then current
Interest Period or Periods, if any, but otherwise without penalty or premium.
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12. CURRENCY INDEMNITY
12.1 Currency Conversion. If for the purpose of obtaining or enforcing a
judgment in any court in any country it becomes necessary to convert into any
other currency (the "Judgment Currency") an amount due in Dollars under any
Financing Document then the conversion shall be made, in the discretion of the
Agent at the rate of exchange prevailing either on the date of default or on the
day before the day on which the judgment is given or the order for enforcement
is made, as the case may be (the "Conversion Date"), provided that the Agent
shall not be entitled to recover under this clause any amount in the Judgment
Currency which exceeds at the Conversion Date the amount in Dollars due under
any Financing Document.
12.2 Change in Exchange Rate. If there is a change in the rate of exchange
prevailing between the Conversion Date and the date of actual payment of the
amount due, the Borrower shall pay such additional amounts (if any, but in any
event not a lesser amount) as may be necessary to ensure that the amount paid in
the Judgment Currency when converted at the rate of exchange prevailing on the
date of payment will produce the amount then due under any Financing Document in
Dollars; any excess over the amount due received or collected by the Lenders
shall be remitted to the Borrower.
12.3 Additional Debt Due. Any amount due from the Borrower under this Section 12
shall be due as a separate debt and shall not be affected by judgment being
obtained for any other sums due under or in respect of the Financing Documents.
12.4. Rate of Exchange. The term "rate of exchange" in this Section 12 means the
rate at which the Agent in accordance with its normal practices is able on the
relevant date to purchase Dollars with the Judgment Currency and includes any
premium and costs of exchange payable in connection with such purchase.
13 FEES AND EXPENSES
13.1 Commitment Fee. The Borrower will pay to the Lenders a Commitment Fee at a
rate, per annum, equal to forty percent (40%) of the aggregate of (a) the then
applicable Margin and (b) one quarter of one percent (0.25%), accruing from the
date hereof, payable quarterly in arrears from the date hereof and on the Final
Payment Date, on the available but undrawn amount of the Revolving Credit
Facility. The Commitment Fee shall accrue from day to day and be calculated on
the actual number of days elapsed and a three hundred sixty (360) day year.
13.2 Facilities Fee. A Facilities Fee payable to the Lenders on the earlier of
(a) the date on which the Term Loans are repaid or prepaid in full or refinanced
and (b) the second anniversary of the date hereof. The Facilities Fee shall be
equal to the product of (x) Twenty-Four Million Dollars ($24,000,000) and (y),
if such fee is payable on or before the day falling (i) six (6) months after the
date hereof, one quarter of one percent (0.25%), (ii) twelve (12) months after
the date hereof, one half of one percent (0.50%) or
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(iii) twelve (12) months and one (1) day after the date hereof, three-quarters
of one percent (0.75%).
13.3 Other Fees. The Borrower shall pay the fees set forth in the fee letter
between the Borrower and the Agent dated the date hereof.
13.4 Expenses. The Borrower agrees, whether or not the transactions hereby
contemplated are consummated, on demand to pay, or reimburse the Lenders, the
Agent and the Westhampton Trustee for their payment of, the reasonable expenses
of the Lenders, the Agent and the Westhampton Trustee incident to said
transactions (and in connection with any supplements, amendments, waivers or
consents relating thereto or incurred in connection with the enforcement or
defense of any of the rights and remedies of any Lender, the Agent or the
Westhampton Trustee with respect thereto or in the preservation of the
priorities of the Lenders, the Agent or the Westhampton Trustee under the
documentation executed and delivered in connection therewith) including, without
limitation, all reasonable costs and expenses of preparation, negotiation,
execution and administration of this Agreement and the documents referred to
herein, the reasonable fees and disbursements of the counsel of the Lenders, the
Agent and the Westhampton Trustee in connection therewith, as well as the
reasonable fees and expenses of any independent appraisers, surveyors, engineers
and other consultants retained by the Lenders, the Agent or the Westhampton
Trustee for this transaction, all reasonable costs and expenses, if any, for the
enforcement of the Financing Documents and stamp and other similar taxes, if
any, incident to the execution and delivery of the documents (including, without
limitation, the Notes) herein contemplated and to hold the Lenders, the Agent
and the Westhampton Trustee free and harmless in connection with any liability
arising from the nonpayment of any such stamp or other similar taxes. Such taxes
and, if any, interest and penalties related thereto as may become payable after
the date hereof shall be paid immediately by the Borrower to the relevant
Lender, the Agent or the Westhampton Trustee, as the case may be, when liability
therefor is no longer contested by the Lenders, the Agent or the Westhampton
Trustee, as the case may be, or reimbursed immediately by the Borrower to such
Lender, the Agent or the Westhampton Trustee, as the case may be.
14. APPLICABLE LAW, JURISDICTION AND WAIVER
14.1 Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without any reference to the
conflicts of laws principles of such State.
14.2 Jurisdiction. The Borrower hereby irrevocably submits to the jurisdiction
of the courts of the State of New York and of the United States District Court
for the Southern District of New York in any action or proceeding brought
against it by the Agent, any Lender or the Westhampton Trustee under this
Agreement or under any document delivered hereunder and hereby irrevocably
agrees that valid service of summons or other legal process on it may be
effected by serving a copy of the summons and other legal process in any such
action or proceeding on the Borrower by mailing or delivering the
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same by hand to the Borrower at the address indicated for notices in Section
16.2. The service, as herein provided, of such summons or other legal process in
any such action or proceeding shall be deemed personal service and accepted by
the Borrower as such, and shall be legal and binding upon the Borrower for all
the purposes of any such action or proceeding. Final judgment (a certified or
exemplified copy of which shall be conclusive evidence of the fact and of the
amount of any indebtedness of the Borrower to the Agent, the Lenders or the
Westhampton Trustee) against the Borrower in any such legal action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment. The Borrower will advise the Agent promptly of any change of address
for the purpose of service of process. Notwithstanding anything herein to the
contrary, the Lenders, the Agent or the Westhampton Trustee may bring any legal
action or proceeding in any other appropriate jurisdiction.
14.3 WAIVER OF JURY TRIAL. IT IS MUTUALLY AGREED BY AND AMONG THE BORROWER, THE
OTHER SECURITY PARTIES, THE AGENT, THE WESTHAMPTON TRUSTEE AND THE LENDERS THAT
EACH OF THEM HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY ANY PARTY TO ANY FINANCING DOCUMENT AGAINST ANY OTHER
PARTY TO ANY FINANCING DOCUMENT ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN
ANY WAY CONNECTED WITH ANY FINANCING DOCUMENT.
15. THE AGENT
15.1 (a) Appointment of Agent. Each of the Lenders hereby irrevocably appoints
and authorizes the Agent (which for purposes of this Section 15 shall be deemed
to include the Agent acting in its capacity as security trustee pursuant to
Section 15.1(b)) to take such action as agent on its behalf and to exercise such
powers under the Financing Documents as are delegated to the Agent by the terms
hereof and thereof. Neither the Agent nor any of its directors, officers,
employees or agents shall be liable for any action taken or omitted to be taken
by it or them under the Financing Documents or in connection therewith, except
for its or their own gross negligence or willful misconduct.
(b) Appointment of Security Trustee. Each of the Lenders irrevocably
appoints the Agent as security trustee on their respective behalf with regard to
the (i) security, powers, rights, titles, benefits and interests (both present
and future) constituted by and conferred on the Lenders or any of them or for
the benefit thereof under or pursuant to the Financing Documents (including,
without limitation, the benefit of all covenants, undertakings, representations,
warranties and obligations given, made or undertaken to any Lender in any
Financing Document), (ii) all moneys, property and other assets paid or
transferred to or vested in any Lender or any agent of any Lender or received or
recovered by any Lender or any agent of any Lender pursuant to, or in connection
with, the Financing Documents whether from any Security Party or any other
person and (iii) all money, investments, property and other assets at any time
representing or deriving from any of the foregoing, including all interest,
income and other sums at
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any time received or receivable by any Lender or any agent of any Lender in
respect of the same (or any part thereof). The Agent hereby accepts such
appointment.
15.2 Distribution of Payments. Whenever any payment is received by the Agent
from any Security Party for the account of the Lenders, or any of them, whether
of principal or interest on the Notes, commissions, fees under Sections 13.1 or
13.2 and expenses under Section 13.4, or otherwise, it will thereafter cause to
be distributed on the same day if received before 11 a.m. New York time, or on
the next day if received thereafter, like funds relating to such payment ratably
to the Lenders according to their respective Commitments, in each case to be
applied according to the terms of this Agreement.
15.3 Holder of Interest in Note. The Agent may treat each Lender as the holder
of all of the interest of such Lender in the Note, until, in the case of an
assignment, the Agent has received an original Assignment and Assumption
Agreement executed by such Lender and its assignee.
15.4 No Duty to Examine, Etc. The Agent shall not be under a duty to examine or
pass upon the validity, effectiveness or genuineness of any of the Financing
Documents or any instrument, document or communication furnished pursuant to or
in connection with any Financing Document, and the Agent shall, in the absence
of gross negligence, be entitled to assume that the same are valid, effective
and genuine, have been signed or sent by the proper parties and are what they
purport to be.
15.5 Agent as Lender. With respect to that portion of the Term Loan and the
Revolving Credit Facility made available by it, the Agent shall have the same
rights and powers hereunder as any other Lender and may exercise the same as
though it were not the Agent, and the term "Lender" or "Lenders" shall include
the Agent in its capacity as a Lender. The Agent and its affiliates may accept
deposits from, lend money to and generally engage in any kind of business with,
the Security Parties as if it were not the Agent.
15.6 (a) Obligations of Agent. The obligations of the Agent under the Financing
Documents are only those expressly set forth herein and therein.
(b) No Duty to Investigate. The Agent shall not at any time be under any
duty to investigate whether an Event of Default, or an event which with the
giving of notice or lapse of time, or both, would constitute an Event of
Default, has occurred or to investigate the performance of any Financing
Document by any Security Party.
15.7 (a) Discretion of Agent. The Agent shall be entitled to use its discretion
with respect to exercising or refraining from exercising any rights which may be
vested in it by, and with respect to taking or refraining from taking any action
or actions which it may be able to take under or in respect of, the Financing
Documents, unless the Agent shall have been instructed by the Majority Lenders
to exercise such rights or to take or refrain from taking such action; provided,
however, that the Agent shall not be required
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to take any action which exposes the Agent to personal liability or which is
contrary to this Agreement or applicable law.
(b) Instructions of Majority Lenders. The Agent shall in all cases be
fully protected in acting or refraining from acting under any Financing Document
in accordance with the instructions of the Majority Lenders, and any action
taken or failure to act pursuant to such instructions shall be binding on all of
the Lenders.
15.8 Assumption re Event of Default. Unless the Agent has been notified by any
Security Party that an Event of Default, or event which with the giving of
notice or lapse of time, or both, would constitute an Event of Default, has
occurred and is continuing, or has been notified by a Lender that such Lender
considers that an Event of Default or such an event (specifying in detail the
nature thereof) has occurred and is continuing, except as otherwise provided in
Section 15.14 hereof, the Agent shall be entitled to assume that no Event of
Default, or event which with the giving of notice or lapse of time, or both,
would constitute an Event of Default, has occurred and is continuing. In the
event that the Agent shall have been notified by any Security Party or any
Lender in the manner set forth in the preceding sentence of any Event of Default
or of an event which with the giving of notice or lapse of time, or both, would
constitute an Event of Default, the Agent shall notify the Lenders and shall
take action and assert such rights under the Financing Documents as the Majority
Lenders shall request in writing.
15.9 No Liability of Agent or Lenders. Neither the Agent nor any of the Lenders
shall be under any liability or responsibility whatsoever:
(a) to any Security Party or any other person or entity as a consequence
of any failure or delay in performance by, or any breach by, any other Lenders
or any other person of any of its or their obligations under any Financing
Document;
(b) to any Lender or Lenders, as a consequence of any failure or delay in
performance by, or any breach by, any Security Party of any of its respective
obligations under the Financing Documents; or
(c) to any Lender or Lenders, for any statements, representations or
warranties contained in any Financing Document or any document or instrument
delivered in connection with the transaction hereby contemplated; or for the
validity, effectiveness, enforceability or sufficiency of any Financing Document
or any document or instrument delivered in connection with the transactions
hereby contemplated.
15.10 Indemnification of Agent. The Lenders agree to indemnify the Agent (to the
extent not reimbursed by the Security Parties or any thereof), pro rata
according to the respective amounts of their Commitments, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever (including legal fees and expenses incurred in investigating claims
and defending itself against such liabilities) which may be imposed on, incurred
by or asserted against, the Agent in any way relating to or arising
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out of any Financing Document, any action taken or omitted by the Agent
thereunder or the preparation, administration, amendment or enforcement of, or
waiver of any provision of, any Financing Document, except that no Lender shall
be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Agent's gross negligence or willful misconduct.
15.11 Consultation with Counsel. The Agent may consult with legal counsel
selected by the Agent and shall not be liable for any action taken, permitted or
omitted by it in good faith in accordance with the advice or opinion of such
counsel.
15.12 Resignation. The Agent may resign at any time by giving sixty (60) days'
written notice thereof to the Lenders and the Borrower. Upon any such
resignation, the Lenders shall have the right to appoint a successor Agent. If
no successor Agent shall have been so appointed by the Lenders and shall have
accepted such appointment within sixty (60) days after the retiring Agent's
giving notice of resignation, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent which shall be a bank or trust company of
recognized standing. The appointment of any successor Agent shall be subject to
the prior written consent of the Borrower, such consent not be unreasonably
withheld. After any retiring Agent's resignation as Agent hereunder, the
provisions of this Section 15 shall continue in effect for its benefit with
respect to any actions taken or omitted by it while acting as Agent.
15.13 Representations of Lenders. Each Lender represents and warrants to each
other Lender and the Agent that:
(i) In making its decision to enter into this Agreement and to make its
Commitment available hereunder, it has independently taken whatever steps it
considers necessary to evaluate the financial condition and affairs of the
Security Parties, that it has made an independent credit judgment and that it
has not relied upon any statement, representation or warranty by any other
Lender or the Agent; and
(ii) So long as any portion of its Commitment remain outstanding, it will
continue to make its own independent evaluation of the financial condition and
affairs of the Security Parties.
15.14 Notification of Event of Default. The Agent hereby undertakes to notify
promptly the Lenders, and the Lenders hereby undertake to notify promptly the
Agent and the other Lenders, of the existence of any Event of Default which
shall have occurred and be continuing of which the Agent or any Lender has
actual knowledge.
16. NOTICES AND DEMANDS
16.1 Notices in Writing. Every notice or demand under this Agreement shall be in
writing and may be given or made by facsimile.
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16.2 Addresses for Notice. Every notice or demand shall be sent as follows:
If to the Borrower:
c/o Marine Transport Corporation
1200 Harbour Boulevard, 9th Floor,
Weehawken, New Jersey 07087
Fax No.: 201-330-9645
Attn: General Counsel, P.N. Popov
If to the Agent (with copies to the Lenders):
200 Park Avenue
New York, New York 10166
Fax No.: 212-681-3900
Attn: Nikolai Nachamkin
If to the Lenders, to such Lender's address and fax number as set forth in
Schedule 1 (with a copy to the Agent).
Any notice sent by facsimile shall be confirmed by letter dispatched as soon as
practicable thereafter.
16.3 Notices Deemed Received. Every notice or demand shall, except so far as
otherwise expressly provided by this Agreement, be deemed to have been received
(provided that it is received prior to 2 p.m. New York time; otherwise it shall
be deemed to have been received on the next following Banking Day), in the case
of a facsimile at the time of dispatch thereof (provided further that if the
date of dispatch is not a Banking Day in the locality of the party to whom such
notice or demand is sent it shall be deemed to have been received on the next
following Banking Day in such locality) and, in the case of a letter, at the
time of receipt thereof.
17. MISCELLANEOUS
17.1 Time of Essence. Time is of the essence of this Agreement but no failure or
delay on the part of the Lenders, the Agent or the Westhampton Trustee to
exercise any power or right under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise by the Lenders, the Agent or
the Westhampton Trustee of any power or right hereunder preclude any other or
further exercise thereof or the exercise of any other power or right. The
remedies provided herein are cumulative and are not exclusive of any remedies
provided by law.
17.2 Unenforceable, etc., Provisions - Effect. In case any one or more of the
provisions contained in any Financing Document would, if given effect, be
invalid, illegal or unenforceable in any respect under any law applicable in any
relevant jurisdiction, said provision shall not be enforceable against the
relevant Security Party,
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but the validity, legality and enforceability of the remaining provisions herein
or therein contained shall not in any way be affected or impaired thereby.
17.3 Indemnification. The Borrower and, by its execution and delivery of the
Consent and Agreement set forth below, each of the other Security Parties
jointly and severally agree to indemnify the Lenders, the Agent, the Westhampton
Trustee, their respective successors and assigns, and their respective officers,
directors, employees, representatives and agents (each an "Indemnitee") from,
and hold each of them harmless against, any and all losses, liabilities, claims,
damages, expenses, obligations, penalties, actions, judgments, suits, costs or
disbursements of any kind or nature whatsoever (including, without limitation,
the fees and disbursements of counsel for such Indemnitee in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not such Indemnitee shall be designated a party thereto) that may at
any time (including, without limitation, at any time following the repayment of
the Term Loan and the Revolving Credit Facility Advances) be imposed on,
asserted against or incurred by, any Indemnitee as a result of, or arising out
of or in any way related to or by reason of, (a) any violation by any Security
Party (or any charterer or other operator of any Vessel) of any applicable
Environmental Law, (b) any Environmental Claim arising out of the management,
use, control, ownership or operation of property or assets by any Security Party
(or, after foreclosure, by the Lenders, the Agent, the Westhampton Trustee or
their respective successors or assigns after any such foreclosure) and (3) the
breach of any representation, warranty or covenant set forth in Sections 2.1 (p)
or (q) or 9.1(A)(xi). If and to the extent that the obligations of the Security
Parties under this Section are unenforceable for any reason, the Borrower and,
by its execution and delivery of the Consent and Agreement set forth below, each
of the other Security Parties jointly and severally agree to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under applicable law. The obligations of the Security Parties under
this Section 17.3 shall survive the termination of this Agreement and the
repayment to the Lender, the Agent and the Westhampton Trustee of all amounts
owing to each thereof under or in connection herewith.
17.4 References. References herein to Sections and Schedules are to be construed
as references to sections of, and schedules to, this Agreement.
17.5 Further Assurances. The Borrower agrees that if any Financing Document
shall, in the reasonable opinion of the Agent, at any time be deemed by the
Agent for any reason insufficient in whole or in part to carry out the true
intent and spirit hereof or thereof, it will execute or cause to be executed
such other and further assurances and documents as in the opinion of the Agent
may be required in order more effectively to accomplish the purposes of such
Financing Document.
17.6 Prior Agreements, Merger. Any and all prior understandings and agreements
heretofore entered into between the Security Parties on the one part, and the
Lenders, the Agent or the Westhampton Trustee, on the other part, whether
written or oral, are superseded by and merged into this Agreement and the other
agreements (the forms of which are exhibited hereto) to be executed and
delivered in connection herewith to which
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any Security Party and/or the Lenders, the Agent or the Westhampton Trustee are
parties, which alone fully and completely express the agreements between the
Security Parties, the Lenders, the Agent and the Westhampton Trustee.
17.7 Entire Agreement; Amendments. This Agreement constitutes the entire
agreement of the parties hereto including all parties added hereto pursuant to
an Assignment and Assumption Agreement and cannot be amended other than by
written agreement signed by all such parties.
17.8 Headings. In this Agreement, Section headings are inserted for convenience
of reference only and shall not be taken into account in the interpretation of
this Agreement.
IN WITNESS whereof, each party hereto has caused this Agreement to
be duly executed by its duly authorized representative on the day and year first
above written.
MARINE TRANSPORT LINES, INC.
By:____________________________
Name:
Title:
By Special Authority for
DEN NORSKE BANK ASA
By:____________________________
Theodore S. Jadick
Senior Vice President
New York Branch
By:____________________________
Nikolai Nachamkin
Vice President
New York Branch
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CONSENT AND AGREEMENT
AND ACCOUNT ASSIGNMENT
Each of the undersigned, referred to in the foregoing Amended and
Restated Term Loan and Revolving Credit Facility Agreement as the "Guarantors",
hereby consents and agrees to said Agreement and to the documents contemplated
thereby and to the provisions contained therein relating to conditions to be
fulfilled and obligations to be performed by the undersigned pursuant to or in
connection with said Agreement and particularly agree to be bound by the
representations, warranties and covenants relating to the undersigned contained
in Sections 2 and 9 of said Agreement to the same extent as if the undersigned
were a party to said Agreement.
In particular, but without limitation of the foregoing, each of the
undersigned hereby covenants and agrees to maintain its primary collection and
revenue accounts with the Agent and shall procure that all earnings of any
Vessels shall be paid into such collection accounts. As security for its
obligations under the Financing Documents, each of the undersigned hereby
pledges, assigns and grants the Agent, on behalf of the Lenders, a security
interest in all the undersigned's right, title and interest in and to the
aforesaid collection and disbursement accounts and consents that if an Event of
Default shall occur and so long as the same shall be continuing, all moneys held
in the said accounts and all moneys thereafter received by the Agent may be
applied as provided in Section 8.3 of the Agreement.
Each of the undersigned which are Existing Guarantors, as defined in
the Agreement hereby covenants and agrees that each of the Security Documents
executed thereby pursuant to the Original Credit Agreement shall be amended to
the extent that all references therein to the Credit Agreement, the Notes, the
Guaranty, the Mortgages and the other Security Documents shall be deemed to
refer to the Agreement, the Notes, the Guaranty and the Security Documents as
the same are amended and restated or amended in accordance with the terms of the
foregoing Agreement.
MARINE TRANSPORT OSWEGO CORPORATION
MANAGEMENT, INC.
By:_________________________ By:___________________________
Peter N. Popov Peter N. Popov
Secretary Secretary
OSWEGO CHEMICAL CARRIERS MARINE BARGE COMPANY
CORPORATION
By:_________________________ By:___________________________
Peter N. Popov Peter N. Popov
Secretary Secretary
67
<PAGE> 76
MARINE CHEMICAL NAVIGATION MARINE NAVIGATION SULPHUR
CORPORATION CARRIERS, INC.
By:_________________________ By:___________________________
Peter N. Popov Peter N. Popov
Secretary Secretary
MARINE SULPHUR SHIPPING MARINE ALASKA, INC.
CORPORATION
By:_________________________ By:_________________________
Peter N. Popov Peter N. Popov
Secretary Secretary
OMI CHALLENGER TRANSPORT, INC. OMI PETROLINK, CORP.
By:_________________________ By:_________________________
Peter N. Popov Peter N. Popov
Secretary Secretary
COURIER TRANSPORT, INC. INTREPID SHIP MANAGEMENT, INC.
By:_________________________ By:_________________________
Peter N. Popov Peter N. Popov
Secretary Secretary
PATRIOT TRANSPORT, INC. ROVER TRANSPORT, INC.
By:_________________________ By:_________________________
Peter N. Popov Peter N. Popov
Secretary Secretary
68
<PAGE> 77
HARLINK CORP. OMIP, INC.
By:_________________________ By:_________________________
Peter N. Popov Peter N. Popov
Secretary Secretary
NUELINK CORP. OMI OFFSHORE MARINE SERVICES
INC.
By:_________________________ By:_________________________
Peter N. Popov Peter N. Popov
Secretary Secretary
MARINE TRANSPORT CORPORATION MARINE CAR CARRIERS INC., a
Delaware corporation
By:_________________________ By:_________________________
Peter N. Popov Peter N. Popov
Secretary Secretary
69
<PAGE> 1
Exhibit 10.12
TERM LOAN AND REVOLVING CREDIT FACILITY AGREEMENT
- --------------------------------------------------------------------------------
MARINE TRANSPORT CORPORATION
Borrower
The Financial Institutions Listed on Schedule 1,
Lenders
and
DEN NORSKE BANK ASA,
Agent
- --------------------------------------------------------------------------------
as of June 17, 1998
<PAGE> 2
INDEX
PAGE
----
SECTION 1 DEFINITIONS.................................................... 1
1.1 Defined Terms........................................ 1
1.2 Construction......................................... 21
1.3 Accounting Terms..................................... 22
SECTION 2 REPRESENTATIONS AND WARRANTIES................................. 22
2.1(a) Due Organization and Power........................... 22
2.1(b) Authorization and Consents........................... 22
2.1(c) Binding Obligations.................................. 22
2.1(d) No Violation......................................... 22
2.1(e) Litigation........................................... 23
2.1(f) No Default........................................... 23
2.1(g) Vessels.............................................. 23
2.1(h) Insurance............................................ 24
2.1(i) Citizenship and Qualification as Owner............... 24
2.1(j) Financial Information................................ 24
2.1(k) Tax Returns.......................................... 24
2.1(l) ERISA................................................ 24
2.1(m) Chief Executive Office............................... 25
2.1(n) Foreign Trade Control Regulations.................... 25
2.1(o) Equity Ownership..................................... 25
2.1(p) Environmental Matters................................ 26
2.1(q) Pending, Threatened or Potential Environmental Claims 26
2.1(r) Compliance with ISM Code............................. 27
2.1(s) Threatened Withdrawal of DOC or SMC.................. 27
2.1(t) Year 2000 Issue...................................... 27
SECTION 3 ADVANCES....................................................... 27
3.1 Purposes............................................. 27
3.2 Term Loan Advances................................... 27
3.3 Revolving Credit Facility Advances................... 27
3.4 Drawdown Notice...................................... 28
3.5 Effect of Drawdown Notices........................... 28
3.6 Notation of Advances................................. 28
SECTION 4 CONDITIONS..................................................... 28
4.1 Conditions to Advance of Term Loan and the Initial
Revolving Credit Facility Advance................. 28
i
<PAGE> 3
4.2 Further Conditions Precedent......................... 34
4.3 Satisfaction After Drawdown.......................... 35
4.4 Breakfunding Costs................................... 35
SECTION 5 REPAYMENT, PREPAYMENT AND REDUCTION
OF FACILITY............................................ 35
5.1 Repayment of Term Loan............................... 35
5.2 Revolving Credit Facility............................ 35
5.3 Voluntary Prepayment of Term Loan.................... 35
5.4 Mandatory Prepayment of Term Loan.................... 36
5.5 Prepay Term Loans Pro Rata........................... 36
5.6 Application of Prepayments........................... 36
5.7 Mandatory Reduction of Revolving Credit Facility..... 36
5.8 Voluntary Reduction of Revolving Credit Facility..... 36
SECTION 6 INTEREST AND RATE.............................................. 37
6.1 Term Loan Applicable Rate and Default Rate........... 37
6.2 Revolving Credit Facility Applicable Rate and
Default Rate...................................... 37
6.3 Determination of Applicable Margin................... 37
6.4 Determination of LIBOR............................... 37
6.5 Interest Periods..................................... 38
6.6 Interest Payments.................................... 38
6.7 Payment on Banking Day............................... 38
6.8 Calculation of Interest.............................. 38
SECTION 7 PAYMENTS....................................................... 39
7.1 Place of Payments, No Set Off........................ 39
7.2 Tax Credits.......................................... 39
SECTION 8 EVENTS OF DEFAULT.............................................. 39
8.1(a) Non-Payment of Principal............................. 39
8.1(b) Non-Payment of Interest or Other Amounts............. 39
8.1(c) Representations...................................... 39
8.1(d) Covenants............................................ 40
8.1(e) Indebtedness......................................... 40
8.1(f) Change of Control; Ownership or Management of
Other Security.................................... 40
8.1(g) U.S. Citizenship..................................... 40
8.1(h) Bankruptcy........................................... 41
8.1(i) Termination of Operations; Sale of Assets............ 41
8.1(j) Judgments............................................ 41
ii
<PAGE> 4
8.1(k) Inability to Pay Debts............................... 41
8.1(l) Change in Financial Position......................... 41
8.1(m) Relevant Contracts................................... 41
8.1(n) Key Management Agreements............................ 41
8.1(o) Related Credit Agreement; OMI COLUMBIA
Loan Documents and Mortgage Securing
OMI Debt.......................................... 42
8.2 Indemnification...................................... 42
8.3 Application of Moneys................................ 42
SECTION 9 COVENANTS...................................................... 43
9.1(A)(i) Performance of Agreements............................ 43
9.1(A)(ii) Notice of Default; Litigation and Adverse Change .... 43
9.1(A)(iii) Obtain Consents...................................... 44
9.1(A)(iv) Financial Information................................ 44
9.1(A)(v) U.S. Citizenship; Qualification to Own
Foreign Flag Vessels.............................. 45
9.1(A)(vi) Corporate Existence.................................. 45
9.1(A)(vii) Books and Records.................................... 45
9.1(A)(viii) Taxes and Assessments................................ 45
9.1(A)(ix) Inspection........................................... 45
9.1(A)(x) Compliance with Statutes, etc........................ 45
9.1(A)(xi) Environmental Matters................................ 46
9.1(A)(xii) ERISA................................................ 46
9.1(A)(xiii) Vessel Management.................................... 46
9.1(A)(xiv) Cash................................................. 46
9.1(A)(xv) Working Capital...................................... 47
9.1(A)(xvi) Debt Service Coverage Ratio.......................... 47
9.1(A)(xvii) Total Debt to EBITDA................................. 47
9.1(A)(xviii) Brokerage Commissions, etc........................... 47
9.1(A)(xix) Deposit Accounts; Assignment......................... 47
9.1(A)(xx) MARINE DUVAL, AMELINA, CALINA and SAVONETTA.......... 48
9.1(A)(xxi) Proceeds of Marine Car Carriers (MI).............. 48
9.1(A)(xxi) Year 2000 Issue...................................... 48
9.1(A)(xxii) ISM Code Matter...................................... 48
9.1(A)(xxiii) OMI Columbia......................................... 49
9.1(B)(i) Liens ............................................... 49
9.1(B)(ii) Loans, Advances and Investments...................... 50
9.1(B)(iii) Indebtedness......................................... 50
9.1(B)(iv) Permitted Third Party Debt........................... 50
9.1(B)(v) Guarantees, etc...................................... 51
9.1(B)(vi) Changes in Business.................................. 51
9.1(B)(vii) Use of Corporate Funds............................... 51
9.1(B)(viii) Issuance of Shares................................... 51
iii
<PAGE> 5
9.1(B)(ix) Sale of Shares....................................... 51
9.1(B)(x) Sale of Assets....................................... 51
9.1(B)(xi) Capital Expenditures................................. 51
9.1(B)(xii) Changes in Offices or Names.......................... 52
9.1(B)(xiii) Changes in Management................................ 52
9.1(B)(xiv) Consolidation and Merger............................. 52
9.1(B)(xv) Chartering-in of Vessels............................. 52
9.1(B)(xvi) Dividends............................................ 52
9.1(B)(xvii) Loan From Marine Car Carriers (MI)................... 52
9.2 Vessel Valuations.................................... 52
9.3 Asset Maintenance.................................... 53
9.4 Inspection and Survey Reports........................ 53
SECTION 10 ASSIGNMENT.................................................... 53
SECTION 11 ILLEGALITY, INCREASED COST,
NON-AVAILABILITY, ETC.................................... 54
11.1 Illegality........................................... 54
11.2 Increased Cost....................................... 54
11.3 Nonavailability of Funds............................. 55
11.4 Agent's Certificate Conclusive....................... 55
11.5 Compensation for Losses.............................. 56
SECTION 12 CURRENCY INDEMNITY............................................ 56
12.1 Currency Conversion.................................. 56
12.2 Change in Exchange Rate.............................. 56
12.3 Additional Debt Due.................................. 56
12.4 Rate of Exchange..................................... 56
SECTION 13 FEES AND EXPENSES............................................. 56
13.1 Commitment Fee....................................... 56
13.2 Facility Fee......................................... 57
13.3 Other Fees........................................... 57
13.4 Expenses............................................. 57
SECTION 14 APPLICABLE LAW, JURISDICTION AND WAIVER....................... 57
14.1 Applicable Law....................................... 57
14.2 Jurisdiction......................................... 58
14.3 Waiver Of Jury Trial................................. 58
iv
<PAGE> 6
SECTION 15 THE AGENT..................................................... 58
15.1(a) Appointment of Agent................................. 58
15.1(b) Appointment of Security Trustee...................... 58
15.2 Distribution of Payments............................. 59
15.3 Holder of Interest in Note........................... 59
15.4 No Duty to Examine, Etc.............................. 59
15.5 Agent as Lender...................................... 59
15.6(a) Obligations of Agent................................. 59
15.6(b) No Duty to Investigate............................... 59
15.7(a) Discretion of Agent.................................. 60
15.7(b) Instructions of Majority Lenders..................... 60
15.8 Assumption re Event of Default....................... 60
15.9 No Liability of Agent or Lenders..................... 60
15.10 Indemnification of Agent............................. 61
15.11 Consultation with Counsel............................ 61
15.12 Resignation.......................................... 61
15.13 Representations of Lenders........................... 61
15.14 Notification of Event of Default..................... 61
SECTION 16 NOT ICES AND DEMANDS...................................... 62
16.1 Notices in Writing................................... 62
16.2 Addresses for Notice................................. 62
16.3 Notices Deemed Received.............................. 62
SECTION 17 MISCELLANEOUS................................................. 62
17.1 Time of Essence...................................... 62
17.2 Unenforceable, etc., Provisions - Effect............. 63
17.3 Indemnification...................................... 63
17.4 References........................................... 63
17.5 Further Assurances................................... 63
17.6 Prior Agreements, Merger............................. 64
17.7 Entire Agreement, Amendments......................... 64
17.8 Headings............................................. 64
CONSENT AND AGREEMENT AND ACCOUNT ASSIGNMENT.............................. 65
v
<PAGE> 7
SCHEDULES
1 LENDERS
2 GUARANTORS
3 OTHER SUBSIDIARIES
4 MORTGAGED VESSELS
5 OTHER VESSELS
6 MANAGEMENT AGREEMENTS
7 LITIGATION, SUITS, PROCEEDINGS AND
ENVIRONMENTAL CLAIMS
EXHIBITS
1 TERM LOAN NOTE
2 REVOLVING CREDIT FACILITY NOTE
3 GUARANTY
4 U.S. MORTGAGE
5 LIBERIAN MORTGAGE
6 EARNINGS ASSIGNMENTS
7 INSURANCES ASSIGNMENTS
8 GENERAL SECURITY AGREEMENT
9 ASSIGNMENT OF VESSEL MANAGEMENT RECEIVABLES
10 ASSIGNMENT OF JOINT VENTURE PROCEEDS
11 ASSIGNMENT OF GOVERNMENT RECEIVABLES
12 NEGATIVE PLEDGE
13 DRAWDOWN NOTICE
14 COMPLIANCE CERTIFICATE
vi
<PAGE> 8
15 ASSIGNMENT AND ASSUMPTION AGREEMENT
vii
<PAGE> 9
TERM LOAN AND REVOLVING CREDIT FACILITY AGREEMENT
THIS TERM LOAN AND REVOLVING CREDIT FACILITY AGREEMENT (this
"Agreement") is made as of the day of June, 1998, by and between (1) MARINE
TRANSPORT CORPORATION, a corporation incorporated under the laws of the State of
Delaware with offices at 1200 Harbour Boulevard, 9th Floor, Weehawken, New
Jersey (the "Borrower"), (2) the financial institutions listed on Schedule 1
hereto (together with their respective successors and assigns hereinafter called
the "Lenders") and (3) DEN NORSKE BANK ASA, acting through its New York branch,
with offices at 200 Park Avenue, New York, New York 10166 (the "Agent").
WITNESSETH THAT:
1. DEFINITIONS
1.1 Defined Terms. The words and expressions specified in this Agreement shall,
except where the context otherwise requires, have the meanings attributed to
them below:
"Acceptable Accounting Firm" Ernst & Young, or such other recognized
international accounting firm as shall be
approved by the Agent, such approval not to be
unreasonably withheld;
"Acquisition Agreement" that certain acquisition agreement, dated as of
September 15, 1997, among OMI Corp., Universal
Bulk Carriers, Inc., Marine Transport Lines and
the persons set forth on Exhibit A attached
thereto, together with any and all amendments,
modifications or waivers of provisions thereof
and supplements thereto;
"Advance" each Term Loan Advance and each Revolving
Credit Facility Advance;
"Affiliate" as to any Person, any other Person that,
directly or indirectly, controls or is
controlled by or is under common control with
such Person. (For purposes of this definition,
the term "control", including the terms
"controlling", "controlled by" and "under
common control with", of a Person means the
possession, direct or indirect, of the power to
vote 5% or more of the securities having
ordinary voting power for
<PAGE> 10
the election of directors of such Person or to
direct or cause the direction of the management
and policies of such Person, whether through
the ownership of voting securities, by contract
or otherwise);
"AMELINA" that certain 10,922 dwt Liberian flag ammonia
tanker named AMELINA, Official No. 2015
documented under the laws and flag of the
Republic of Liberia in the name of Oswego
Chemical Carriers Corporation;
"Argosy" Argosy Ventures Ltd., a Delaware not-for-profit
corporation.
"Assignment and Assumption the Assignment and Assumption Agreement(s)
Agreement(s)" executed pursuant to Section 10 substantially
in the form of Exhibit 15;
"Assignment Notices" notices for the (a) Earnings Assignments
substantially in the form set out in Exhibit 1
thereto or in such other form as the Agent may
agree;
(b) Insurances Assignments substantially in the
form set out in Exhibit 3 thereto or in such
other form as the Agent may agree;
(c) Assignments of Vessel Management
Receivables substantially in the form set out
in Exhibit 1 thereto or in such other form as
the Agent may agree;
(d) Assignment of Joint Venture Proceeds
substantially in the form set out in Exhibit 1
thereto or in such other form as the Agent may
agree; and
(e) Assignments of Government Receivables
substantially in the forms set out in Exhibits
1 and 2 thereto or in such other form as the
Agent may agree;
2
<PAGE> 11
"Assignment of Government the assignments of receivables payable to
Receivables" Marine Transport Lines or Intrepid Ship
Management, Inc., as the case may be, for their
respective contracts with MARAD executed or to
be executed by Marine Transport Lines and
Intrepid Ship Management, Inc. in favor of the
Agent pursuant to Section 4.1 of this
Agreement, substantially in the form of Exhibit
11 or in such other form as the Agent may
agree;
"Assignment of Joint Venture the second assignment of those proceeds to
Proceeds" which Marine Car Carriers (Del) is entitled
based upon its shares in Marine Car Carriers
(MI) such assignment to be executed by Marine
Car Carriers (Del) in favor of the Agent
pursuant to the Original Credit Agreement in
the form set out in Exhibit 12 or in such other
form as the Agent may agree;
"Assignment of Vessel the assignments executed or to be executed by
Management Receivables" Marine Transport Management and Intrepid Ship
Management, Inc. in favor of the Agent of all
right, title and interest of such Guarantors in
its receivables pursuant to Section 4.1 of this
Agreement, substantially in the form set out in
Exhibit 11 or in such other form as the Agent
may require;
"Assignments" the Earnings Assignments, the Insurances
Assignments, the Assignments of Government
Receivables, the General Security Agreements,
the Assignments of Vessel Management
Receivables and the Assignment of Joint Venture
Proceeds;
"Banking Day(s)" day(s) on which banks are open for the
transaction of business of the nature required
by this Agreement or any other documents
executed in connection herewith in London,
England and New York, New York;
3
<PAGE> 12
"CALINA" that certain 15,661 dwt Liberian flag ammonia
tanker named CALINA, Official No. 2774
documented under the laws and flag of the
Republic of Liberia in the name of Oswego
Chemical Carriers Corporation;
"Cash Equivalents" (i) securities issued or directly and fully
guaranteed or insured by the United States of
America or any agency or instrumentality
thereof (provided that the full faith and
credit of the United States of America is
pledged in support thereof) having maturities
of not more than ninety (90) days from the date
of acquisition, (ii) time deposits and
certificates of deposit, denominated in
Dollars, of the Agent, of any Lender or of any
commercial bank of recognized standing
organized under the laws of any country which
is a member of the Organization of Economic
Cooperation and Development or any governmental
subdivision or taxing authority of any such
country having capital and surplus in excess of
Five Hundred Million Dollars ($500,000,000) or
its equivalent in such country's currency, (any
such commercial bank, a "Qualified Bank"),
(iii) repurchase obligations with a term of not
more than seven (7) days for underlying
securities of the types described in (i) above
entered into with the Agent, any Lender or any
Qualified Bank, and (iv) commercial paper,
denominated in Dollars, issued by the Agent,
any Lender or by the parent corporation of any
Qualified Bank, and commercial paper rated at
least A-1 or the equivalent thereof by Standard
& Poor's Corporation or at least P-1 or the
equivalent thereof by Moody's Investor
Services, Inc., and in each case maturing
within ninety (90) days after the date of
acquisition;
4
<PAGE> 13
"Code" the Internal Revenue Code of 1986, as amended,
and any successor statute and regulations
promulgated thereunder;
"Collateral Vessel Value" the aggregate, as calculated from time to time
in the manner provided in Sections 9.2 and 9.3,
of (a) the FMVs of each of the Vessels then
mortgaged to secure obligations owed to the
Lenders under or in connection with either this
Agreement or the Related Credit Agreement and
(b) the value of the OMI COLUMBIA;
"Commitment(s)" that portion of the Term Loan and the Revolving
Credit Facility set out opposite a Lender's
name in Schedule 1 hereto or, as the case may
be, in any relevant Assignment and Assumption
Agreement, as reduced from time to time
pursuant to the terms of this Agreement;
"Compliance Certificate" a certificate of the Chief Financial Officer of
the Borrower certifying the compliance with all
of the covenants of the Borrower contained
herein, delivered to the Agent from time to
time pursuant to Section 9.1(A)(iv) hereof in
the form set out in Exhibit 14, or in such
other form as the Agent may require;
"Consents and Agreements" such third party consents as may be required
under any contract to which a Security Party is
a party in order for a Security Party to grant
a security interest pursuant to any Security
Document;
"COURIER" that certain 1977 built 35,662 dwt product
tanker named COURIER, Official No. 578746,
documented under the laws and flag of the
United States in the name of Courier Transport,
Inc.;
"DOC" means a document of compliance issued to an
Operator in accordance with rule 13 of the ISM
Code;
5
<PAGE> 14
"Dollars" and the sign "$" the legal currency, at any relevant time
hereunder, of the United States of America and,
for all payments hereunder, in same day funds
settled through the New York Clearing House
Interbank Payments system (or such other Dollar
funds as may be determined by the Agent to be
customary for the settlement in New York City
of banking transactions of the type herein
involved);
"Drawdown Date" each Term Loan Drawdown Date and each Revolving
Credit Facility Drawdown Date;
"Drawdown Notice" the meaning ascribed thereto in Section 3.4;
"Earnings Assignments" assignments of the earnings of the Mortgaged
Vessels executed or to be executed by the
appropriate Shipowning Guarantor or OMI
Challenger Transport, in favor of the Agent
pursuant to Section 4.1 substantially in the
form set out in Exhibit 8 or in such other form
as the Agent may require;
"EBITDA" means, on a consolidated basis, the Borrower's
earnings before interest, taxes, depreciation
and amortization (calculated in accordance with
GAAP) less income from 50% or less, directly or
indirectly, owned affiliates, based on the
preceding twelve (12) months actual operating
income (for purposes of calculating EBITDA for
the period commencing from the date hereof and
ending on the first anniversary of the date
hereof, the results for each quarterly
reporting period shall be annualized);
"Environmental Affiliate" any person or entity liable for Environmental
Claims, which claims any Security Party may
have assumed by contract or operation of law;
6
<PAGE> 15
"Environmental Approvals" the meaning ascribed thereto in Section 2.1(p);
"Environmental Claim" the meaning ascribed thereto in Section 2.1(p);
"Environmental Laws" the meaning ascribed thereto in Section 2.1(p);
"ERISA" the Employee Retirement Income Security Act of
1974, as amended;
"ERISA Affiliate" a trade or business (whether or not
incorporated) which is under common control
with, or part of a controlled group of
corporations with, any Security Party within
the meaning of Sections 414(b), (c), (m) or (o)
of the Code;
"Events of Default" any of the events set out in Section 8.1;
"Final Payment Date" June , 2003, or if such day is not a
Banking Day, the next following Banking Day
unless such next following Banking Day falls in
the following month, in which case the Final
Payment Date shall be the immediately preceding
Banking Day;
"Financing Documents" this Agreement, the Notes, the Guaranty and the
Security Documents;
"FMV" with respect to a Vessel, fair market value as
determined in accordance with Section 9.2
hereof;
"Former Lenders" Harrowston and Wolfson;
"Former Lenders Indebtedness" the indebtedness of the Borrower and/or its
Affiliates formerly owed to the Former Lenders
in the aggregate principal amount of Two
Million Eight Hundred Ninety Thousand] Dollars
($2,890,000), plus accrued and unpaid interest
thereon;
"GAAP" the meaning ascribed thereto in Section 1.3;
7
<PAGE> 16
"General Security Agreements" general security agreements to be executed by
each of the Guarantors which does not own a
Mortgaged Vessel in favor of the Agent pursuant
to Section 4.1 substantially in the form set
out in Exhibit 10 or in such other form as the
Agent may require;
"Guarantor(s)" each of the companies listed on Schedule 2;
"Guaranty" the guaranty of the obligations of the Borrower
under this Agreement and under the Notes to be
executed by each Guarantor in favor of the
Agent pursuant to Section 4.l substantially in
the form set out in Exhibit 3 or in such other
form as the Agent may require;
"Harrowston" Harrowston Corporation, a company organized
under the laws of Canada;
"Indebtedness" for any Person at any date of determination
(without duplication), all (i) indebtedness of
such Person for borrowed money, (ii)
obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments,
(iii) obligations of such Person arising from
letters of credit or other similar instruments
(including reimbursement obligations with
respect thereto), (iv) except trade payables,
obligations of such Person to pay the deferred
and unpaid purchase price of property or
services, which purchase price is due more than
six (6) months after the date of placing such
property in service or taking delivery thereof
or the completion of such services, (v)
obligations on account of principal of such
Person as lessee under capitalized leases, (vi)
indebtedness of other Persons secured by a lien
on any asset of such Person, whether or not
such indebtedness is assumed by such Person;
provided that the amount of such indebtedness
shall be the lesser of (a) the
8
<PAGE> 17
fair market value of such asset at such date of
determination and (b) the amount of such
indebtedness, and (vii) indebtedness of other
Persons guaranteed by such Person to the extent
such indebtedness is so guaranteed. The amount
of Indebtedness of any Person at any date shall
be the outstanding balance at such date of all
unconditional obligations as described above
and, with respect to contingent obligations,
the maximum liability upon the occurrence of
the contingency giving rise to the obligation,
provided that the amount outstanding at any
time of any indebtedness issued with original
issue discount is the face amount of such
indebtedness less the remaining unamortized
portion of the original issue discount of such
indebtedness at such time as determined in
conformity with GAAP; and provided further that
Indebtedness shall not include any liability
for federal, state, local or other taxes;
"Insurances Assignments" assignments of the insurances of the Mortgaged
Vessels to be executed by the appropriate
Shipowning Guarantor in favor of the Agent,
pursuant to Section 4.1 substantially in the
form set out in Exhibit 9 or in such other form
as the Agent may require;
"Interest Notice" a notice delivered to the Agent pursuant to
Section 6.5 specifying the duration of any
relevant Interest Period;
"Interest Period(s)" period(s) of one (1), two (2), three (3) or six
(6) months selected by the Borrower or such
other period(s) as may be agreed between the
Borrower and the Lenders;
"Intrepid Ship Management, Intrepid Ship Management, Inc., a corporation
Inc." organized and existing under the laws of the
State of Delaware;
9
<PAGE> 18
"ISM Code" means the International Safety Management Code
for the Safe Operating of Ships and for
Pollution Prevention constituted pursuant to
Resolution A. 741(18) of the International
maritime organization and incorporated into the
Safety of Life at Sea Convention including any
amendments or extensions thereto and any
regulation issued pursuant thereto;
"Key Management Agreements" a) that certain vessel operating agreement
between Marine Transport Management and Union
Carbide Corporation, dated as of January 1,
1996, for the United States flag vessel
CHEMICAL PIONEER (Official No. 661060) and any
renewals or extensions thereof,
b) that certain operating agreement, dated
December 18, 1979 between Marine Alaska and
Marine Transport Management, relating to the
United States flag vessel B.T. ALASKA (Official
No. 590208) and any renewals or extensions
thereof,
c) that certain vessel management agreement
between the Borrower and OMI Challenger
Transport, dated as of January 29, 1997, as
amended, for the OMI COLUMBIA and any renewals
or extensions thereof,
d) that certain contract No. DTMA98-98-C-00004,
awarded June 12, 1998, between MTL and MARAD
relating to the United States flag vessels CAPE
COD and CAPE CHALMERS and any renewals or
extensions thereof,
e) that certain contract No. DTMA98-98-C-00009,
awarded June 12, 1998, between MTL and MARAD
relating to the United States flag vessels CAPE
EDMONT and CAPE DUCATO and any renewals or
extensions thereof,
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f) that certain contract No. DTMA98-98-C-00010,
awarded June 12, 1998, between MTL and MARAD
relating to the United States flag vessels CAPE
DECISION and CAPE DOUGLAS and any renewals or
extensions thereof,
g) that certain contract No. DTMA98-98-C-00011,
awarded June 12, 1998, between MTL and MARAD
relating to the United States flag vessels CAPE
DIAMOND and CAPE DOMINGO and any renewals or
extensions thereof, and
h) that certain contract No. DTMA98-98-C-00033,
awarded June 12, 1998, between MTL and MARAD
relating to the United States vessels CAPE BON
and NORTHERN LIGHT and any renewals or
extensions thereof;
"Liberian Mortgages" those second preferred Liberian ship mortgages
on the each Mortgaged Vessel registered under
the laws and flag of the Republic of Liberia to
be executed by the appropriate Shipowning
Guarantor in favor of the Agent pursuant to
Section 9.1(A)(xx) substantially in the form
set out in Exhibit 6 or in such form as the
Agent may require;
"LIBOR" the rate (rounded upward to the nearest 1/16th
of one percent) for deposits of Dollars for a
period equivalent to the relevant Interest
Period at or about 11:00 a.m. (London time) on
the second London Banking Day before the first
day of such period as displayed on Telerate
page 3750 (British Bankers' Association
Interest Settlement Rates) (or such other page
as may replace such page 3750 on such system or
on any other system of the information vendor
for the time being designated by the British
Bankers' Association to calculate the BBA
Interest
11
<PAGE> 20
Settlement Rate (as defined in the British
Bankers' Association's Recommended Terms and
Conditions ("BBAIRS" terms) dated August
1985)), provided that if on such date no such
rate is so displayed for the relevant Interest
Period, LIBOR for such period shall be the rate
offered by the Agent for deposits of Dollars in
an amount approximately equal to the amount for
which LIBOR is to be determined for a period
equivalent to the relevant Interest Period to
prime banks in the London Interbank Market at
or about 11:00 a.m. (London time) on the second
Banking Day before the first day of such
period;
"Majority Lenders" Lenders whose Commitments exceed sixty-seven
percent (67%) of the total Commitments;
"Management Agreements" the management and/or operating contracts
listed on Schedule 6 hereto;
"MARAD" the United States Maritime Administration:
"Marine Alaska" Marine Alaska, Inc., a Delaware corporation;
"Marine Car Carriers (Del)" Marine Car Carriers, Inc., a Delaware
corporation;
"Marine Car Carriers (MI)" Marine Car Carriers, Inc. (MI), a Marshall
Islands corporation;
"Marine Transport Lines" Marine Transport Lines, Inc., a corporation
incorporated under the laws of the State
Delaware;
"Marine Transport Management" Marine Transport Management, Inc., a
corporation incorporated under the laws of the
State of Delaware;
"Margin" the meaning ascribed thereto in Section 6.3;
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<PAGE> 21
"MARINE CHEMIST" that certain 1970 built 36,526 dwt chemical
tanker named MARINE CHEMIST, Official No.
529399, documented under the laws and flag of
the United States in the name of Marine
Chemical Navigation Corporation;
"MARINE DUVAL" that certain 1970 rebuilt 25,131 dwt molten
sulphur carrier named MARINE DUVAL, Official
No. 245851, documented under the laws and flag
of the United States in the name of Marine
Sulphur Shipping Corporation;
"Materials of Environmental the meaning ascribed thereto in Section 2.1(p);
Concern"
"MCCMI Shareholders Agreement" that certain
shareholders agreement among the shareholders
of Marine Car Carriers (MI) dated as of March
1, 1995;
"Mortgaged Vessels" the vessels identified on Schedule 4;
"Mortgages" the U.S. Mortgages and the Liberian Mortgages;
"Mortgages Securing the those certain first preferred ship mortgages
OMI Debt" over the Workboats in favor of and securing the
OMI Debt;
"Negative Pledge" the negative pledge by OMI Challenger Transport
of all of its interest in OMI COLUMBIA or any
Vessel Agreement relating to such Vessel,
substantially in the form of Exhibit 12.
"New Workboats" the United States flag vessels OMS TRAVIS
(Official No. 587445) and OMS MAVERICK
(Official No. 517406);
"Notes" the Term Loan Note and the Revolving Credit
Facility Note;
"OMI" OMI Corporation, a corporation incorporated
under the laws of the Marshall Islands;
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<PAGE> 22
"OMI Challenger Transport" OMI Challenger Transport, Inc., a corporation
incorporated under the laws of the State of
Delaware;
"OMI COLUMBIA" that certain 1974 built 138,698 dwt oil tanker
named OMI COLUMBIA, Official No. 663428,
documented under the laws and flag of the
United States in the name of Argosy;
"OMI COLUMBIA Loan Documents" that certain credit agreement, dated as of
January 29, 1997, among Citicorp North America
Inc., as agent, the Lenders (as defined
therein), Argosy, et al., and any documents
executed in connection therewith or securing
any obligation owing thereunder;
"OMI Debt" Indebtedness of the Borrower to OMI in the
original principal amount of Six Million Four
Hundred Forty-Three Thousand Dollars
($6,443,000);
"Operator" means any Person approved by the Agent who is
from time to time during the Security Period,
concerned with the operation of a Vessel and
falls within the definition of "Company" set
out in rule 1.1.2 of the ISM Code;
"Other Vessels" the vessels identified on Schedule 5;
"PATRIOT" that certain 1976 built 35,662 dwt product
tanker named PATRIOT, Official No. 571049,
documented under the laws and flag of the
United States in the name of Patriot Transport,
Inc.;
"Permitted Indebtedness" collectively, the Indebtedness incurred under
this Agreement, the Related Indebtedness, the
OMI Indebtedness and Permitted Third Party
Debt;
"Permitted Liens" the meaning ascribed thereto in Section
9.1(B)(i);
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<PAGE> 23
"Permitted Third Party Debt" Indebtedness, incurred with recourse to any
Security Party or any other party owned
directly or indirectly by the Borrower and for
the purposes of acquiring new assets or
supporting MARAD vessel management contracts,
not to exceed, in the aggregate, the principal
amount of US$20,000,000 outstanding at any
time;
"Person" means any individual, sole proprietorship,
corporation, partnership (general or limited),
business trust, bank, trust company, joint
venture, association, joint stock company,
trust or other unincorporated organization,
whether or not a legal entity, or any
government or agency or political subdivision
thereof;
"Plan" any employee benefit plan covered by Title IV
of ERISA;
"Reduction Date" June , 2001, or if such day is not a
Banking Day, the next following Banking Day
unless such next following Banking Day falls in
the following month, in which case the
Revolving Credit Facility Termination Date
shall be the immediately preceding Banking Day;
"Related Credit Agreement" that certain amended and restated term loan and
revolving credit agreement of even date
herewith among Marine Transport Lines, as
borrower, the Lenders and the Agent, as the
same may hereafter be amended or supplemented;
"Related Indebtedness" the Indebtedness of the Security Parties owed
under and in connection with the Related Credit
Agreement;
"Related Security Documents" the "Security Documents" as defined in the
Related Credit Agreement;
"Related Term Loan" the "Term Loan" as defined in the Related
Credit Agreement;
15
<PAGE> 24
"Relevant Contracts" a) that certain time charter, dated April 31,
1982, of the MARINE DUVAL to Freeport MacMoran
Resource Partners, Limited Partnership and any
renewals or extensions thereof;
b) the contract of affreightment, dated as of
January 1, 1996, with Shell Oil Company for the
MARINE CHEMIST and any renewals or extensions
thereof;
c) the contract of affreightment, dated
September 24, 1994, with PPG Industries, Inc.
for the MARINE CHEMIST and any renewals or
extensions thereof;
d) the contract of affreightment, dated as of
July 1, 1996, with ARCO Products Company for
the MARINE CHEMIST and any renewals or
extensions thereof;
e) that certain bareboat charter dated on or
about July 29, 1965, of the CALINA between
Oswego Chemical Carriers Corporation, as owner,
and Oswego Corporation, as charterer and any
renewals or extensions thereof; and
f) that certain time charter, dated as of March
14, 1978 between Marine Alaska, Inc. and BP Oil
Shipping Company, USA, for the United States
flag vessel B.T. ALASKA (Official No. 590208)
and any renewals or extensions thereof;
g) that certain time charter, dated as of June
1, 1994 between OMI Challenger Transport and BP
Oil Shipping Company, USA for the OMI COLUMBIA
and any renewals or extensions thereof; and
h) that certain time charter, dated as of
January 29, 1997, between Argosy and OMI
Challenger Transport for the OMI
16
<PAGE> 25
COLUMBIA and any renewals or extensions
thereof;
"Revolving Credit Facility" the sums to be advanced by the Lenders to the
Borrower in an aggregate amount not to exceed
at any one time outstanding Two Million Dollars
($2,000,000) pursuant to Section 3.3 as the
same may be reduced as provided in this
Agreement;
"Revolving Credit Facility any amount advanced to the Borrower under the
Advance" Revolving Credit Facility on any Revolving
Credit Facility Drawdown Date;
"Revolving Credit Facility Applicable Rate" any rate of
interest on the Revolving Credit Facility
Balance from time to time prescribed by Section
6.2;
"Revolving Credit Facility the outstanding Dollar amount of the Revolving
Balance" Credit Facility Advances at any relevant time;
"Revolving Credit Facility has the meaning ascribed thereto in Section
Default Rate" 6.2;
"Revolving Credit Facility each date which is a Banking Day not later
Drawdown Date" than May , 2000, upon which the Borrower has
requested any Revolving Credit Facility
Advance as provided in Section 3.3;
"Revolving Credit Facility the promissory note, to be executed by the
Note" Borrower to the order of the Lenders to
evidence the Revolving Credit Facility
substantially in the form set out in Exhibit 2
or in such other form as the Agent may require;
"Revolving Credit Facility June , 2002, or if such day is not a
Termination Date" Banking Day, the next following Banking Day
unless such next following Banking Day falls in
the following month, in which case the
Revolving Credit Facility Termination Date
shall be the immediately preceding Banking Day;
17
<PAGE> 26
"ROVER" that certain 1977 built 35,662 dwt product
tanker named ROVER, Official No. 577241,
documented under the laws and flag of the
United States in the name of Rover Transport,
Inc.;
"SAVONETTA" that certain 10,947 dwt Liberian flag ammonia
tanker named SAVONETTA, Official No. 2129,
documented under the laws and flag of the
Republic of Liberia in the name of Oswego
Chemical Carriers Corporation;
"Security Documents" the Mortgages, the Assignments, the Assignment
Notices, the Subordination Agreement, the
Consents and Agreements. the Negative Pledge
and any other documents that may be executed as
security for the Term Loan and/or the Revolving
Credit Facility and the Borrower's obligations
arising therefrom;
"Security Parties" the Borrower and each Guarantor;
"Security Period" the period from the initial Drawdown Date of
the initial Term Loan Advance to the date upon
which all amounts owing under the Term Loan and
the Revolving Credit Facility and all other
amounts due to the Lenders and the Agent
pursuant to the Financing Documents are prepaid
in full or become repayable and are repaid in
full and no further Revolving Credit Facility
Advances are available;
"Shipowning Guarantors" each of the Guarantors which owns a Mortgaged
Vessel;
`SMC" means a safety management certificate issued
for a Vessel in Accordance with rule 13 of the
ISM Code;
"Taxes" any present or future income or other taxes,
levies, duties, charges, fees, deductions, or
withholdings of any nature now or hereafter
imposed, levied,
18
<PAGE> 27
collected, withheld or assessed by any taxing
authority whatsoever, except for taxes on or
measured by the income of the Agent or any
Lender imposed by the Agent's or such Lender's
jurisdiction of organization, the jurisdiction
of the principal place of business of the Agent
or such Lender, the United States of America,
the State or City of New York or any
governmental subdivision or taxing authority of
any of them or by any other jurisdiction or
taxing authority having jurisdiction over the
Agent or such Lender (unless such jurisdiction
is asserted by reason of the activities of the
Security Parties or any of them);
"Term Loan" the sum advanced by the Lenders pursuant to
this Agreement in the principal amount of Eight
Million Eight Hundred Eighty-Seven Thousand
Dollars ($8,887,000);
"Term Loan Advance" the amount advanced to the Borrower pursuant to
Section 3.2 on a Term Loan Drawdown Date;
"Term Loan Applicable Rate" any rate of interest on the Term Loan Balance
from time to time applicable pursuant to
Section 6.1;
"Term Loan Balance" the Dollar amount of the Term Loan at any
relevant time as reduced by payments pursuant
to the terms of this Agreement;
"Term Loan Default Rate" has the meaning ascribed thereto in Section
6.1;
"Term Loan Drawdown Date" each date, which is a Banking Day not later
than June 30, 1998, upon which the Borrower has
requested that a Term Loan Advance be made
available to the Borrower as provided in
Section 3.2;
"Term Loan Note" the promissory note to be executed by the
Borrower to the order of the Lenders to
evidence the Term Loan substantially in
19
<PAGE> 28
the form set out in Exhibit 1 or in such other
form as the Agent may require;
"Term Loan Payment Dates" (i) September , 1998 and (ii) each of
the dates falling at intervals of three (3)
months after such date up to and including the
Final Payment Date, provided, however, that if
any such day is not a Banking Day, the next
following Banking Day, unless such next
following Banking Day falls in the following
calendar month, in which case the relevant Term
Loan Payment Date shall be the immediately
preceding Banking Day;
"Total Debt" the Indebtedness of the Borrower on a
consolidated basis;
"Total Loss" the actual, agreed, arranged or compromised
total loss of any Vessel;
"Unrestricted Cash and Cash Equivalents" cash or Cash
Equivalents (excluding, however, undrawn
amounts available under the Revolving Credit
Facility or under the Related Credit Agreement)
which are free of liens and unencumbered to any
party other than the Agent and the Lenders in
connection herewith;
"U.S. Mortgages" the second preferred United States ship
mortgages on each Mortgaged Vessel registered
under the laws and flag of the United States of
America to be executed by the appropriate
Shipowning Guarantor in favor of the Agent
pursuant to Section 4.1 substantially in the
form set out in Exhibit 4 or in such other form
as the Agent may require;
"Vessel Agreements" a) the Relevant Contracts;
b) that certain time charter, dated January 1,
1985 (as amended), of the SAVONETTA to Hydro
Agri Ammonia, Inc.;
20
<PAGE> 29
c) that certain time charter, dated September
16, 1987 (as amended), of the CALINA to Hydro
Agri Ammonia, Inc.;
d) that certain time charter, dated January 1,
1985 (as amended), of the AMELINA to Hydro Agri
Ammonia, Inc.;
e) the Mortgage(s) Securing the OMI Debt; and
f) the OMI COLUMBIA Loan Documents.
"Vessels" the Mortgaged Vessels and the Other Vessels;
"Wolfson" The Wolfson Descendants' 1983 Trust, a grantor
trust established under the laws of New Jersey;
and
"Work Boats" the United States flag vessels OMS HARRIS
(Official No. 650997), OMS NUECES (Official No.
570688), OMS LIBERTY (Official No. 602050) and
OMS SHELBY (Official No. 603076).
"Year 2000 Issue" the failure of computer software, hardware and
firmware systems and equipment containing
embedded computer chips properly to receive,
transmit, process, manipulate, store, retrieve,
re-transmit or in any other way utilize data
and information due to the occurrence of the
year 2000 or the inclusion of dates on or after
January1, 2000.
1.2 Construction. Words importing the singular number only shall include the
plural and vice versa. Words importing persons shall include companies, firms,
corporations, partnerships, unincorporated associations and their respective
successors and assigns.
1.3 Accounting Terms. All accounting terms not specifically defined herein shall
be construed in accordance with generally accepted accounting principles as in
effect from time to time in the United States of America consistently applied
("GAAP") and all financial statements submitted pursuant to this Agreement shall
be prepared in
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<PAGE> 30
accordance with, and all historical financial data submitted pursuant hereto
shall be derived from financial statements prepared in accordance with, GAAP.
2. REPRESENTATIONS AND WARRANTIES
2.1 In order to induce the Agent and the Lenders to enter into this Agreement
and to make the Term Loan and Revolving Credit Facility available to the
Borrower, the Borrower hereby represents and warrants to the Agent and the
Lenders (which representations and warranties shall survive the execution and
delivery of this Agreement and the Notes and the making of such advances) that:
(a) Due Organization and Power. Each of the Security Parties is duly
formed and is validly existing in good standing under the laws of its
jurisdiction of incorporation, has full power to carry on its business as now
being conducted and to enter into and perform its obligations under those
Financing Documents to which it is or is to be a party pursuant to this
Agreement, and has complied with all (i) statutory, regulatory and other
requirements relative to such business; and (ii) such agreements which if not
complied with, could reasonably be expected to have a material adverse effect on
its business, assets or operations, financial or otherwise;
(b) Authorization and Consents. All necessary corporate action has
been taken to authorize, and all necessary consents and authorities have been
obtained and remain in full force and effect to permit, each Security Party to
enter into and perform its obligations under those Financing Documents to which
it is or is to be a party pursuant to this Agreement and, in the case of the
Borrower, to borrow, service and repay the Term Loan and the Revolving Credit
Facility and, as of the date of this Agreement, no further consents or
authorities are necessary for the borrowing, service and repayment of the Term
Loan and/or the Revolving Credit Facility or any part thereof;
(c) Binding Obligations. Each of the Financing Documents constitutes
or, when executed will constitute, the legal, valid and binding obligation of
each Security Party which is a party thereto enforceable against such Security
Party in accordance with its terms, except to the extent that such enforcement
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting generally the enforcement of creditors' rights;
(d) No Violation. The execution and delivery of, and the performance
of the provisions of, each Financing Document by each Security Party which is a
party thereto do not, and will not during the Security Period, contravene any
applicable law or regulation existing at the date hereof or any contractual
restriction binding on such Security Party or its certificate of incorporation,
by-laws or equivalent documents;
(e) Litigation. Except as set forth on Schedule 7 hereto, no action,
suit or proceeding is pending or threatened against any Security Party before
any court, board of arbitration or administrative agency which (after taking
into account the benefits of any applicable insurance which can reasonably be
expected to be recovered by the
22
<PAGE> 31
relevant Security Party, as the case may be) could or might result in any
material adverse change in the business or condition (financial or otherwise) of
any thereof;
(f) No Default. No Security Party or Marine Car Carriers (MI) is in
default under any material agreement by which it is bound, or is in default in
respect of any material financial commitment or obligation;
(g) Vessels. As of the date hereof:
(i) each of the Mortgaged Vessels is in the sole and
absolute ownership of the respective Guarantor, as
listed opposite its name in Schedule 4, unencumbered,
save and except for, the respective Mortgage recorded
thereagainst, the relevant Related Security Documents
and the respective Vessel Agreements,] and duly
registered in the name of such Guarantor under the
respective flag as set forth in Schedule 4;
(ii) each of the Other Vessels is in the sole and absolute
ownership of an Affiliate of the Borrower or, in the
case of OMI COLUMBIA, Argosy, as listed opposite its
name in Schedule 5, unencumbered, save and except for,
the respective Vessel Agreements and the relevant
Related Security Documents, and duly registered in the
name of such Affiliate of the Borrower under the
respective flag as set forth in Schedule 5;
(iii) each Vessel will be classed in the highest
classification and rating for vessels of the same age
and type with the respective classification society as
set forth in Schedules 4 and 5 without any material
outstanding recommendations;
(v) each Vessel will be operationally seaworthy and in all
material respects fit for its intended service;
(v) each of the Mortgaged Vessels will be insured in
accordance with the provisions of the governing Mortgage
and the requirements thereof for such insurances will
have been complied with and each of the Other Vessels
will be insured against such risks, in such amounts and
with such insurance companies as would a reasonably
prudent shipowner engaged in the same trades; and
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<PAGE> 32
(vi) each Vessel subject to a charter or other contract of
carriage constituting a Vessel Agreement has been
accepted by its respective charterer and is in service
under such Vessel Agreement;
(h) Insurance. Each of the Security Parties has insured its
properties and assets against such risks and in such amounts as are customary
for companies engaged in similar businesses;
(i) Citizenship and Qualification as Owner. Each Security Party or
other Affiliate of the Borrower owning a United States flag Vessel is a United
States citizen within the meaning of Section 2 of the United States Shipping
Act, 1916, as amended (46 U.S.C. ss.802), qualified to own and operate vessels
in the coastwise trade of the United States of America and each Security Party
or other Affiliate of the Borrower which is the registered owner of a Vessel
registered under a flag other than the United States of America is duly
qualified under the laws of such flag to be the registered owner and operator of
a vessel registered under such flag;
(j) Financial Information. Except as otherwise disclosed in writing
to the Agent on or prior to the date hereof, all financial statements,
information and other data furnished by the Borrower to the Agent are complete
and correct, and such financial statements have been prepared in accordance with
GAAP and accurately and fairly present the financial condition of the parties
covered thereby as of the respective dates thereof and the results of the
operations thereof for the period or respective periods covered by such
financial statements and since such date or dates, there has been no material
adverse change in the financial condition or results of the operations of any of
such parties and none thereof has any contingent obligations, liabilities for
taxes or other outstanding financial obligations which are material in the
aggregate except as disclosed in (a) such statements, information and data or
(b) in Schedule 7 prepared pursuant to Section 2.1(e) of this Agreement;
(k) Tax Returns. Except as previously advised to the Lender in
writing, each Security Party has filed all tax returns required to be filed
thereby and has paid all taxes payable thereby which have become due, other than
those (a) not yet delinquent or the nonpayment of which would not have a
material adverse effect on such Security Party; and (b) being contested in good
faith and by appropriate proceedings or other acts and for which adequate
reserves have been set aside on its books;
(l) ERISA. The execution and delivery of this Agreement and the
consummation of the transactions hereunder will not involve any prohibited
transaction within the meaning of ERISA or Section 4975 of the Code and no
condition exists or event or transaction has occurred in connection with any
Plan maintained or contributed to by any Security Party or any ERISA Affiliate
(as such term is hereinafter defined) resulting from the failure of any such
party to comply with ERISA insofar as ERISA applies thereto which is reasonably
likely to result in such Security Party or any ERISA Affiliate incurring any
liability, fine or penalty which individually or in the aggregate
24
<PAGE> 33
would have a material adverse effect on such Security Party or ERISA Affiliate.
As used herein the term "ERISA Affiliate" means a trade or business (whether or
not incorporated) which is under common control with the Security Party in
question within the meaning of Sections 414(b), (c), (m) or (o) of the Code.
Prior to the date hereof, the Borrower has delivered to the Agent a list of all
the employee benefit plans to which each Security Party or any ERISA Affiliate
is a "party in interest" (within the meaning of Section 3(14) of ERISA) or a
"disqualified person" (within the meaning of Section 4975(e)(2) of the Code);
(m) Chief Executive Office. Each Security Party's chief executive
office and chief place of business and the office in which the records relating
to the earnings and other receivables of such Security Party are kept is, and
will continue to be, located at 1200 Harbour Boulevard, 9th Floor, Weehawken,
New Jersey or, in the case of OMI Petrolink Corp. and its Subsidiaries, 4606 FM
1960 West Suite 200, Houston, Texas and, in the case of Intrepid Ship Management
Inc., 370 Seventh Avenue, 11th Floor, New York, New York;
(n) Foreign Trade Control Regulations. None of the transactions
contemplated herein will violate any of the provisions of the Foreign Assets
Control Regulations of the United States of America (Title 31, Code of Federal
Regulations, Chapter V, Part 500, as amended), any of the provisions of the
Cuban Assets Control Regulations of the United States of America (Title 31, Code
of Federal Regulations, Chapter V, Part 515, as amended), any of the provisions
of the Libyan Assets Control Regulations of the United States of America (Title
31, Code of Federal Regulations, Chapter V, Part 550, as amended), any of the
provisions of the Iraqi Sanctions Regulations (Title 31, Code of Federal
Regulations, Chapter V, Part 575, as amended), any of the provisions of the
Iranian Transactions Regulations of the United States of America (Title 31, Code
of Federal Regulations, Chapter V, part 560, as amended) any of the provisions
of the Federal Republic of Yugoslavia (Serbia and Montenegro) Assets Control
Regulations (Title 31, Code of Federal Regulations, Chapter V, Part 585 as
amended) or any of the provisions of the Regulations of the United States of
America Governing Transactions in Foreign Shipping of Merchandise (Title 31,
Code of Federal Regulations, Chapter V, Part 505, as amended);
(o) Equity Ownership. Each of the Security Parties (other than the
Borrower) is a, direct or indirect, wholly-owned subsidiary of the Borrower. As
of the date hereof, the Borrower does not own any shares of capital stock,
partnership interest or any other direct or indirect equity interest in any
corporation, partnership or other entity except the Security Parties and the
companies listed on Schedule 3;
(p) Environmental Matters. Except as heretofore disclosed on
Schedule 7, (i) each of the Security Parties and their Environmental Affiliates
will, when required, be in full compliance with all applicable United States
federal and state, local, foreign and international laws, regulations,
conventions and agreements relating to pollution prevention or protection of
human health or the environment (including, without limitation, ambient air,
surface water, ground water, navigable waters, waters of
25
<PAGE> 34
the contiguous zone, ocean waters and international waters), including, without
limitation, laws, regulations, conventions and agreements relating to (1)
emissions, discharges, releases or threatened releases of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous materials, oil, hazardous
substances, petroleum and petroleum products and by-products ("Materials of
Environmental Concern"), or (2) the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Materials of
Environmental Concern ("Environmental Laws"); (ii) each of the Security Parties
and their Environmental Affiliates will, when required, have all permits,
licenses, approvals, rulings, variances, exemptions, clearances, consents or
other authorizations required under applicable Environmental Laws
("Environmental Approvals") and will, when required, be in full compliance with
all Environmental Approvals required to operate their business as then being
conducted; (iii) none of the Security Parties or their Environmental Affiliates
has received any notice of any claim, action, cause of action, investigation or
demand by any person, entity, enterprise or government, or any political
subdivision, intergovernmental body or agency, department or instrumentality
thereof, alleging potential liability for, or a requirement to incur,
investigatory costs, cleanup costs, response and/or remedial costs (whether
incurred by a governmental entity or otherwise), natural resources damages,
property damages, personal injuries, attorneys' fees and expenses, or fines or
penalties, in each case arising out of, based on or resulting from (1) the
presence, or release or threat of release into the environment, of any Materials
of Environmental Concern at any location, whether or not owned by such person,
or (2) circumstances forming the basis of any violation, or alleged violation,
of any Environmental Law or Environmental Approval ("Environmental Claim")
(other than Environmental Claims that have been fully and finally adjudicated or
otherwise determined and all fines, penalties and other costs, if any, payable
by the Security Parties or any Environmental Affiliate any thereof in respect
thereof have been paid in full or are fully covered by insurance (including
permitted deductibles)); and (iv) there are no circumstances existing as of the
date hereof that may prevent or interfere with such full compliance in the
future;
(q) Pending, Threatened or Potential Environmental Claims. Except as
heretofore disclosed on Schedule 7 there are no (1) Environmental Claims pending
or threatened against any Security Party or its Environmental Affiliates and (2)
past or present actions, activities, circumstances, conditions, events or
incidents, including, without limitation, the release, emission, discharge or
disposal of any Materials of Environmental Concern, that could form the basis of
any Environmental Claim against any Security Party or its Environmental
Affiliates;
(r) Compliance with ISM Code. Each Vessel and any Operator complies
with the requirement s of the ISM Code, including (but not limited to) the
maintenance and renewal of valid certificates pursuant thereto;
(s) Threatened Withdrawal of DOC or SMC. There is no threatened or
actual withdrawal of any Operator's DOC or the SMC in respect of any Vessel; and
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<PAGE> 35
(t) Year 2000 Issue. The Borrower and each of the guarantors have
reviewed the effect of the Year 2000 Issue on the computer software, hardware
and firmware systems and equipment containing embedded microchips owned or
operated by or for the Borrower and the Guarantors or used or relied upon in the
conduct of their business (including systems and equipment supplied by others or
with which such computer systems of the Borrower and the guarantors interface).
The costs to the Borrower and the Guarantors of any reprogramming required as a
result of the Year 2000 Issue to permit the proper functioning of such systems
and equipment and the proper processing of data, and the testing of such
reprogramming, and of the reasonably foreseeable consequences of the Year 2000
Issue to the Borrower or any of the Guarantors (including reprogramming errors
and the failure of systems or equipment supplied by others) are not reasonably
expected to result in a Default or Event of Default or to have a material
adverse effect on the business, assets, operations, prospects or condition
(financial or otherwise) of the Borrower or any of the Guarantors.
3. ADVANCES
3.1 Purposes. (a) The proceeds of Term Loan shall be applied solely and
exclusively for the purposes of (i) refinancing, in full, the Former Lenders
Indebtedness and (ii) to pay transaction expenses, financing fees and other
expenses or obligations payable in connection with the transactions contemplated
by this Agreement, the Related Credit Agreement and the Acquisition Agreement;
and
(b) the proceeds of Revolving Credit Facility shall be applied
solely and exclusively for working capital purposes of the Borrower and the
Guarantors.
3.2 Term Loan Advances. Each of the Lenders, relying upon each of the
representations and warranties set out in Section 2, hereby agrees with the
Borrower that, subject to and upon the terms of this Agreement, it will on the
Term Loan Drawdown Dates, make the Term Loan Advances available to the Borrower
in an aggregate amount not to exceed, on a pro rata basis, its Commitment for
its respective portion of the Term Loan, provided, however, that (a) the Term
Loan may only be drawn down in a single Advance and (b) to the extent that any
portion of the Term Loan remains undrawn as of 12:00 noon (New York time) on
June 25, 1998, each Lender's commitment to advance such undrawn portion of its
Commitment thereunder shall expire.
3.3 Revolving Credit Facility Advances. Each of the Lenders, relying upon each
of the representations and warranties set out in Section 2, hereby agrees with
the Borrower that, subject to the terms of this Agreement, it will on or before
12:00 noon New York time on the Revolving Credit Facility Drawdown Dates make
the Revolving Credit Facility Advances available to the Borrower in an aggregate
amount not to exceed, on a pro rata basis, its Commitment for its respective
portion of the Revolving Credit Facility, provided, however, that (a) each such
Advance shall be in the minimum amount of One Hundred Thousand Dollars
($100,000) and (b) the maximum aggregate amount of all Revolving Credit Facility
Advances which may be outstanding under this Agreement is Two Million Dollars
($2,000,000), as the same may be reduced from time to time as
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<PAGE> 36
provided in Sections 5.7 and 5.8. Within the limits of the Revolving Credit
Facility and upon the conditions herein provided, the Borrower may from time to
time, and on as many occasions as the Borrower may deem appropriate, borrow
pursuant to this Section 3.3, repay pursuant to Section 5.2 and reborrow
pursuant to this Section 3.3.
3.4 Drawdown Notice. The Borrower shall not less than three (3) Banking Days
before any Drawdown Date serve a notice (a "Drawdown Notice") on the Agent,
substantially in the form set out in Exhibit 13 or in such other form as the
Agent may agree, which notice shall (a) be in writing addressed to the Agent,
(b) be effective upon receipt by the Agent as aforesaid, provided it is received
before 11:00 a.m. New York time (otherwise it shall be deemed to have been
received on the next Banking Day), (c) specify the Banking Day on which the
relevant Advance is to be drawn down, (d) specify the initial Interest Period,
(e) specify the disbursement instructions and (f) be irrevocable.
3.5 Effect of Drawdown Notice. Each Drawdown Notice shall be deemed to
constitute a warranty by the Borrower that (a) the representations and
warranties stated in Section 2 (updated mutatis mutandis) are true and correct
in all material respects on the date of such Drawdown Notice and will be true
and correct in all material respects on such drawdown date as if made on such
date, and (b) that no Event of Default or any event which with the giving of
notice or lapse of time or both would constitute an Event of Default has
occurred and is continuing.
3.6 Notation of Advances. Each Revolving Credit Facility Advance made by the
Lenders to the Borrower may be evidenced by a notation of the same made by the
Agent on the grid attached to the Revolving Credit Facility Note, which
notation, absent manifest error, shall be prima facie evidence of the amount of
the relevant Advance.
4. CONDITIONS
4.1 Conditions to Advance of Term Loan and the Initial Revolving Credit Facility
Advance. The obligations of the Lenders to advance the Term Loan and the initial
Revolving Credit Facility Advance are expressly subject to the satisfaction of
the following conditions precedent:
(a) the Agent shall have received the following documents in form and
substance satisfactory to the Agent and its legal advisors:
(i) copies, certified as true and complete by an officer of
each Security Party, of the resolutions of the board of
directors and, in the case of the Guarantors, the
shareholders thereof evidencing approval of this
Agreement and the other Financing Documents called for
hereby to which such Security Party is a party and
authorizing an appropriate officer or officers or
attorney-in-fact or attorneys-in-fact to execute the
same on its behalf;
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<PAGE> 37
(ii) copies, certified as true and complete by an officer of
the Borrower or other party acceptable to the Agent, of
all documents evidencing any other necessary action
(including actions by such parties thereto other than
the Borrower as may be required by the Agent), approvals
or consents with respect to the Financing Documents;
(iii) copies, certified as true and complete by an officer of
the respective Security Party of the certificate of
incorporation and by-laws (or equivalent instruments)
thereof;
(iv) a certificate of the Secretary of the Borrower
certifying that it legally and beneficially, directly or
indirectly, owns all of the issued and outstanding
shares of the capital stock of each of the other
Security Parties, in each case, free and clear of any
liens, claims, pledges or other encumbrances;
(v) a certificate of the Secretary of Marine Car Carriers
(Del) certifying that it legally and beneficially owns
fifty percent (50%) of the issued and outstanding shares
of Marine Car Carriers (MI), free and clear of any
liens, claims, pledges or other encumbrances whatsoever
except for a pledge in favor of the Agent;
(vi) certificate of the Secretary of each Security Party
(other than the Borrower) certifying as to the record
ownership of all of its issued and outstanding capital
stock;
(vii) certificates of the jurisdiction of incorporation of
each Security Party as to the good standing of such
corporation;
(viii) copies of each Vessel Agreement, Management Agreement,
the MCCMI Shareholders Agreement, all agreements and
other documents evidencing Permitted Indebtedness and
Permitted Liens outstanding and existing as of the date
hereof and the Acquisition Agreement each certified by
an officer of the Borrower to be a true and complete
copy thereof;
(ix) letters, in form and substance satisfactory to the
Agent, from counsel representing the Borrower (or its
relevant Affiliate) in connection with each action, suit
or proceeding listed on Schedule 7 or in connection with
any Environmental Claim disclosed to the Agent,
regarding details of such action, suit, proceeding or
claim including a description of the nature of the
claim, and the Borrower's
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<PAGE> 38
(or its Affiliate's) potential liabilities and an
opinion as to the likely outcome of the relevant matter;
and
(x) a pro forma consolidated balance sheet for the Borrower,
certified to be true and correct by its chief financial
officer, demonstrating that, as of the date hereof and
after giving effect to the transactions contemplated
hereby and by the Related Credit Agreement and the
Acquisition Agreement, the Borrower has Unrestricted
Cash and Cash Equivalents in an amount at least equal to
Two Million Dollars ($2,000,000) (for purposes of
determining compliance with this condition, Unrestricted
Cash or Cash Equivalents held by Marine Car Carriers
(MI) for the benefit of Marine Car Carriers (Del) shall
be calculated on the basis of the Borrower's share of
such sums after deduction of any taxes that would be
payable (as of the time of determination) upon the
distribution and repatriation of such sums by Marine Car
Carriers (MI) to Marine Car Carriers (Del) or any other
Affiliate of the Borrower).
(b) the Agent shall have received evidence satisfactory to it and
its legal advisors that:
(i) each of the Mortgaged Vessels is in the sole and
absolute ownership of the respective Guarantors, other
Affiliates of the Borrower as set forth in Schedules 4
and 5 or Argosy save and except for, in the case of the
Mortgaged Vessels, the respective Mortgage recorded
thereagainst and for the respective Vessel Agreements
and Related Security Documents, and duly registered in
the name of such Guarantor or such Affiliate under the
respective flag as set forth in Schedules 4 and 5;
(ii) each Vessel is classed in the highest classification and
rating for vessels of the same age and type with the
respective classification society as set forth in
Schedules 4 and 5 without any material outstanding
recommendations;
(iii) each of the Vessels is operationally seaworthy and in
every material respect fit for its intended service;
(iv) each of the Mortgaged Vessels will be insured in
accordance with the provisions of the Mortgage on her in
favor of the Agent, as the case may be, and the
requirements thereof in respect of such insurances will
have been met and each of the Other Vessels will be
insured
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<PAGE> 39
against such risks, in such amounts and with such
insurance companies as would be required by a reasonably
prudent shipowner engaged in the same trades;
(v) each Vessel subject to a charter or other contract of
carriage constituting a Vessel Agreement has been
accepted by its respective charterer and is in service
under such Vessel Agreement; and
(vi) that, except as provided in the Financing Documents,
there are no restrictions or limitations on the
Borrower's ability to withdraw or apply any funds of
Marine Car Carriers (MI) held for the benefit of Marine
Car Carriers (Del) and payable to the Borrower for such
purposes as the Borrower may deem fit.
(c) the Borrower shall have duly executed and delivered:
(i) this Agreement and
(ii) the Notes;
(iii) its Assignment of Vessel Management Receivables;
(iv) its Assignment Notices, and
(v) Uniform Commercial Code Financing Statements for filing
in New Jersey and its jurisdiction of incorporation;
(d) each Guarantor shall have executed and delivered:
(i) the Guaranty,
(ii) the Consent and Agreement and Account Assignment
provided at the end of this Agreement, and
(iii) Uniform Commercial Code Financing Statements for filing
in New Jersey;
(e) each Shipowning Guarantor shall have duly executed and
delivered:
(i) the Mortgage over its Mortgaged Vessel(s),
(ii) an Insurances Assignment with respect to such Vessel(s),
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<PAGE> 40
(iii) an Earnings Assignment with respect to such Vessel(s),
(iv) its Assignment Notices, and
(v) Uniform Commercial Code Financing Statements for filing
in New Jersey and its jurisdiction of Incorporation;
(f) OMI Challenger Transport shall have duly executed and delivered
the Negative Pledge.
(g) the Guarantors which do not own a Mortgaged Vessel (other than
OMI Challenger Transport) shall have executed and delivered:
(i) its General Security Agreement, and,
(ii) Uniform Commercial Code Financing Statements for filing
in New Jersey and in its jurisdiction of incorporation;
(h) Intrepid Ship Management, Inc. shall have executed and
delivered:
(i) its Assignment of Government Receivables,
(ii) its Assignment Notices, and
(iv) Uniform Commercial Code Financing Statements for filing
in New Jersey and in its jurisdiction of incorporation;
(i) Marine Transport Lines shall have executed and delivered:
(i) its Assignment of Government Receivables,
(ii) its Assignment Notices, and
(iii) Uniform Commercial Code Financing Statements for filing
in New Jersey and in its jurisdiction of incorporation;
(j) Marine Transport Management shall have executed and delivered:
(i) its Assignment of Vessel Management Receivables,
(ii) its Assignment Notices, and
(iii) Uniform Commercial Code Financing Statements for filing
in New Jersey and in its jurisdiction of incorporation;
(k) Marine Car Carriers (Del) shall have executed and delivered:
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<PAGE> 41
(i) the Assignment of Joint Venture Proceeds,
(ii) its Assignment Notices, and]
(iiiv) Uniform Commercial Code Financing Statements for filing
in New Jersey and in its jurisdiction of incorporation;
(l) the Agent shall have received appraisals, in form and substance
satisfactory to the Agent, from two independent shipbrokers acceptable to the
Agent evidencing that the Borrower is in compliance with Section 9.3, each of
which appraisals shall be dated, and the appraisals contained therein shall be
as of a date, no earlier than ninety (90) days prior to the date hereof;
(m) the Agent shall have received a certificate of the chief
financial officer of each Guarantor confirming the representations and
warranties with respect to solvency set forth in its Guaranty and containing
conclusions as to the solvency of such Guarantor;
(n) the Agent shall be satisfied that no Security Party is subject
to any Environmental Claim (except as set forth on Schedule 7) which could have
a material adverse effect on the business, assets or results of operations of
any thereof;
(o) the Agent shall have received payment in full of all fees and
expenses due to the Agent and the Lenders on or prior to the date thereof under
Section 13;
(p) the Agent shall have received evidence satisfactory to it and to
its legal advisors that, save for the liens created by the Mortgages, the
Assignments, the Related Security Agreements and the Vessel Agreements there are
no liens, charges or encumbrances of any kind whatsoever on any of the Vessels
or on their respective earnings except as permitted hereby or by any of the
Security Documents;
(q) each party which the Agent shall have required to execute a
Consent and Agreement shall have executed a Consent and Agreement, in each case,
in form and substance satisfactory to the Agent;
(r) all conditions precedent to the advancement of the term loan
under the Related Credit Agreement shall have been met or waived to the
satisfaction of the Lenders;
(s) the transactions contemplated by the Acquisition Agreement shall
subject only to consummation of this Agreement and the Related Credit Agreement,
have been consummated in accordance with the provisions thereof, and the legal
status and corporate structure of the Borrower shall be satisfactory to the
Agent and its legal counsel;
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<PAGE> 42
(t) the terms and conditions of the Permitted Indebtedness and
Permitted Liens shall be in form and substance acceptable to the Agent; and
(u) the Agent shall have received legal opinions from (i) Peter N.
Popov, Esq., in-house counsel for the Security Parties, (ii) Kaye, Scholer,
Fierman, Hays & Handler, L.L.P., special counsel to the Security Parties and
(iii) Seward & Kissel, special counsel to the Agent and the Lenders, in each
case in such form as the Agent may require, as well as such other legal opinions
as the Agent shall have required as to all or any matters under the laws of the
United States of America, the States of New York, New Jersey and Texas covering
the representations and conditions which are the subjects of Sections 2 and 4.1.
4.2 Further Conditions Precedent. The obligation of the Lenders to enter into
this Agreement or to make any Advance available to the Borrower shall be
expressly and separately from the foregoing conditional upon, as of the date
hereof and at each Drawdown Date:
(a) the Agent having received the Drawdown Notice in accordance with
the terms of Section 3.4;
(b) the representations stated in Section 2 (updated mutatis
mutandis to such date) being true and correct as if made on that date;
(c) no Event of Default having occurred and being continuing and no
event having occurred and being continuing which, with the giving of notice or
lapse of time, or both, would constitute such an Event of Default;
(d) the Agent being satisfied that no change in any applicable laws,
regulations, rules or in the interpretation thereof shall have occurred which
make it unlawful for the Borrower or any other of the parties thereto to make
any payment as required under the terms of the Financing Documents or any of
them; and
(e) there having been no material adverse change in the financial
condition of the Security Parties taken as a whole since the date hereof.
4.3 Satisfaction after Drawdown. Without prejudice to any of the terms and
conditions of this Agreement, in the event the Lenders, in their sole
discretion, makes any Advance prior to the satisfaction of all or any of the
conditions precedent set forth in Sections 4.1 and 4.2, the Borrower hereby
covenants and undertakes to satisfy or procure the satisfaction of such
condition or conditions within fourteen (14) days after the relevant Drawdown
Date (or such longer period as the Lenders, in their sole discretion, may
agree).
4.4 Breakfunding Costs. In the event that, on any date specified for the making
of an Advance in any Drawdown Notice, the Lenders shall not be required under
this Agreement to make such advance available under this Agreement, the Borrower
shall
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<PAGE> 43
indemnify and hold the Lenders fully harmless against any losses which the
Lenders or any thereof may sustain as a result of borrowing or agreeing to
borrow funds to meet the drawdown requirement of the Borrower and the
certificate of the relevant Lender(s) shall, absent manifest error, be
conclusive and binding on the Borrower as to the extent of any such losses.
5. REPAYMENT, PREPAYMENT AND REDUCTION OF FACILITIES.
5.1 Repayment of Term Loan. The Borrower shall repay the principal of the Term
Loan in twenty (20) quarterly installments in Dollars in freely available-same
day funds on the Term Loan Payment Dates, the first four (4) installments shall
each be in the principal amount of Two Hundred Fifty Thousand Dollars
($250,000), the next fifteen (15) of which shall be in the principal amount of
Four Hundred Ninety-Two Thousand Nine Hundred Thirty-Seven and 50/100 Dollars
($492,937.50) and twentieth such installment shall be in the amount necessary to
repay the Term Loan in full.
5.2 Revolving Credit Facility. Subject to the provisions of Section 3.3, any
outstanding Revolving Credit Facility Advances (a) may be repaid (together with
any and all actual costs or expenses incurred by any Lender as the result of any
breaking of funding (as certified by the relevant Lender, which certification
shall, absent any manifest error, be conclusive and binding on the Borrower) on
any Banking Day (in Dollars in freely available-same day funds equal to or
exceeding One Hundred Thousand Dollars ($100,000), each such repayment to be in
an integral multiple of One Hundred Thousand Dollars ($100,000)) and (b) must be
repaid (i) on the last date of then prevailing Interest Period in respect of
such Advance, (ii) as required pursuant to Section 5.7 on the Reduction Date and
(iii) on or before the Revolving Credit Facility Termination Date.
5.3 Voluntary Prepayment of Term Loan. The Borrower may prepay any Term Loan
Advance on any Banking Day, in whole or in part, without penalty or premium (in
Dollars in freely available-same day funds equal to or exceeding One Hundred
Thousand Dollars ($100,000), each such repayment to be in an integral multiple
of One Hundred Thousand Dollars ($100,000)), on any Banking Day upon giving the
Agent not less than five (5) Banking Days prior written notice (which notice
shall be irrevocable and shall specify the amount and date of prepayment).
5.4 Mandatory Prepayment of Term Loan. Upon the sale, disposition or Total Loss
of any Vessel or any other asset (having a fair market value equal or exceeding
One Hundred Thousand Dollars ($100,000) directly or indirectly owned by the
Borrower, the Borrower shall prepay the Term Loan, in part and without penalty,
in an amount equal to the proceeds of the sale, disposition or insurance net of
taxes payable as a result of any such sale or disposition.
5.5 Prepay Term Loans Pro Rata. Any prepayment made hereunder (including,
without limitation, those made pursuant to Sections 5.3 and 5.4, but excluding a
prepayment under Sections 5.7 and 9.3) or under the Related Credit Agreement
shall be applied against the Term Loan and the Related Term Loan, pro rata.
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5.6 Application of Prepayments. Any prepayment of the Term Loan made hereunder
(including, without limitation, those made pursuant to Sections 5.3, 5.4, 5.7
and 9.3), shall be subject to the condition that:
(a) in the case of Term Loan Advances, any partial prepayment made
shall be applied in or towards satisfaction of the repayment installments of the
Term Loan in inverse order of maturity;
(b) in the case of Term Loan Advances and an amount prepaid pursuant
to Section 5.7, any amounts prepaid shall not be available for re-borrowing; and
(c) on the date of prepayment all accrued interest to the date of
such prepayment shall be paid in full with respect to the portion of the
principal being prepaid, together with any and all actual costs or expenses
incurred by any Lender as the result of any breaking of funding (as certified by
the relevant Lender, which certification shall, absent any manifest error, be
conclusive and binding on the Borrower).
5.7 Mandatory Reduction of Revolving Credit Facility. On the Reduction Date: (a)
the maximum principal amount of Advances which may be outstanding shall be
reduced to One Million Dollars ($1,000,000); and (b) the Borrower shall
immediately repay the Revolving Credit Facility Advances to the extent the
aggregate Revolving Credit Facility Advances outstanding on the Reduction Date
exceeds One Million Dollars ($1,000,000). Upon the reduction of the Revolving
Credit Facility as provided in this Section, each Lender's Commitment to make
Revolving Credit Facility Advances shall be reduced pro rata.
5.8 Voluntary Reduction of Revolving Credit Facility. The Borrower shall have
the right, at any time and from time to time, upon giving to the Agent not less
than five (5) Banking Days prior written notice (which notice shall be
irrevocable) to terminate in whole, or reduce the available unused portion of,
the Revolving Credit Facility; provided, however, that each partial reduction
shall be equal to or shall exceed One Hundred Thousand Dollars ($100,000) and
shall be an integral multiple of One Hundred Thousand Dollars ($100,000). Upon
any reduction of the Revolving Credit Facility as provided in this Section, each
Lender's Commitment to make Revolving Credit Facility Advances shall be reduced
pro rata.
6. INTEREST AND RATE
6.1 Term Loan Applicable Rate and Default Rate. The Term Loan Balance shall bear
interest at the Term Loan Applicable Rate which shall be the rate per annum
which is equal to the aggregate of (a) LIBOR for the applicable Interest Period
(determined in accordance with Section 6.5) plus (b) the then prevailing Margin.
Any principal payment with respect to the Term Loan not paid when due, whether
on a Term Loan Payment Date or by acceleration, shall bear interest thereafter
at a rate per annum of two percent (2.0%)
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<PAGE> 45
over the Term Loan Applicable Rate in effect with respect to such payment at the
time of such default (the "Term Loan Default Rate").
6.2 Revolving Credit Facility Applicable Rate and Default Rate. The Revolving
Credit Facility Balance shall bear interest at the Revolving Credit Facility
Applicable Rate which shall be equal to the aggregate of (a) LIBOR for the
applicable Interest Period (determined in accordance with Section 6.5) plus (b)
the then prevailing Margin plus (c) one quarter of one percent (0.25%) per
annum. Any principal payment with respect to the Revolving Credit Facility not
paid when due, whether by acceleration or otherwise, shall bear interest
thereafter at a rate per annum of two percent (2.0%) over the Revolving Credit
Facility Applicable Rate in effect with respect to such payment at the time of
such default (the "Revolving Credit Facility Default Rate").
6.3 Determination of Applicable Margin. The Margin shall be determined by the
Agent two (2) Banking Days prior to the first day of the relevant Interest
Period. Prior to the day falling two (2) Banking Days after the date on which
the Borrower delivers its first quarterly financial report to the Agent in
accordance with Section 9.1(A)(iv), the Margin shall be equal to one and three
quarters of one percent (1.75--%) per annum. Thereafter, the Margin shall be
based upon the then prevailing ratio of the Borrower's Total Debt to EBITDA, as
determined in accordance with Section 9.1(A)(xvii) as follows:
<TABLE>
Applicable Margin Total Debt to EBITDA
<S> <C>
2.25% > 3.0x
2.00% <=3.0x but >2.5x
1.75% <=2.5x but >2.0x
1.50% <=2.0x but >=1.0x
1.25% <1.0x
</TABLE>
6.4 Determination of LIBOR. LIBOR shall be determined by the Agent two (2)
Banking Days prior to the first day of the relevant Interest Period and together
with any and all actual costs or expenses incurred by any Lender as the result
of any breaking of funding (as certified by the relevant Lender, which
certification shall, absent any manifest error, be conclusive and binding on the
Borrower). The Borrower shall be promptly notified in writing of such
determination of the Term Loan Applicable Rate and the Revolving Credit Facility
Applicable Rate, as the case may be. Absent manifest error, such determination
shall be conclusive and binding upon the Borrower.
6.5 Interest Periods. For purposes of funding any Advance, the Borrower may
select Interest Periods of one (1), two (2), three (3) or six (6) months (or for
such longer periods as the Lenders may, in their sole discretion agree),
provided, however, that (a) at all times the Borrower must select an Interest
Period for a portion of each Advance so that sufficient deposits shall mature on
each Payment Date (and, in the case of Revolving
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Credit Facility Advances, on the Reduction Date so as to comply with the
provisions of Section 5.7) to cover the principal installments due on such dates
and (b) no more than two (2) Interest Periods may be running simultaneously for
the entire Term Loan Balance and no more than three (3) Interest Periods may be
running simultaneously for the entire Revolving Credit Facility Balance. No
Interest Period may extend beyond, in the case of Revolving Credit Facility
Advances, the Revolving Credit Facility Termination Date and, to the extent
necessary to comply with Section 5.7, the Reduction Date and, in the case of
Term Loan Advances, the Final Payment Date. The Borrower shall give the Agent an
Interest Notice specifying the Interest Period selected at least three (3)
Banking Days prior to the end of any then existing Interest Period. If at the
end of any then existing Interest Period the Borrower fails to give an Interest
Notice, the relevant Interest Period shall be three (3) months. The Borrower's
right to select an Interest Period shall be subject to the restriction that no
selection of an Interest Period shall be effective unless the Lenders are
satisfied that the necessary funds will be available to the Lenders for such
period and that no Event of Default or event which, with the giving of notice or
lapse of time, or both, would constitute an Event of Default shall have occurred
and be continuing.
6.6 Interest Payments. The Borrower agrees to pay interest on each Advance on
the last day of each Interest Period applicable to such Advance and at such
other times as interest is required to be paid by each Lender on the deposits
acquired thereby to fund the relevant Advance, or any portion thereof, as the
case may be, and, in the event any Interest Period shall extend beyond three (3)
months, three (3) months after the commencement of such Interest Period and each
three (3) month anniversary thereafter until the end of the Interest Period; and
6.7 Payment on Banking Day. If interest would, under Section 6.6, be payable on
a day which is not a Banking Day, it shall then be payable on the next following
Banking Day, unless such next following Banking Day falls in the following month
in which case it shall be payable on the Banking Day immediately preceding the
day on which such interest would otherwise be payable.
6.8 Calculation of Interest. All interest shall accrue and be calculated on the
actual number of days elapsed and on the basis of a three hundred sixty (360)
day year.
7. PAYMENTS
7.1 Place of Payments, No Set Off. All payments to be made hereunder by the
Borrower shall be made to the Agent, not later than 11 a.m. New York time (any
payment received after 11 a.m. New York time shall be deemed to have been paid
on the next Banking Day) on the due date of such payment, at its office located
at 200 Park Avenue, New York, New York 10166 or to such other office of the
Agent as the Agent may direct, without set-off or counterclaim and free from,
clear of, and without deduction for, any Taxes, provided, however, that if the
Borrower shall at any time be compelled by law to withhold or deduct any Taxes
from any amounts payable to the Agent or the Lenders hereunder, then the
Borrower shall pay such additional amounts in Dollars as may be
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necessary in order that the net amounts received after any such withholding or
deduction shall equal the amounts which would have been received if such
withholding or deduction were not required and, in the event any withholding or
deduction is made, whether for Taxes or otherwise, the Borrower shall promptly
send to the Agent and the Lenders such documentary evidence for such withholding
or deduction as may be required from time to time by the Agent or the relevant
Lender, as the case may be.
7.2 Tax Credits. If any Lender obtains the benefit of a credit against the
liability thereof for federal income taxes imposed by any taxing authority for
all or part of the Taxes as to which the Borrower has paid additional amounts as
aforesaid (and such Lender agrees to use its best efforts to obtain the benefit
of any such credit which may be available to it, provided it has knowledge that
such credit is in fact available to it), then such Lender shall reimburse the
Borrower for the amount of the credit so obtained. Each Lender agrees that in
the event that Taxes are imposed on account of the situs of its loans hereunder,
such Lender, upon acquiring knowledge of such event, shall, if commercially
reasonable, shift such loans on its books to another office of such Lender so as
to avoid the imposition of such Taxes.
8. EVENTS OF DEFAULT
8.1 In the event that any of the following events shall occur and be continuing:
(a) Non-Payment of Principal. Any principal of the Term Loan or the
Revolving Credit Facility is not paid on the due date; or
(b) Non-Payment of Interest or Other Amounts. Any interest on the
Term Loan, the Revolving Credit Facility or any other amount becoming payable to
the Agent or the Lenders under any Financing Document is not paid on the due
date or date of demand (as the case may be), and such default continues
unremedied for a period of five (5) Banking Days; or
(c) Representations. Any representation, warranty or other statement
made by any Security Party in any Financing Document or in any other instrument,
document or other agreement delivered in connection with any thereof proves to
have been untrue or misleading in any material respect as of the date when made
or confirmed; or
(d) Covenants. Any Security Party defaults in the due and punctual
observance or performance of any other term, covenant or agreement contained in
any Financing Document or in any other instrument, document or other agreement
delivered in connection herewith or therewith, or it becomes impossible or
unlawful for any Security Party to fulfill any such term, covenant or agreement
or there occurs any other event which constitutes a default under any Financing
Document, in each case other than an Event of Default referred to elsewhere in
this Section 8.1, and such default, impossibility and/or unlawfulness, in the
reasonable opinion of the Majority Lenders, would be likely to have a material
adverse effect on the rights of the Lenders or the Agent
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under any Financing Document or on the rights of the Lenders or the Agent to
enforce any Financing Document, and continues unremedied or unchanged, as the
case may be, for a period of thirty (30) days; or
(e) Indebtedness. Any Security Party, Marine Car Carriers (MI) or
any wholly owned subsidiary of any such party shall default in the payment when
due (subject to any applicable grace period) of any Indebtedness in an amount in
excess of Two Hundred Fifty Thousand Dollars ($250,000) or such Indebtedness is,
or by reason of such default is subject to being, accelerated or any party
becomes entitled to enforce the security for any such Indebtedness and such
party takes steps to enforce the same, unless such default or enforcement is
being contested in good faith and by appropriate proceedings or other acts and
the Security Party, Marine Car Carriers (MI) or subsidiary, as the case may be,
shall set side on its books adequate reserves with respect thereto; or
(f) Change of Control; Ownership or Management of Other Security
Parties. There is a change of control of any Security Party and the Lenders have
not prior thereto consented in writing to such change. As used herein, "change
of control" means (i) with respect to the Borrower, (A) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934
(the "Exchange Act")) is or becomes the beneficial owner (as defined in Rules
13d-3 and 13d-5 promulgated pursuant to the Exchange Act), directly or
indirectly, of more than fifty percent (50%) of the total voting power of the
voting stock of the Borrower or (B) the Board of Directors of the Borrower
ceases to consist of a majority of the existing directors or directors elected
by the existing directors (as used herein, "existing director" means each of the
Directors of the Borrower as of the date immediately following consummation of
the transactions contemplated by the Acquisition Agreement) or (ii), with
respect to any other Security Party, any material change in the beneficial stock
ownership, voting control or senior management of any of the Security Parties;
or
(g) US Citizenship. Any Security Party owning a United States flag
Vessel ceases to be a United States of America citizen within the meaning of
Section 2 of the United States Shipping Act of 1916, as amended, qualified to
operate vessels in the coastwise trade; or
(h) Bankruptcy. Any Security Party or Marine Car Carriers (MI)
commences any proceeding under any reorganization, arrangement or readjustment
of debt, dissolution, winding up, adjustment, composition, bankruptcy or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect ("Proceeding"), or there is commenced against any thereof any Proceeding
and such Proceeding remains undismissed or unstayed for a period of thirty (30)
days or any receiver, trustee, liquidator or sequestrator of, or for, any
thereof or any substantial portion of the property of any thereof is appointed
and is not discharged within a period of thirty (30) days or any thereof by any
act indicates consent to or approval of or acquiescence in any Proceeding or the
appointment of any receiver, trustee, liquidator or sequestrator of, or for,
itself or of, or for, any substantial portion of its property; or
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(i) Termination of Operations; Sale of Assets. Without the Agent's
prior written consent, any Security Party ceases its operations or sells or
otherwise disposes of all or substantially all of its assets or all or
substantially all of the assets of the any Security Party are seized or
otherwise appropriated; or
(j) Judgments. Any judgment or order is made which would render
ineffective or invalid any Financing Documents; or
(k) Inability to Pay Debts. Any Security Party or Marine Car
Carriers (MI) is unable to pay or admits its inability to pay its debts as they
fall due or a moratorium shall be declared in respect of any material
indebtedness of any Security Party or Marine Car Carriers (MI); or
(l) Change in Financial Position. Any change in the financial
position of the Security Parties (taken as a whole) which, in the reasonable
opinion of the Majority Lenders, shall have a material adverse effect on the
ability of any Security Parties to perform its respective material obligations
under any Financing Document; or
(m) Relevant Contracts. Any of the Relevant Contracts or the MCCMI
Shareholders Agreement is terminated or is materially amended or modified
without the prior written consent of the Majority Lenders, or any party to a
Relevant Contract defaults or ceases to perform under such agreement for any
reason whatsoever and, with regard to any such termination, default or
nonperformance of a Relevant Contract, the relevant Vessel shall not be engaged
in an alternative employment, acceptable to the Lenders, under a contract,
acceptable to the Lenders, within ninety (90) days of such termination, default
or nonperformance; or
(n) Key Management Agreements. Any of the Key Management Agreements
(including any extensions or renewals thereof) is terminated prior to its stated
termination date or is materially amended or modified without the prior written
consent of the Majority Lenders, or any party to a Key Management Agreement
defaults or ceases to perform under such agreement for any reason whatsoever
and, as a result of such default or non-performance, the obligor under such
agreement ceases to pay or be obligated to pay to the relevant Security Party,
as the case may be, amounts payable by such obligor under such agreement; or
(o) Related Credit Agreement; OMI COLUMBIA Loan Documents and
Mortgage Securing OMI Debt. An "Event of Default" (as defined in any of the
Related Credit Agreement, the OMI COLUMBIA Loan Documents or the Mortgage
Securing the OMI Debt) shall have occurred and be continuing
then the Lenders' obligation to make any Advances available shall cease and the
Lenders may, by notice to the Borrower, declare the entire unpaid balance of the
Term Loan, accrued interest, the entire Revolving Credit Facility Balance,
accrued interest, and any other sums payable by the Borrower hereunder and under
any other Financing Document due and payable, whereupon, the same shall
forthwith be due and payable without
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presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived; provided that upon the occurrence of an event specified in
subsections (h) or (k) of this Section 8.1, the Notes shall be immediately due
and payable without declaration or other notice to the Borrower. In such event,
the Lenders may proceed to protect and enforce their rights by action at law,
suit in equity or in admiralty or other appropriate proceeding, whether for
specific performance of any covenant contained in any Financing Document, or in
aid of the exercise of any power granted in any thereof, or the Lenders may
proceed to enforce the payment of the Notes or to enforce any other legal or
equitable right of the Lenders, or proceed to take any action authorized or
permitted under the terms of any of the Security Documents or by applicable law
for the collection of all sums due, or so declared due, on the Notes, including,
without limitation, the right to appropriate and hold, or apply (directly, by
way of set-off or otherwise) to the payment of the obligations of the Borrower
to the Lenders or the Agent under any Financing Document (whether or not then
due) all moneys and other amounts of the Borrower then or thereafter in
possession of any Lender or the Agent, the balance of any deposit account
(demand or time, matured or unmatured) of the Borrower then or thereafter with
any Lender or the Agent and every other claim of the Borrower then or thereafter
against any Lender or the Agent.
8.2 Indemnification. The Borrower agrees to, and shall, indemnify and hold the
Lenders and the Agent harmless against any loss (excluding any consequential
damages), as well as against any reasonable costs or expenses (including
reasonable legal fees and expenses), which the Lenders or the Agent sustains or
incurs as a consequence of any default in payment of the principal amount of the
Term Loan, the Revolving Credit Facility, interest accrued thereon or any other
amount payable under any Financing Document, including, but not limited to, all
actual losses incurred in liquidating or re-employing fixed deposits made by
third parties or funds acquired to effect or maintain the Term Loan and/or the
Revolving Credit Facility and/or any portion of either thereof. The
certification of each Lender or the Agent of such costs and expenses shall,
absent any manifest error, be conclusive and binding on the Borrower.
8.3 Application of Moneys. Except as otherwise provided in any Security
Document, all moneys received by the Lenders or the Agent under or pursuant to
this Agreement, any Notes, any Guaranty or any of the Security Documents after
the occurrence and continuation of any Event of Default (unless cured to the
satisfaction of the Lenders) shall be applied by the Lenders in the following
manner:
(a) first, in or towards the payment or reimbursement of any
expenses or liabilities incurred by the Lenders or the Agent in connection with
the ascertainment, protection or enforcement of its rights and remedies under
any Financing Documents,
(b) second, in or towards payment of any interest owing on the Term
Loan and the Revolving Credit Facility,
(c) third, in or towards repayment of principal owing in respect of
the Term Loan and the Revolving Credit Facility,
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(d) fourth, in or towards payment of all other sums which may be
owing to the Lenders or the Agent under any Financing Document, and
(e) fifth, the surplus (if any) shall be paid to the Borrower or to
whosoever else may be entitled thereto.
9. COVENANTS
9.1 The Borrower and, by their execution of the consent and agreement and
assignment of account provided below, each of the Guarantors hereby covenants
and undertakes with the Lenders and the Agent that, from the date hereof and so
long as any principal, interest or other moneys are owing in respect of the Term
Loan, the Revolving Credit Facility or are otherwise owing under any Financing
Document:
(A) it will, and will procure that each other Security Party will:
(i) Performance of Agreements. Duly perform and observe, and
procure the observance and performance by all other parties thereto (other than
the Lenders and the Agent) of, the terms of the Financing Documents;
(ii) Notice of Default, Litigation and Adverse Change.
Promptly upon obtaining knowledge thereof, inform the Lenders of the occurrence
of any (a) Event of Default or of any event which, with the giving of notice or
lapse of time, or both, would constitute an Event of Default, (b) their
respective litigation or governmental proceeding pending or threatened against
it or against any of the Security Parties or Marine Car Carriers (MI) which
could reasonably be expected to have a material adverse effect on the business,
assets, operations, property or financial condition of any thereof, and (c)
other event or condition which is reasonably likely to have a material adverse
effect on its ability, or the ability of the Security Parties as a group, to
perform their respective obligations under any Financing Document;
(iii) Obtain Consents. Without prejudice to Section 2.1(b) and
this Section 9.1, obtain every consent and do all other acts and things which
may from time to time be necessary or advisable for the continued due
performance of all its and the other Security Parties' respective obligations
under the Financing Documents;
(iv) Financial Information. At the expense of the Borrower,
deliver to the Agent:
(a) as soon as available but not later than ninety (90) days
after the end of each fiscal year of the Borrower, a
complete copy of the 10K report of the Borrower filed
with the United States Securities and Exchange
Commission (including audited annual financial
statements of the Borrower together with a report
thereon by an Acceptable
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Accounting Firm), which shall be prepared by the
Borrower and certified by the chief financial officer of
the Borrower together with a Compliance Certificate;
(b) as soon as available but not later than forty-five (45)
days after the end of each quarter of each fiscal year
of the Borrower, a copy of the 10Q report of the
Borrower filed with the United States Securities and
Exchange Commission which shall be prepared by the
Borrower and certified by the chief financial officer of
the Borrower, together, in each instance, with a
Compliance Certificate of such chief financial officer
in such form as the Lender may reasonably require;
(c) as soon as available, copies of all 8K reports filed by
the Borrower with the United States Securities and
Exchange Commission;
(d) as soon as available but not later than thirty (30) days
after the end of each month of each fiscal year of the
Borrower, unaudited monthly operating statements showing
actual versus budgeted cash flow (itemized for each
Vessel, Management Agreement and Vessel Agreement),
accounts receivable and accounts payable balances and
cash position for the Borrower and its Subsidiaries,
certified to be true and complete by the Chief Financial
Officer of the Borrower; and
(e) such other statements, lists of assets and accounts,
budgets, forecasts, reports and other financial
information with respect to its business as the Agent
may from time to time reasonably request, certified to
be true and complete by the Chief Financial Officer of
the Borrower;
(v) U.S. Citizenship; Qualification to Own Foreign Flag
Vessels. Continue to be, and cause each other Security Party or other Affiliate
of the Borrower owning a United States flag Vessel to continue to be, a United
States citizen within the meaning of Section 2 of the United States Shipping
Act, 1916, as amended (46 U.S.C. ss.802), qualified to own and operate vessels
in the coastwise trade of the United States of America and to cause each other
Security Party or other Affiliate of the Borrower which is the registered owner
of a Vessel registered under a flag other than the United States of America to
continue to be duly qualified under the laws of such flag to be the registered
owner and operator of a Vessel registered under such flag;
(vi) Corporate Existence. Do or cause to be done, and procure
that each Security Party shall do or cause to be done, all things necessary to
preserve and
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keep in full force and effect its corporate existence, and all licenses,
franchises, permits and assets necessary to the conduct of its business;
(vii) Books and Records. Keep, and cause each other Security
Party to keep, proper books of record and account into which full and correct
entries shall be made in accordance with GAAP throughout the Security Period;
(viii) Taxes and Assessments. Pay and discharge, and cause
each other Security Party to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or property
prior to the date upon which penalties attach thereto; provided, however, that
it shall not be required to pay and discharge, or cause to be paid and
discharged, any such tax, assessment, charge or levy so long as (a) the legality
thereof shall be contested in good faith and by appropriate proceedings or other
acts and it shall set aside on its books adequate reserves with respect thereto
or (b) where such failure to pay or discharge is not reasonably likely to,
individually or in the aggregate, have a material adverse effect on the
business, prospects or financial condition of the Borrower and its Subsidiaries
taken as a whole;
(ix) Inspection. Allow, and cause each other Security Party to
allow, any representative or representatives designated by any Lender, subject
to applicable laws and regulations, to visit and inspect any of its properties,
and, on request, to examine its books of account, records, reports and other
papers and to discuss its affairs, finances and accounts with its officers, all
at such reasonable times and as often as any Lender may reasonably request;
(x) Compliance with Statutes, etc. Do or cause to be done, and
cause each other Security Party to do and cause to be done, all things necessary
to comply with all material laws, and the rules and regulations thereunder,
applicable to the Borrower or such other Security Party, including, without
limitation, those laws, rules and regulations relating to employee benefit plans
and environmental matters;
(xi) Environmental Matters. Promptly upon the occurrence of
any of the following conditions, provide to the Agent a certificate of the chief
executive officer thereof, specifying in detail the nature of such condition and
its proposed response or the response of its Environmental Affiliate: (a) its
receipt or the receipt by any other Security Party or any Environmental
Affiliate of the Borrower or any other Security Party of any written
communication whatsoever that alleges that such person is not in compliance with
any applicable environmental law or environmental approval, if such
noncompliance could reasonably be expected to have a material adverse effect on
the business, assets, operations, property or financial condition of the
Borrower or any other Security Party, (b) knowledge by it, or by any other
Security Party or any Environmental Affiliate of the Borrower or any other
Security Party that there exists any Environmental Claim pending or threatened
against any such person, which could reasonably be expected to have a material
adverse effect on the business, assets or operations, property or financial
condition of the Borrower or any other Security Party, or (c) any release,
emission, discharge or disposal of any material that could form the basis of any
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Environmental Claim against it, any other Security Party or against any
Environmental Affiliate of the Borrower or any other Security Party, if such
Environmental Claim could reasonably be expected to have a material adverse
effect on the business, assets or operations, property or financial condition of
the Borrower or any other Security Party. Upon the written request by the Agent,
it will submit to the Agent at reasonable intervals, a report providing an
update of the status of any issue or claim identified in any notice or
certificate required pursuant to this subsection;
(xii) ERISA. Forthwith upon learning of the occurrence of any
material liability of the any Security Party or any ERISA Affiliate pursuant to
ERISA in connection with the termination of any Plan or withdrawal or partial
withdrawal of any multi-employer plan (as defined in ERISA) or of a failure to
satisfy the minimum funding standards of Section 412 of the Code or Part 3 of
Title I of ERISA by any Plan for which any Security Party or any ERISA Affiliate
is plan administrator (as defined in ERISA), furnish or cause to be furnished to
the Agent written notice thereof;
(xiii) Vessel Management. Cause each of the Vessels to be
managed by the Borrower, by a wholly-owned subsidiary thereof or by third party
manager reasonably acceptable to the Agent and procure that no agreements
providing or governing the management of such vessels shall be amended or
modified without the prior written consent of the Agent unless (in the case of
management agreements other than Key Management Agreements) such amendment or
modification would not, in the reasonable opinion of the Agent, adversely affect
the economic interests of the Borrower or any other Security Party thereunder;
(xiv) Cash. Maintain at all times on a consolidated basis,
readily available Unrestricted Cash or Cash Equivalents of not less than the
greater of (a) Two Million Dollars ($2,000,000) and (b) ten percent (10%) of the
Total Debt of the Borrower (for purposes of determining compliance with this
covenant, Unrestricted Cash or Cash Equivalents held by Marine Car Carriers (MI)
for the benefit of Marine Car Carriers (Del) shall be calculated on the basis of
the Borrower's share of such sums after deduction of any taxes that would be
payable (as of the time of determination) consequent upon the distribution and
repatriation of such sums by Marine Car Carriers (MI) to Marine Car Carriers
(Del));
(xv) Working Capital. Maintain at all times on a consolidated
basis, a positive working capital position (for purposes of determining
compliance with this covenant, Unrestricted Cash or Cash Equivalents held by
Marine Car Carriers (MI) shall be calculated on the basis of the Borrower's
share of such sums after deduction of any taxes that would be payable (as of the
time of determination) consequent upon the distribution and repatriation of such
sums by Marine Car Carriers (MI) to Marine Car Carriers (Del));
(xvi) Debt Service Coverage Ratio. Maintain on a consolidated
basis, a ratio of EBITDA to scheduled payments of principal and interest in
respect of consolidated Indebtedness of not less than, during the period
commencing from the date
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hereof and ending on the second anniversary of the date hereof, 1.25 to 1.0,
and, thereafter, 1.5 to 1.0, such ratio to be determined quarterly based on the
scheduled principal and interest (assuming the then prevailing interest rates
shall remain in effect for the next twelve (12) months) payments payable over
the next twelve (12) month period;
(xvii) Total Debt to EBITDA. Maintain on a consolidated basis,
a ratio of Total Debt to EBITDA of not greater than, (x) during the period
commencing from the date hereof and ending on the first anniversary of the date
hereof, 3.25 to 1.0, (y) during the period commencing from the first anniversary
of the date hereof and ending on the second anniversary of the date hereof, 3.0
to 1.0 and (z) thereafter, 2.5 to1.0;
(xviii) Brokerage Commissions, etc. Indemnify and hold the
Lenders and the Agent harmless from any claim for any brokerage commission, fee,
or compensation from any broker or third party resulting from the transactions
contemplated hereby;
(xix) Deposit Accounts; Assignment. Throughout the Security
Period, maintain, and procure that each Security Party shall maintain its
primary collection and revenue accounts with the Agent and shall procure, and
shall cause each Security Party to procure that, all earnings of any Vessels
shall be paid (without set-off or counterclaim) into such collection accounts.
As security for the obligations of the Borrower hereunder, the Borrower hereby
pledges, assigns and grants the Agent, on behalf of the Lenders, a security
interest in all the Borrowers' right, title and interest in and to the aforesaid
collection and disbursement accounts and consents that if an Event of Default
shall occur and so long as the same shall be continuing, all moneys held in the
said accounts and all moneys thereafter received by the Agent may be applied as
provided in Section 8.3;
(xx) MARINE DUVAL, AMELINA, CALINA and SAVONETTA. Promptly
upon termination of the respective charter over the MARINE DUVAL, AMELINA,
CALINA or SAVONETTA, procure that the Guarantor owning such Vessel shall, unless
otherwise agreed by the Agent in writing, grant a United States or Liberian
Mortgage, as the case may be, together with the appropriate Earnings Assignment
and Insurances Assignment over such Vessel in favor of the Agent;
(xxi) Proceeds of Marine Car Carriers (MI). Promptly upon the
direct or indirect acquisition, in the aggregate, by the Borrower, the
Guarantors or any affiliate of any thereof of one hundred percent (100%) of the
equity of Marine Car Carriers (MI) or one hundred percent (100%) of the assets
thereof, grant, or procure the grant, to the Agent of a security interest in the
assets of Marine Car Carriers (MI) in form and substance satisfactory to the
Agent, it being hereby agreed by the Agent and the Lenders that, simultaneous
with the investment of the assets of Marine Car Carriers (MI) into a new joint
venture with a third party not affiliated with the Borrower or the
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Guarantors, such security interest shall be released and replaced with a
negative pledge in form and substance satisfactory to the Agent];
(xxii) Year 2000 Issue. The Borrower shall take, and shall
cause each of the Guarantors to take, all necessary action to complete in all
materials respects by September, 1999, the reprogramming of computer software,
hardware and firmware systems and equipment containing embedded microchips owned
or operated by or for the Borrower and the Guarantors or used or relied upon in
the conduct of their business (including systems and equipment supplied by
others or with which such systems of the Borrower or any of the Guarantors
interface) required as a result of the Year 2000 Issue to permit the proper
functioning of such computer systems and other equipment and the testing of such
systems and equipment, as so reprogrammed. At the request of the Agent, the
Borrower shall provide, and shall cause each of the Guarantors to provide, to
the Agent reasonable assurance of its compliance with the preceding sentence;
(xxiii) ISM Code Matters. (a) Procure that the relevant
Operator will, comply with, and ensure that (i) each Vessel will comply with the
requirements of the ISM Code by not later than July 1, 1998, and (ii) any
newly-acquired Vessel will comply with the requirements of the ISM Code within
three months of its acquisition, including (but not limited to) the maintenance
and renewal of valid certificates pursuant thereto throughout the Security
Period;
(b) Procure that any Operator will, immediately inform the
agent if there is any threatened or actual withdrawal of
its, DOC or the SMC for any Vessel; and
(c) Procure that the relevant Operator will, promptly inform
the Agent upon the issuance (i) to such Operator of a
DOC and (ii) to the relevant Vessel of an SMC; and
(xxiv) OMI COLUMBIA. Procure that promptly upon the
acquisition of ownership of OMI COLUMBIA by OMI Challenger Transport (or any
other Affiliate of the Borrower), such Guarantor shall execute and deliver a
second preferred mortgage and assignments of earnings and insurance in respect
of such Vessel in form and substance satisfactory to the Agent.
(B) The Borrower will not, and will procure that no other Security
Party will, without the prior written consent of the Agent:
(i) Liens. Create, assume or permit to exist, any mortgage,
pledge, lien, charge, encumbrance or any security interest whatsoever upon any
of such party's property or other assets, real or personal, tangible or
intangible, whether now owned or hereafter acquired except:
(a) liens for taxes not yet payable for which adequate
reserves have been maintained;
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(b) the Financing Documents and other liens granted in
connection herewith in favor of the Lenders or the
Agent, as the case may be;
(c) liens, charges and encumbrances against their
respective Vessels except those of the type and amounts
permitted to exist under the terms of the Mortgages;
(d) pledges of certificates of deposit or other cash
collateral securing any Security Party's reimbursement
obligations in connection with letters of credit now or
hereafter issued for the account of such Security Party
in connection with the establishment of the financial
responsibility of the Security Parties under 33 C.F.R.
Part 130 or 46 C.F.R. Part 540, as the case may be, as
the same may be amended or replaced;
(e) pledges or deposits to secure obligations under
workmen's compensation laws or similar legislation,
deposits to secure public or statutory obligations,
warehousemen's or other like liens, or deposits to
obtain the release of such liens and deposits to secure
surety, appeal or customs bonds on which any of the
Security Parties is the principal, as to all of the
foregoing, only to the extent arising and continuing in
the ordinary course of business;
(f) liens on assets acquired with Permitted Third Party
Debt and securing only the Permitted Third Party Debt
incurred to acquire such assets;
(g) the Mortgages securing the OMI Debt (and related
assignments of marine insurances for the Vessels subject
to such mortgages);
(h) other liens, charges and encumbrances incidental to
the conduct of the business of each such party, the
ownership of any such party's property and assets and
which do not in the aggregate materially detract from
the value of each such party's property or assets or
materially impair the use thereof in the operation of
its business
(items (a) through (h) are hereinafter collectively referred to as "Permitted
Liens");
(ii) Loans, Advances and Investments. Make any loans or
advances to, or any investments in any Person, firm, corporation, joint venture
or other
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entity (including, without limitation, any loan or advance to any officer,
director, stockholder, employee or customer of any company affiliated with any
Security Party) except for advances and investments in the ordinary course of
its business and loans or advances to any Security Party;
(iii) Indebtedness. Incur any Indebtedness except Permitted
Indebtedness;
(iv) Permitted Third Party Debt. Incur any Permitted Third
Party Debt, unless, in the case of any such Indebtedness other than that
supporting MARAD vessel management contracts:
(a) the Borrower and the Security Parties are in
compliance with their covenants set forth in this
Agreement,
(b) no Event of Default (or any event or condition
which, with the giving of notice or passage of time or
both, would constitute an Event of Default) shall have
occurred or will occur and be continuing before or after
the incurrence of such Permitted Third Party Debt,
(c) the Borrower demonstrates to the satisfaction of the
Agent, in its sole discretion, that the ratio of (1)
projected EBITDA to be generated by the particular asset
to be acquired with such Permitted Third Party Debt to
(2) projected scheduled payments of interest and
principal for such Permitted Third Party Debt shall be
at least 1.0 to 1.0 over the entire term of such
Permitted Third Party Debt and
(d) the Borrower demonstrates to the satisfaction of the
Agent, in its sole discretion, that following the
incurrence of such Permitted Third Party Debt, the
Borrower and the Guarantors shall be in compliance with
the financial covenants set forth in Sections
9.1(A)(xiv), (xv), (xvi) and (xvii) (for purposes of the
calculations required by this clause (z), (1) EBITDA
shall include the projected EBITDA to be generated by
the particular asset to be acquired with such Permitted
Third Party Debt, (2) Total Debt shall include the
Permitted Third Party Debt to be incurred and (3)
scheduled payments of interest and principal on Total
Debt shall include projected scheduled payments of
interest and principal in respect of such Permitted
Third Party Debt;
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(v) Guarantees, etc. Assume, guarantee or (other than in the
ordinary course of its business) endorse or otherwise become or remain liable,
in connection with any obligation of any person, firm, company or other entity
except for guarantees, in connection herewith, in favor of the Lenders or the
Agent or guarantees of Permitted Indebtedness;
(vi) Changes in Business. Change the nature of its business or
engage in any businesses other than domestic and international marine
transportation;
(vii) Use of Corporate Funds. Pay out any funds to any company
or Person except (a) as contemplated by the Acquisition Agreement; (b) in the
ordinary course of business in connection with the management of the business of
the Security Parties, including the operation and/or repair of the Vessels and
other vessels owned, managed or operated by such parties and (c) the servicing
of Permitted Indebtedness provided, however, it shall not prepay any such
Permitted Indebtedness (excluding the Indebtedness hereunder and under the
Related Credit Agreement);
(viii) Issuance of Shares. Permit any subsidiaries to issue or
dispose of any shares of its own capital stock to any Person;
(ix) Sale of Shares. Sell, assign, transfer, pledge or
otherwise convey or dispose of any of the shares of the capital stock of any
Security Parties or Marine Car Carriers (MI);
(x) Sale of Assets. Sell, or otherwise dispose of, any Vessel,
any shares in any subsidiary corporation or any other asset which represents all
or a substantial portion of its assets taken as a whole;
(xi) Capital Expenditures. Make or commit to make any capital
expenditures provided, however, that in no event shall this subsection (xi)
preclude the Borrower or any other Security Party from undertaking necessary
repairs and improvements to any Vessel the cost of which, for accounting
purposes, is treated by the Borrower as a capital expenditure;
(xii) Changes in Offices or Names. Change the location of the
chief executive office of any Security Party, the office of the chief place of
business of any such parties, the office of the Security Parties in which the
records relating to the earnings or insurances of the Vessels are kept unless
the Agent shall have received thirty (30) days prior written notice of such
change;
(xiii) Changes in Management. Make any material changes in the
existing management of any Security Party;
(xiv) Consolidation and Merger. Consolidate with, or merge
into, any corporation or other entity, or merge any corporation or other entity
into it
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unless, in the case of the relevant Security Party, such company shall be the
surviving entity;
(xv) Chartering-in of Vessels. Except for the chartering-in of
oil tankers by OMI Petrolink Corp., a Delaware corporation, in connection with
the operation of its lightering business, charter-in any vessel under a charter
having a term (inclusive of all extensions and renewals) of twelve (12) months
or more;
(xvi) Dividends. (x) Declare or make, and procure that no
other Security Party shall declare or make to any party other than another
Security Party, any distributions to its shareholders, by dividend or otherwise,
or otherwise dispose of any assets to its shareholders- in cash or in any other
manner or (y) enter into, and procure that no other Security Party shall enter
into, any agreement or arrangement (other than this Agreement and the Related
Credit Agreement) which restricts or limits it or such other Security Party from
making any such distributions to its immediate parent; and
(xvii) Loans From Marine Car Carriers (MI). Procure that
Marine Car Carriers (MI) shall not make any loans or advances to the Borrower,
or any subsidiary, officer, director, shareholder or Affiliate thereof.
9.2 Vessel Valuations. At least every twelve (12) months commencing on the day
falling twelve (12) months from the date hereof and in any event upon the
request of the Agent, the Borrower shall obtain, at the Borrower's cost,
valuations of the Vessels, charter-free, in Dollars from two independent
shipbrokers satisfactory to the Agent. In the event the Borrower fails or
refuses to obtain the valuations requested pursuant to this Section 9.2 within
ten (10) days of the Agent's request therefor, the Agent shall be authorized to
obtain such valuations, at the Borrower's cost, from two independent shipbrokers
selected by the Agent, which valuations shall be deemed the equivalent of
valuations duly obtained by the Borrower pursuant to this Section 9.2, but the
Agent's actions in doing so shall not excuse any default of the Borrower under
this Section 9.2. The average of such two (2) valuations shall be the FMV of
each Vessel.
9.3 Asset Maintenance. If at any time the Collateral Vessel Value (together with
the value of any additional collateral theretofore provided under this Section)
falls below one hundred fifty percent (150%) (the "Required Percentage") of an
amount (the "Principal Exposure") equal to the aggregate of (a) the Term Loan
Balance, (b) any Revolving Credit Facility Advances then outstanding, (c) any
undrawn amounts then available under the Revolving Credit Facility, (d) the
Related Indebtedness then outstanding and (e) any amounts then available to be
drawn down pursuant to the Related Credit Agreement, the Borrower shall, within
a period of thirty (30) days following receipt by the Borrower of written notice
from the Agent notifying the Borrower of such shortfall and specifying the
amount thereof (which amount shall, in the absence of manifest error, be deemed
to be conclusive and binding on the Borrower), either (a) deliver to the Lenders
or the Agent as the case may be, such additional collateral, as may be
satisfactory to the Agent in its sole discretion, of sufficient value to restore
compliance with the Required Percentage or (b)(i) prepay such part of the Term
Loan (together with interest thereon and other moneys
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payable in respect of such prepayment pursuant to Section 5.6) or (ii) procure
the prepayment of such part of the Related Term Loan in accordance with the
terms of the Related Credit Agreement as shall result in the restoration of
compliance with the Required Percentages. Any such prepayment of the Term Loan
shall be applied as provided in Section 5.6. For purposes of calculating the
Collateral Vessel Value under this Section 9.3, the value of the OMI COLUMBIA
shall be deemed to be equal to the product of (1) the lightweight tonnage of
such Vessel multiplied by (2) (x) One Hundred Twenty-Five Dollars ($125) or (y)
if such Vessel is hereafter subject to legal restrictions as to the geographic
location where such Vessel may be scrapped, a scrap price, reasonably deemed by
the Agent to reflect a conservative average market scrap price for those
jurisdictions which, in the Agent's reasonable opinion, such Vessel may be
scrapped in a commercially reasonable manner.
9.4 Inspection and Survey Reports. If the Agent shall so request, the Borrower
shall provide the Agent with copies of all internally generated inspection or
survey reports on the Vessels.
10. ASSIGNMENT
This Agreement shall be binding upon, and inure to the benefit of, the
Borrower, the Lenders and the Agent and their respective successors and assigns,
except that the Borrower may not assign any of its rights or obligations
hereunder without the prior written consent of the Majority Lenders. In giving
any consent as aforesaid to any assignment by the Borrower, the Lenders shall be
entitled to impose such conditions as they shall deem advisable. Each Lender
shall be entitled to assign the whole or any part of its rights or obligations
under this Agreement or grant participation(s) in the Term Loan and the
Revolving Credit Facility to any subsidiary, holding company or other affiliate
of such Lender, to any subsidiary or other affiliate company of any thereof or
to any other bank or financial institution, and such Lender shall forthwith give
notice of any such assignment or participation to the Borrower provided, that,
the relevant Lender assigns or participates, as the case may be, to its assignee
or participant, (a) equal proportionate shares of such Lender's interest in both
the Term Loan and the Revolving Credit Facility and (b), simultaneously with its
assignment or participation of a share in the Indebtedness provided hereunder,
an equal proportionate share in the Related Indebtedness in accordance with the
provisions of the Related Credit Agreement and, provided, further, that in the
event of any assignment by any Lender, such assignment (but not any
participation) is to be made pursuant to an Assignment and Assumption Agreement.
The Borrower will take all reasonable actions requested by the Agent, on behalf
of such Lender.
11. ILLEGALITY, INCREASED COST, NON-AVAILABILITY, ETC.
11.1 Illegality. In the event that by reason of any change in any applicable
law, regulation or regulatory requirement or in the interpretation thereof (any
such change or interpretation), a Lender has a good faith reasonable basis to
conclude that it has become unlawful for it to maintain or give effect to its
obligations as contemplated by this
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Agreement, such Lender shall inform the Borrower to that effect, whereafter the
liability of such Lender to make its portion of the Term Loan and/or the
Revolving Credit Facility available shall forthwith cease and the Borrower shall
be required either to repay to such Lender that portion of the outstanding
balance of the Term Loan and/or the Revolving Credit Facility funded by such
Lender immediately or, with respect to the Term Loan, if the relevant Lender so
agrees, to repay such portion of the Term Loan to such Lender on the last day of
any then current Interest Period in accordance with and subject to the
provisions of Section 11.5. In any such event, but without prejudice to the
aforesaid obligations of the Borrower to repay the Term Loan and/or the
Revolving Credit Facility, the Borrower and the relevant Lender shall negotiate
in good faith with a view to agreeing on terms for making such portion of the
Term Loan and/or the Revolving Credit Facility available from another
jurisdiction or otherwise restructuring such portion of the Term Loan and/or the
Revolving Credit Facility on a basis which is not unlawful.
11.2 Increased Costs. If any change in applicable law, regulation or regulatory
requirement, or in the interpretation or application thereof by any governmental
or other authority, shall:
(i) subject the Agent or any Lender to any Taxes with respect to
its income from the Term Loan and/or the Revolving Credit
Facility, or any part of either thereof, or
(ii) change the basis of taxation to the Agent or any Lender of
payments of principal or interest or any other payment due or
to become due pursuant to this Agreement (other than a change
in the basis effected by the jurisdiction of organization of
the Agent or such Lender, the jurisdiction of the principal
place of business of the Agent or such Lender, the United
States of America, the State or City of New York or any
governmental subdivision or other taxing authority having
jurisdiction over the Agent or Lender (unless such
jurisdiction is asserted by reason of the activities of any of
the Security Parties) or such other jurisdiction where the
Term Loan and/or the Revolving Credit Facility may be
payable), or
(iii) impose, modify or deem applicable any reserve requirements or
require the making of any special deposits against or in
respect of any assets or liabilities of, deposits with or for
the account of, or loans by, the Lender, or
(iv) impose on the Agent or any Lender any other condition
affecting the Term Loan and/or the Revolving Credit Facility
or any part of either thereof,
and the result of the foregoing is either to increase the cost to such Lender of
making available or maintaining its Commitment or any part of either thereof or
to reduce the
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amount of any payment received by the Agent or such Lender, then and in any such
case if such increase or reduction in the opinion of the Agent or such Lender
materially affects the interests of the Agent or such Lender under or in
connection with this Agreement:
(a) the Agent or such Lender, as the case may be, shall notify the
Borrower of the occurrence of such event, and
(b) the Borrower agrees forthwith upon demand to pay to the Agent
or such Lender such amount as the Agent or such Lender
certifies to be necessary to compensate the Agent or such
Lender for such additional cost or such reduction.
11.3 Nonavailability of Funds. If the Agent shall determine that, by reason of
circumstances affecting the London Interbank Market generally, adequate and
reasonable means do not or will not exist for ascertaining the LIBOR for any
Interest Period, the Agent shall give notice of such determination to the
Borrower. The Borrower and the Agent shall then negotiate in good faith in order
to agree upon a mutually satisfactory interest rate and/or Interest Period to be
substituted for LIBOR which would otherwise have applied under this Agreement.
If the Borrower and Agent are unable to agree upon such a substituted interest
rate and/or Interest Period within thirty (30) days of the giving of such
determination notice, the Agent shall set an interest rate and Interest Period
to take effect from the expiration of the Interest Period in effect at the date
of determination, which rate shall be equal to the aggregate of (a) the cost to
each Lender (as certified by such Lender) of funding the relevant Advance, (b)
the then prevailing Margin and (c) in the case of Revolving Credit Facility
Advances, one quarter of one percent (0.25%). In the event the state of affairs
to which this Section 11.3 refers shall extend beyond the end of the Interest
Period, the foregoing procedure shall continue to apply until circumstances are
such that LIBOR may be determined pursuant to Section 6.
11.4 Agent's Certificate Conclusive. A certificate or determination notice of
the Agent or any Lender as to any of the matters referred to in this Section 11
shall, absent manifest error, be conclusive and binding on the Borrower.
11.5 Compensation for Losses. Where the Term Loan and/or the Revolving Credit
Facility or a portion of either thereof is to be repaid by the Borrower pursuant
to this Section 11, the Borrower agrees simultaneously with such repayment to
pay to the relevant Lender all accrued interest to the date of actual payment on
the amount repaid and all other sums then payable by the Borrower to the
relevant Lender pursuant to this Agreement together with such amounts as may be
certified by the relevant Lender to be necessary to compensate the Lender for
any actual loss, premium or penalties incurred or to be incurred thereby on
account of funds borrowed to make, fund or maintain its Commitment or such
portion of either thereof for the remainder (if any) of the then current
Interest Period or Periods, if any, but otherwise without penalty or premium.
12. CURRENCY INDEMNITY
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12.1 Currency Conversion. If for the purpose of obtaining or enforcing a
judgment in any court in any country it becomes necessary to convert into any
other currency (the "Judgment Currency") an amount due in Dollars under any
Financing Document then the conversion shall be made, in the discretion of the
Agent at the rate of exchange prevailing either on the date of default or on the
day before the day on which the judgment is given or the order for enforcement
is made, as the case may be (the "Conversion Date"), provided that the Agent
shall not be entitled to recover under this clause any amount in the Judgment
Currency which exceeds at the Conversion Date the amount in Dollars due under
any Financing Document.
12.2 Change in Exchange Rate. If there is a change in the rate of exchange
prevailing between the Conversion Date and the date of actual payment of the
amount due, the Borrower shall pay such additional amounts (if any, but in any
event not a lesser amount) as may be necessary to ensure that the amount paid in
the Judgment Currency when converted at the rate of exchange prevailing on the
date of payment will produce the amount then due under any Financing Document in
Dollars; any excess over the amount due received or collected by the Lenders
shall be remitted to the Borrower.
12.3 Additional Debt Due. Any amount due from the Borrower under this Section 12
shall be due as a separate debt and shall not be affected by judgment being
obtained for any other sums due under or in respect of the Financing Documents.
12.4. Rate of Exchange. The term "rate of exchange" in this Section 12 means the
rate at which the Agent in accordance with its normal practices is able on the
relevant date to purchase Dollars with the Judgment Currency and includes any
premium and costs of exchange payable in connection with such purchase.
13. FEES AND EXPENSES
13.1 Commitment Fee. The Borrower will pay a Commitment Fee at a rate, per
annum, equal to forty percent (40%) of the aggregate of (a) the then applicable
Margin and (b) one quarter of one percent (0.25%), accruing from the date
hereof, payable quarterly in arrears from the date hereof and on the Revolving
Credit Facility Termination Date, on the available but undrawn amount of the
Revolving Credit Facility. The Commitment Fee shall accrue from day to day and
be calculated on the actual number of days elapsed and a three hundred sixty
(360) day year.
13.2 Facilities Fee. A Facilities Fee payable to the Lenders on the earlier of
(a) the date on which the Term Loans are repaid or prepaid in full or refinanced
and (b) the second anniversary of the date hereof. The Facilities Fee shall be
equal to the product of (x) Twenty-Four Million Dollars ($24,000,000) and (y),
if such fee is payable on or before the day falling (i) six (6) months after the
date hereof, one quarter of one percent (0.25%), (ii) twelve (12) months after
the date hereof, one half of one percent (0.50%) or (iii) twelve (12) months and
one (1) day after the date hereof, three-quarters of one percent (0.75%).
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13.3 Other Fees. The Borrower shall pay the fees set forth in the fee letter
between the Borrower and the Agent dated the date hereof.
13.4 Expenses. The Borrower agrees, whether or not the transactions hereby
contemplated are consummated, on demand to pay, or reimburse the Lenders and the
Agent for their payment of, the reasonable expenses of the Lenders and the Agent
incident to said transactions (and in connection with any supplements,
amendments, waivers or consents relating thereto or incurred in connection with
the enforcement or defense of any of the rights and remedies of any Lender or
the Agent with respect thereto or in the preservation of the priorities of the
Lenders or the Agent under the documentation executed and delivered in
connection therewith) including, without limitation, all reasonable costs and
expenses of preparation, negotiation, execution and administration of this
Agreement and the documents referred to herein, the reasonable fees and
disbursements of the counsel of the Lenders and the Agent in connection
therewith, as well as the reasonable fees and expenses of any independent
appraisers, surveyors, engineers and other consultants retained by the Lenders
or the Agent for this transaction, all reasonable costs and expenses, if any,
for the enforcement of the Financing Documents and stamp and other similar
taxes, if any, incident to the execution and delivery of the documents
(including, without limitation, the Notes) herein contemplated and to hold the
Lenders and the Agent free and harmless in connection with any liability arising
from the nonpayment of any such stamp or other similar taxes. Such taxes and, if
any, interest and penalties related thereto as may become payable after the date
hereof shall be paid immediately by the Borrower to the relevant Lender or the
Agent, as the case may be, when liability therefor is no longer contested by the
Lenders or the Agent, as the case may be, or reimbursed immediately by the
Borrower to such Lender or the Agent, as the case may be.
14. APPLICABLE LAW, JURISDICTION AND WAIVER
14.1 Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without any reference to the
conflicts of laws principles of such State.
14.2 Jurisdiction. The Borrower hereby irrevocably submits to the jurisdiction
of the courts of the State of New York and of the United States District Court
for the Southern District of New York in any action or proceeding brought
against it by the Agent or any Lender under this Agreement or under any document
delivered hereunder and hereby irrevocably agrees that valid service of summons
or other legal process on it may be effected by serving a copy of the summons
and other legal process in any such action or proceeding on the Borrower by
mailing or delivering the same by hand to the Borrower at the address indicated
for notices in Section 16.2. The service, as herein provided, of such summons or
other legal process in any such action or proceeding shall be deemed personal
service and accepted by the Borrower as such, and shall be legal and binding
upon the Borrower for all the purposes of any such action or proceeding. Final
judgment (a certified or exemplified copy of which shall be conclusive evidence
of the fact and of the amount of any indebtedness of the Borrower to the Lenders
or the Agent) against the
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Borrower in any such legal action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment. The Borrower will
advise the Agent promptly of any change of address for the purpose of service of
process. Notwithstanding anything herein to the contrary, the Lenders or the
Agent may bring any legal action or proceeding in any other appropriate
jurisdiction.
14.3 WAIVER OF JURY TRIAL. IT IS MUTUALLY AGREED BY AND AMONG THE BORROWER, THE
OTHER SECURITY PARTIES, THE AGENT AND THE LENDERS THAT EACH OF THEM HEREBY
WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY
PARTY TO ANY FINANCING DOCUMENT AGAINST ANY OTHER PARTY TO ANY FINANCING
DOCUMENT ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH
ANY FINANCING DOCUMENT.
15. THE AGENT
15.1 (a) Appointment of Agent. Each of the Lenders hereby irrevocably appoints
and authorizes the Agent (which for purposes of this Section 15 shall be deemed
to include the Agent acting in its capacity as security trustee pursuant to
Section 15.1(b)) to take such action as agent on its behalf and to exercise such
powers under the Financing Documents as are delegated to the Agent by the terms
hereof and thereof. Neither the Agent nor any of its directors, officers,
employees or agents shall be liable for any action taken or omitted to be taken
by it or them under the Financing Documents or in connection therewith, except
for its or their own gross negligence or willful misconduct.
(b) Appointment of Security Trustee. Each of the Lenders irrevocably
appoints the Agent as security trustee on their respective behalf with regard to
the (i) security, powers, rights, titles, benefits and interests (both present
and future) constituted by and conferred on the Lenders or any of them or for
the benefit thereof under or pursuant to the Financing Documents (including,
without limitation, the benefit of all covenants, undertakings, representations,
warranties and obligations given, made or undertaken to any Lender in any
Financing Document), (ii) all moneys, property and other assets paid or
transferred to or vested in any Lender or any agent of any Lender or received or
recovered by any Lender or any agent of any Lender pursuant to, or in connection
with, the Financing Documents whether from any Security Party or any other
person and (iii) all money, investments, property and other assets at any time
representing or deriving from any of the foregoing, including all interest,
income and other sums at any time received or receivable by any Lender or any
agent of any Lender in respect of the same (or any part thereof). The Agent
hereby accepts such appointment.
15.2 Distribution of Payments. Whenever any payment is received by the Agent
from any Security Party for the account of the Lenders, or any of them, whether
of principal or interest on the Notes, commissions, fees under Sections 13.1 or
13.2and expenses under Section 13.4, or otherwise, it will thereafter cause to
be distributed on the same day if received before 11 a.m. New York time, or on
the next day if received thereafter, like
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funds relating to such payment ratably to the Lenders according to their
respective Commitments, in each case to be applied according to the terms of
this Agreement.
15.3 Holder of Interest in Note. The Agent may treat each Lender as the holder
of all of the interest of such Lender in the Note, until, in the case of an
assignment, the Agent has received an original Assignment and Assumption
Agreement executed by such Lender and its assignee.
15.4 No Duty to Examine, Etc. The Agent shall not be under a duty to examine or
pass upon the validity, effectiveness or genuineness of any of the Financing
Documents or any instrument, document or communication furnished pursuant to or
in connection with any Financing Document, and the Agent shall, in the absence
of gross negligence, be entitled to assume that the same are valid, effective
and genuine, have been signed or sent by the proper parties and are what they
purport to be.
15.5 Agent as Lender. With respect to that portion of the Term Loan and the
Revolving Credit Facility made available by it, the Agent shall have the same
rights and powers hereunder as any other Lender and may exercise the same as
though it were not the Agent, and the term "Lender" or "Lenders" shall include
the Agent in its capacity as a Lender. The Agent and its affiliates may accept
deposits from, lend money to and generally engage in any kind of business with,
the Security Parties as if it were not the Agent.
15.6 (a) Obligations of Agent. The obligations of the Agent under the Financing
Documents are only those expressly set forth herein and therein.
(b) No Duty to Investigate. The Agent shall not at any time be under any
duty to investigate whether an Event of Default, or an event which with the
giving of notice or lapse of time, or both, would constitute an Event of
Default, has occurred or to investigate the performance of any Financing
Document by any Security Party.
15.7 (a) Discretion of Agent. The Agent shall be entitled to use its discretion
with respect to exercising or refraining from exercising any rights which may be
vested in it by, and with respect to taking or refraining from taking any action
or actions which it may be able to take under or in respect of, the Financing
Documents, unless the Agent shall have been instructed by the Majority Lenders
to exercise such rights or to take or refrain from taking such action; provided,
however, that the Agent shall not be required to take any action which exposes
the Agent to personal liability or which is contrary to this Agreement or
applicable law.
(b) Instructions of Majority Lenders. The Agent shall in all cases be
fully protected in acting or refraining from acting under any Financing Document
in accordance with the instructions of the Majority Lenders, and any action
taken or failure to act pursuant to such instructions shall be binding on all of
the Lenders.
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15.8 Assumption re Event of Default. Unless the Agent has been notified by any
Security Party that an Event of Default, or event which with the giving of
notice or lapse of time, or both, would constitute an Event of Default, has
occurred and is continuing, or has been notified by a Lender that such Lender
considers that an Event of Default or such an event (specifying in detail the
nature thereof) has occurred and is continuing, except as otherwise provided in
Section 15.14 hereof, the Agent shall be entitled to assume that no Event of
Default, or event which with the giving of notice or lapse of time, or both,
would constitute an Event of Default, has occurred and is continuing. In the
event that the Agent shall have been notified by any Security Party or any
Lender in the manner set forth in the preceding sentence of any Event of Default
or of an event which with the giving of notice or lapse of time, or both, would
constitute an Event of Default, the Agent shall notify the Lenders and shall
take action and assert such rights under the Financing Documents as the Majority
Lenders shall request in writing.
15.9 No Liability of Agent or Lenders. Neither the Agent nor any of the Lenders
shall be under any liability or responsibility whatsoever:
(a) to any Security Party or any other person or entity as a consequence
of any failure or delay in performance by, or any breach by, any other Lenders
or any other person of any of its or their obligations under any Financing
Document;
(b) to any Lender or Lenders, as a consequence of any failure or delay in
performance by, or any breach by, any Security Party of any of its respective
obligations under the Financing Documents; or
(c) to any Lender or Lenders, for any statements, representations or
warranties contained in any Financing Document or any document or instrument
delivered in connection with the transaction hereby contemplated; or for the
validity, effectiveness, enforceability or sufficiency of any Financing Document
or any document or instrument delivered in connection with the transactions
hereby contemplated.
15.10 Indemnification of Agent. The Lenders agree to indemnify the Agent (to the
extent not reimbursed by the Security Parties or any thereof), pro rata
according to the respective amounts of their Commitments, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever (including legal fees and expenses incurred in investigating claims
and defending itself against such liabilities) which may be imposed on, incurred
by or asserted against, the Agent in any way relating to or arising out of any
Financing Document, any action taken or omitted by the Agent thereunder or the
preparation, administration, amendment or enforcement of, or waiver of any
provision of, any Financing Document, except that no Lender shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
Agent's gross negligence or willful misconduct.
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15.11 Consultation with Counsel. The Agent may consult with legal counsel
selected by the Agent and shall not be liable for any action taken, permitted or
omitted by it in good faith in accordance with the advice or opinion of such
counsel.
15.12 Resignation. The Agent may resign at any time by giving sixty (60) days'
written notice thereof to the Lenders and the Borrower. Upon any such
resignation, the Lenders shall have the right to appoint a successor Agent. If
no successor Agent shall have been so appointed by the Lenders and shall have
accepted such appointment within sixty (60) days after the retiring Agent's
giving notice of resignation, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent which shall be a bank or trust company of
recognized standing. The appointment of any successor Agent shall be subject to
the prior written consent of the Borrower, such consent not be unreasonably
withheld. After any retiring Agent's resignation as Agent hereunder, the
provisions of this Section 15 shall continue in effect for its benefit with
respect to any actions taken or omitted by it while acting as Agent.
15.13 Representations of Lenders. Each Lender represents and warrants to each
other Lender and the Agent that:
(i) In making its decision to enter into this Agreement and to make its
Commitment available hereunder, it has independently taken whatever steps it
considers necessary to evaluate the financial condition and affairs of the
Security Parties, that it has made an independent credit judgment and that it
has not relied upon any statement, representation or warranty by any other
Lender or the Agent; and
(ii) So long as any portion of its Commitment remain outstanding, it will
continue to make its own independent evaluation of the financial condition and
affairs of the Security Parties.
15.14 Notification of Event of Default. The Agent hereby undertakes to notify
promptly the Lenders, and the Lenders hereby undertake to notify promptly the
Agent and the other Lenders, of the existence of any Event of Default which
shall have occurred and be continuing of which the Agent or any Lender has
actual knowledge.
16. NOTICES AND DEMANDS
16.1 Notices in Writing. Every notice or demand under this Agreement shall be in
writing and may be given or made by facsimile.
16.2 Addresses for Notice. Every notice or demand shall be sent as follows:
If to the Borrower:
1200 Harbour Boulevard, 9th Floor,
Weehawken, New Jersey 07087
Fax No.: 201-330-9645
61
<PAGE> 70
Attn: General Counsel, P.N. Popov
If to the Agent (with copies to the Lenders):
200 Park Avenue
New York, New York 10166
Fax No.: 212-681-3900
Attn: Nikolai Nachamkin
If to the Lenders, to such Lender's address and fax number as set forth in
Schedule 1 (with a copy to the Agent).
Any notice sent by facsimile shall be confirmed by letter dispatched as soon as
practicable thereafter.
16.3 Notices Deemed Received. Every notice or demand shall, except so far as
otherwise expressly provided by this Agreement, be deemed to have been received
(provided that it is received prior to 2 p.m. New York time; otherwise it shall
be deemed to have been received on the next following Banking Day), in the case
of a facsimile at the time of dispatch thereof (provided further that if the
date of dispatch is not a Banking Day in the locality of the party to whom such
notice or demand is sent it shall be deemed to have been received on the next
following Banking Day in such locality) and, in the case of a letter, at the
time of receipt thereof.
17. MISCELLANEOUS
17.1 Time of Essence. Time is of the essence of this Agreement but no failure or
delay on the part of the Lenders or the Agent to exercise any power or right
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise by the Lenders or the Agent of any power or right hereunder
preclude any other or further exercise thereof or the exercise of any other
power or right. The remedies provided herein are cumulative and are not
exclusive of any remedies provided by law.
17.2 Unenforceable, etc., Provisions - Effect. In case any one or more of the
provisions contained in any Financing Document would, if given effect, be
invalid, illegal or unenforceable in any respect under any law applicable in any
relevant jurisdiction, said provision shall not be enforceable against the
relevant Security Party, but the validity, legality and enforceability of the
remaining provisions herein or therein contained shall not in any way be
affected or impaired thereby.
17.3 Indemnification. The Borrower and, by its execution and delivery of the
Consent and Agreement set forth below, each of the other Security Parties
jointly and severally agree to indemnify the Lenders, the Agent, their
respective successors and assigns, and their respective officers, directors,
employees, representatives and agents (each an "Indemnitee") from, and hold each
of them harmless against, any and all losses, liabilities, claims, damages,
expenses, obligations, penalties, actions, judgments, suits,
62
<PAGE> 71
costs or disbursements of any kind or nature whatsoever (including, without
limitation, the fees and disbursements of counsel for such Indemnitee in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnitee shall be designated a
party thereto) that may at any time (including, without limitation, at any time
following the repayment of the Term Loan and the Revolving Credit Facility
Advances) be imposed on, asserted against or incurred by, any Indemnitee as a
result of, or arising out of or in any way related to or by reason of, (a) any
violation by any Security Party (or any charterer or other operator of any
Vessel) of any applicable Environmental Law, (b) any Environmental Claim arising
out of the management, use, control, ownership or operation of property or
assets by any Security Party (or, after foreclosure, by the Lenders, the Agent
or their respective successors or assigns after any such foreclosure) and (3)
the breach of any representation, warranty or covenant set forth in Sections 2.1
(p) or (q) or 9.1(A)(xi). If and to the extent that the obligations of the
Security Parties under this Section are unenforceable for any reason, the
Borrower and, by its execution and delivery of the Consent and Agreement set
forth below, each of the other Security Parties jointly and severally agree to
make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law. The obligations of the
Security Parties under this Section 17.3 shall survive the termination of this
Agreement and the repayment to the Lender and the Agent of all amounts owing to
each thereof under or in connection herewith.
17.4 References. References herein to Sections and Schedules are to be construed
as references to sections of, and schedules to, this Agreement.
17.5 Further Assurances. The Borrower agrees that if any Financing Document
shall, in the reasonable opinion of the Agent, at any time be deemed by the
Agent for any reason insufficient in whole or in part to carry out the true
intent and spirit hereof or thereof, it will execute or cause to be executed
such other and further assurances and documents as in the opinion of the Agent
may be required in order more effectively to accomplish the purposes of such
Financing Document.
17.6 Prior Agreements, Merger. Any and all prior understandings and agreements
heretofore entered into between the Security Parties on the one part, and the
Lenders or the Agent, on the other part, whether written or oral, are superseded
by and merged into this Agreement and the other agreements (the forms of which
are exhibited hereto) to be executed and delivered in connection herewith to
which any Security Party and/or the Lenders or the Agent are parties, which
alone fully and completely express the agreements between the Security Parties,
the Lenders and the Agent.
17.7 Entire Agreement; Amendments. This Agreement constitutes the entire
agreement of the parties hereto including all parties added hereto pursuant to
an Assignment and Assumption Agreement and cannot be amended other than by
written agreement signed by all such parties.
63
<PAGE> 72
17.8 Headings. In this Agreement, Section headings are inserted for convenience
of reference only and shall not be taken into account in the interpretation of
this Agreement.
IN WITNESS whereof, each party hereto has caused this Agreement to
be duly executed by its duly authorized representative on the day and year first
above written.
MARINE TRANSPORT CORPORATION
By:____________________________
Name:
Title:
By Special Authority for
DEN NORSKE BANK ASA
By:____________________________
Theodore S. Jadick
Senior Vice President
New York Branch
By:____________________________
Nikolai Nachamkin
Vice President
New York Branch
64
<PAGE> 73
CONSENT AND AGREEMENT
AND ACCOUNT ASSIGNMENT
Each of the undersigned, referred to in the foregoing Term Loan and
Revolving Credit Facility Agreement as the "Guarantors", hereby consents and
agrees to said Agreement and to the documents contemplated thereby and to the
provisions contained therein relating to conditions to be fulfilled and
obligations to be performed by the undersigned pursuant to or in connection with
said Agreement and particularly agree to be bound by the representations,
warranties and covenants relating to the undersigned contained in Sections 2 and
9 of said Agreement to the same extent as if the undersigned were a party to
said Agreement.
In particular, but without limitation of the foregoing, each of the
undersigned hereby covenants and agrees to maintain its primary collection and
revenue accounts with the Agent and shall procure that all earnings of any
Vessels shall be paid into such collection accounts. As security for its
obligations under the Financing Documents, each of the undersigned hereby
pledges, assigns and grants the Agent, on behalf of the Lenders, a security
interest in all the undersigned's right, title and interest in and to the
aforesaid collection and disbursement accounts and consents that if an Event of
Default shall occur and so long as the same shall be continuing, all moneys held
in the said accounts and all moneys thereafter received by the Agent may be
applied as provided in Section 8.3 of the Agreement.
MARINE TRANSPORT OSWEGO CORPORATION
MANAGEMENT, INC.
By:_________________________ By:___________________________
Peter N. Popov Peter N. Popov
Secretary Secretary
OSWEGO CHEMICAL CARRIERS MARINE BARGE COMPANY
CORPORATION
By:_________________________ By:___________________________
Peter N. Popov Peter N. Popov
Secretary Secretary
MARINE CHEMICAL NAVIGATION MARINE NAVIGATION SULPHUR
CORPORATION CARRIERS, INC.
By:_________________________ By:___________________________
Peter N. Popov Peter N. Popov
Secretary Secretary
65
<PAGE> 74
MARINE SULPHUR SHIPPING MARINE ALASKA, INC.
CORPORATION
By:_________________________ By:_________________________
Peter N. Popov Peter N. Popov
Secretary Secretary
OMI CHALLENGER TRANSPORT, INC. OMI PETROLINK, CORP.
By:_________________________ By:_________________________
Peter N. Popov Peter N. Popov
Secretary Secretary
COURIER TRANSPORT, INC. INTREPID SHIP MANAGEMENT INC.
By:_________________________ By:_________________________
Peter N. Popov Peter N. Popov
Secretary Secretary
PATRIOT TRANSPORT, INC. ROVER TRANSPORT, INC.
By:_________________________ By:_________________________
Peter N. Popov Peter N. Popov
Secretary Secretary
HARLINK CORP. OMIP, INC.
By:_________________________ By:_________________________
Peter N. Popov Peter N. Popov
Secretary Secretary
66
<PAGE> 75
NUELINK CORP. OMI OFFSHORE MARINE SERVICES
INC.
By:_________________________ By:_________________________
Peter N. Popov Peter N. Popov
Secretary Secretary
MARINE TRANSPORT LINES, INC. MARINE CAR CARRIERS, INC. a
Delaware corporation
By:_________________________ By:_________________________
Peter N. Popov Peter N. Popov
Secretary Secretary
<PAGE> 1
Exhibit 10.17
THE CORPORATEplan for RETIREMENT(SM)
(PROFIT SHARING/401(K) PLAN)
A FIDELITY PROTOTYPE PLAN
Non-Standardized Adoption Agreement 002
Basic Plan No. 07
<PAGE> 2
ADOPTION AGREEMENT
ARTICLE 1
NON-STANDARDIZED PROFIT SHARING PLAN
1.01 PLAN INFORMATION
(a) Name of Plan:
This is the Marine Transport Lines, Inc. Salaried Employees
Retirement Income Plan (the "Plan").
(b) Type of Plan:
(1) |X| 401(k) and Profit Sharing
(2) |_| Profit Sharing Only
(3) |_| 401(k) Only
(c) Name of Plan Administrator, if not the Employer:
Name:
--------------------------------------------
Address:
----------------------------------------
Phone Number:
------------------------------------
The Plan Administrator is the agent for service of legal process for
the Plan.
(d) Limitation Year (check one):
(1) |X| Calendar Year
(2) |_| Plan Year
(3) |_| Other:
(e) Three Digit Plan Number: 001
(f) Plan Year End (month/day): December 31
(g) Plan Status (check one):
(1) |_| Effective Date of new Plan: ______________
(2) |X| Amendment Effective Date: 10/1/94 . This is (check one):
(A) |_| an amendment of The CORPORATEplan for Retirement(SM)
Adoption Agreement previously executed by the Employer;
or
(B) |X| conversion from another plan document into The
CORPORATEplan for Retirement(SM).
The original effective date of the Plan: 1/1/83
2
<PAGE> 3
The substantive provisions of the Plan shall apply prior
to the Effective Date to the extent required by the Tax
Reform Act of 1986 or other applicable laws.
1.02 EMPLOYER
(a) The Employer is: Marine Transport Lines, Inc.
Address: 1200 Harbor Boulevard
Weehawken, NJ 07087
Contact's Name: Mr. Peter N. Popov
Telephone Number: (201) 330-0200
(1) Employer's Tax Identification Number: 51-0115513
(2) Business form of Employer (check one):
(A) |X| Corporation
(B) |_| Sole proprietor or
(C) |_| Subchapter S
(D) |_| Governmental
(E) |_| Tax exempt partnership organization
(F) |_| Rural Electric Corporation Cooperative
(3) Employer's fiscal year end: 12/31
(4) Date business commenced: January 1, 1941
3
<PAGE> 4
(b) The term "Employer" includes the following Related Employer(s) (as
defined in Section 2.01(a)(26)):
1.03 COVERAGE
(a) All Employees who meet the conditions specified below will be
eligible to participate in the Plan:
(1) Service requirement (check one):
(A) |X| no service requirement.
(B) |_| three consecutive months of service (no minimum
number Hours of Service can be required).
(C) |_| six consecutive months of service (no minimum number
Hours of Service can be required).
(D) |_| one Year of Service (1,000 Hours of Service is
required during the Eligibility Computation Period.)
(2) Age requirement (check one):
(A) |X| no age requirement.
(B) |_| must have attained age ____ (not to exceed 21).
4
<PAGE> 5
(3) The class of Employees eligible to participate in the Plan
(check one):
(A) |X| includes all Employees of the Employer.
(B) |_| includes all Employees of the Employer except for
(check the appropriate box(es)):
(i) |_| Employees covered by a collective bargaining
agreement.
(ii) |_| Highly Compensated Employees as defined in
Code Section 414(q).
(iii) |_| Leased Employees as defined in Section
2.01(a)(18).
(iv) |_| Nonresident aliens who do not receive any
earned income from the Employer which constitutes
United States source income.
(v) |_| Other
Note: No exclusion in this section may create a discriminatory
class of employees. An Employer's Plan must still pass
the Internal Revenue Code coverage and participation
requirements if one or more of the above groups of
Employees have been excluded from the Plan.
(b) The Entry Date(s) shall be (check one):
(1) |_| the first day of each Plan Year (do not select if Section
1.03 (a)(1)(D) is elected or if there is an age requirement of
greater than 20 1/2 in Section 1.03(a)(2)(B)).
(2) |_| the first day of each Plan Year and the date six months
later.
(3) |_| the first day of each Plan Year and the first day of the
fourth, seventh, and tenth months.
(4) |X| the first day of each month.
5
<PAGE> 6
(c) Date of Initial Participation - An Employee will become a
Participant unless excluded by Section 1.03(a)(3) above on the Entry
Date immediately following the date the Employee completes the
service and age requirement(s) in Section 1.03(a), if any, except
(check one):
(1) |_| No exceptions.
(2) |X| Employees employed on the Effective Date in Section
1.01(g) will become Participants on that date.
(3) |_| Employees who meet the age and service requirement(s) of
Section 1.03(a) on the Effective Date in Section 1.01(g) will
become Participants on that date.
1.04 COMPENSATION
(a) For purposes of determining contributions under the Plan,
Compensation shall be as defined in Section 2.01(a)(7), but
excluding (check the appropriate box(es)):
(1) |_| Overtime Pay.
(2) |_| Bonuses.
(3) |_| Commissions.
(4) |_| The value of a qualified or a non-qualified stock option
granted to an Employee by the Employer to the extent such
value is includable in the Employee's taxable income.
Note: These exclusions shall not apply for purposes of the "Top
Heavy" requirements in Section 9.03 or for allocating
Discretionary Employer Contributions if an Integrated Formula
is elected in Section 1.05(a)(2).
(5) |X| No exclusions.
6
<PAGE> 7
(b) Compensation for the First Year of Participation
Contributions for the Plan Year in which an Employee first becomes a
Participant shall be determined based on the Employee's Compensation
(check one):
(1) |X| For the entire Plan Year.
(2) |_| For the portion of the Plan Year in which the Employee is
eligible to participate in the Plan.
1.05 CONTRIBUTIONS
(a) |X| Employer Contributions :
(1) |X| Fixed Formula - Nonintegrated Formula (check (A) or (B)):
(A) |X| Fixed Percentage Employer Contribution:
For each Plan Year, the Employer will contribute for
each eligible Participant an amount equal to 3% (not to
exceed 15%) of such Participant's Compensation.
(B) |_| Fixed Flat Dollar Employer Contribution:
For each Plan Year, the Employer will contribute for
each eligible Participant an amount equal to $ ____ .
(2) |X| Discretionary Formula
The Employer may decide each Plan Year whether to make a
discretionary Employer contribution on behalf of eligible
Participants in accordance with Section 4.06. Such
contributions shall be allocated to eligible Participants
based upon the following (check (A) or (B)):
(A) |X| Nonintegrated Allocation Formula: In the ratio that
each eligible Participant's Compensation bears to the
total Compensation paid to all eligible Participants for
the Plan Year.
(B) |_| Integrated Allocation Formula: In accordance with
Section 4.06.
Note: An Employer who maintains any other plan that provides
for Social Security Integration (permitted disparity)
may not elect (2)(B).
7
<PAGE> 8
(3) Eligibility Requirement(s)
A Participant shall be entitled to Employer Contributions for
a Plan Year under this Subsection (a) if the Participant
satisfies the following requirement(s) (Check the appropriate
box(es) - Options (B) and (C) may not be elected together):
(A) |X| is employed by the Employer on the last day of the
Plan Year.
(B) |_| earns at least 500 Hours of Service during the Plan
Year.
(C) |_| earns at least 1,000 Hours of Service during the
Plan Year.
(D) |_| no requirements.
Note: If option (A), (B) or (C) above is selected then
Employer contributions can only be funded by the
Employer after Plan Year end. Employer contributions
funded during the Plan Year shall not be subject to the
eligibility requirements of this Section 1.05(a)(3).
(b) |X| Deferral Contributions
(1) Regular Contributions
The Employer shall make a Deferral Contribution in accordance
with Section 4.01 on behalf of each Participant who has an
executed salary reduction agreement in effect with the
Employer for the payroll period in question, not to exceed 15%
(no more than 15%) of Compensation for that period.
(A) A Participant may increase or decrease, on a prospective
basis, his salary reduction agreement percentage (check
one):
(i) |_| As of the beginning of each payroll period.
(ii) |X| As of the first day of each month.
(iii) |_| As of the next Entry Date.
(iv) |_| (Specify, but must be at least once per Plan
Year)
(B) A Participant may revoke, on a prospective basis, a
salary reduction agreement at any time upon proper
notice to the Administrator but in such case may not
file a new salary reduction agreement until (check one):
(i) |_| The first day of the next Plan Year.
(ii) |_| Any subsequent Plan Entry Date.
(iii) |X| (Specify, but must be at least once per Plan
Year)
January 1 and July 1
8
<PAGE> 9
(2) |X| Catch-Up Contributions
The Employer may allow Participants upon proper notice and
approval to enter into a special salary reduction agreement to
make additional Deferral Contributions in an amount up to 100%
of their Compensation for the payroll period(s) in the final
month of the Plan Year.
(3) |X| Bonus Contributions
The Employer may allow Participants upon proper notice and
approval to enter into a special salary reduction agreement to
make Deferral Contributions in an amount up to 100% of any
Employer paid cash bonuses made for such Participants during
the Plan Year. The Compensation definition elected by the
Employer in Section 1.04(a) must include bonuses if bonus
contributions are permitted.
Note: A Participant's contributions under (2) and/or (3) may
not cause the Participant to exceed the percentage limit
specified by the Employer in (1) after the Plan Year.
The Employer has the right to restrict a Participant's
right to make Deferral Contributions if they will
adversely affect the Plan's ability to pass the actual
deferral percentage and/or the actual contribution
percentage test.
(4) |X| Qualified Discretionary Contributions
The Employer may contribute an amount which it designates as a
Qualified Discretionary Contribution to be included in the
actual deferral percentage or actual contribution percentage
test. Qualified Discretionary Contributions shall be allocated
to Non-highly Compensated Employees (check one):
(A) |X| in the ratio which each such Participant's
Compensation for the Plan Year bears to the total of all
such Participants' Compensation for the Plan Year.
(B) |_| as a flat dollar amount for each such Participant
for the Plan Year.
9
<PAGE> 10
(c) |X| Matching Contributions (only if Section 1.05(b) is checked) **
(1) The Employer shall make a Matching Contribution on behalf of
each Participant in an amount equal to the following
percentage of a Participant's Deferral Contributions during
the Plan Year (check one):
(A) |_| 50%
(B) |X| 100% **
(C) |_| %
(D) |_| (Tiered Match)
____ % of the first_________________% of the
Participant's Compensation contributed to the Plan,
____ % of the first_________________% of the
Participant's Compensation contributed to the Plan,
____ % of the first_________________% of the
Participant's Compensation contributed to the Plan.
Note: The percentages specified above for Matching
Contributions may not increase as the percentage of
Compensation contributed increases.
(E) |_| The percentage declared for the year, if any, by a
Board of Directors' Resolution (or by a Letter of Intent
for a Sole Proprietor or Partnership).
(2) |_| The Employer may at Plan Year end make an additional
Matching Contribution equal to a percentage declared by the
Employer, through a Board of Directors' Resolution (or by a
Letter of Intent for a Sole Proprietor or Partnership), of the
Deferral Contributions made by each Participant during the
Plan Year (only if an option is checked under Section
1.05(c)(1)).
(3) |X| Matching Contribution Limits (check the appropriate box):
(A) |X| Deferral Contributions in excess of 3% of the
Participant's Compensation for the ** period in question
shall not be considered for Matching Contributions.
Note: If the Employer elects a percentage limit in (A)
above and requests the Trustee to account
separately for matched and unmatched Deferral
Contributions, the Matching Contributions
allocated to each Participant must be computed,
and the percentage limit applied, based upon each
payroll period.
(B) |_| Matching Contributions for each Participant for each
Plan Year shall be limited to $_______________ .
(4) Eligibility Requirement(s)
A Participant who makes Deferral Contributions during the Plan
Year under Section 1.05(b) shall be entitled to Matching
Contributions for that Plan Year if the Participant satisfies
the following requirement(s) (Check the appropriate box(es).
Options (B) and (C) may not be elected together):
(A) |_| Is employed by the Employer on the last day of the
Plan Year.
(B) |_| Earns at least 500 Hours of Service during the Plan
Year.
** Effective January 1, 1999, signed by Peter N. Popov,
Secretary.
10
<PAGE> 11
(C) |_| Earns at least 1,000 Hours of Service during the
Plan Year.
(D) |_| Is not a Highly Compensated Employee for the Plan
Year.
(E) |_| Is not a Partner of the Employer, if the Employer is
a Partnership.
(F) |X| No requirements. **
Note: If option (A), (B) or (C) above is selected then
Matching Contributions can only be funded by the
Employer after the Plan Year ends. Any Matching
Contribution funded before Plan Year end shall not be
subject to the eligibility requirements of this Section
1.05(c)(4)). If option (A), (B), or (C) is adopted
during a Plan Year, such option shall not become
effective until the first day of the next Plan Year.
(d) |X| Employee After-Tax Contributions (check one):
(1) |X| Future Contributions
Participants may make voluntary non-deductible Employee
Contributions pursuant to Section 4.09 of the Plan. This
option may only be elected if the Employer has elected to
permit Deferral Contributions under Section 1.05(b). Matching
Contributions by the Employer are not allowed on any voluntary
non-deductible Employee Contributions. Withdrawals are limited
to one per year unless Employee Contributions were allowed
under a previous plan document which authorized more frequent
withdrawals.
(2) |_| Frozen Contributions
Participants may not make voluntary non-deductible Employee
Contributions, but the Employer does maintain frozen
Participant voluntary non-deductible Employee Contribution
Accounts.
** Effective January 1, 1999, signed by Peter N. Popv,
Secretary.
11
<PAGE> 12
1.06 RETIREMENT AGE(S)
(a) The Normal Retirement Age under the Plan is (check one):
(1) |X| age 65.
(2) |_| age _____ (specify between 55 and 64).
(3) |_| later of the age _____ (can not exceed 65) or the fifth
anniversary of the Participant's Employment Commencement Date.
(b) |X| The Early Retirement Age is the first day of the month after the
Participant attains age 55 (specify 55 or greater) and completes 0
Years of Service for Vesting.
(c) |_| A Participant is eligible for Disability Retirement if he/she
(check the appropriate box(es)):
(1) |_| satisfies the requirements for benefits under the
Employer's Long-Term Disability Plan.
(2) |_| satisfies the requirements for Social Security disability
benefits.
(3) |_| is determined to be disabled by a physician approved by
the Employer.
12
<PAGE> 13
1.07 VESTING SCHEDULE
(a) The Participant's vested percentage in Employer contributions (Fixed
or Discretionary) elected in Section 1.05(a) and/or Matching
Contributions elected in Section 1.05(c) shall be based upon the
schedule(s) selected below, except with respect to any Plan Year
during which the Plan is Top-Heavy. The schedule elected in Section
1.12(d) shall automatically apply for a Top-Heavy Plan Year and all
Plan Years thereafter unless the Employer has already elected a more
favorable vesting schedule below.
(1) Employer Contributions
(check one):
(A) |_| N/A - No Employer Contributions
(B) |X| 100% Vesting immediately
(C) |_| 3 year cliff (see C below)
(D) |_| 5 year cliff (see D below)
(E) |_| 6 year graduated (see E below)
(F) |_| 7 year graduated (see F below)
(G) |_| Other vesting (complete G1 below)
(2) Matching Contributions
(check one):
(A) |_| N/A - No Matching Contributions
(B) |X| 100% Vesting immediately **
(C) |_| 3 year cliff (see C below)
(D) |_| 5 year cliff (see D below)
(E) |_| 6 year graduated (see E below)
(F) |_| 7 year graduated (see E below)
(G) |_| Other vesting (complete G2 below)
<TABLE>
<CAPTION>
Years of Vesting Schedule
Service for
Vesting C D E F G1 G2
------- - - - - -- --
<S> <C> <C> <C> <C> <C> <C>
0 0% 0% 0% 0% ___% ___%
1 0% 0% 0% 0% ___% ___%
2 0% 0% 20% 0% ___% ___%
3 100% 0% 40% 20% ___% ___%
4 100% 0% 60% 40% ___% ___%
5 100% 100% 80% 60% ___% ___%
6 100% 100% 100% 80% ___% ___%
7 100% 100% 100% 100% 100% 100%
</TABLE>
Note: A schedule elected under G1 or G2 above must be at least as favorable as
one of the schedules in C, D, E or F above.
(b) |_| Years of Service for Vesting shall exclude:
(1) |_| for new plans, service prior to the Effective Date as
defined in Section 1.01(g)(1).
(2) |_| for existing plans converting from another plan document,
service prior to the original Effective Date as defined in
Section 1.01(g)(2).
** Effective January 1, 1999, signed by Peter N. Popov,
Secretary.
13
<PAGE> 14
1.08 PREDECESSOR EMPLOYER SERVICE
|_| Service for purposes of eligibility in Section 1.03(a)(1) and
vesting in Section 1.07(a) of this Plan shall include service with
the following employer(s):
1.09 PARTICIPANT LOANS
Participant loans (check (a) or (b)):
(a) |_| will be allowed in accordance with Section 7.09, subject to a
$1,000 minimum amount and will be granted (check (1) or (2)):
(1) |_| for any purpose.
(2) |_| for hardship withdrawal (as defined in Section 7.10)
purposes only.
(b) |X| will not be allowed.
1.10 HARDSHIP WITHDRAWALS
Participant withdrawals for hardship prior to termination of employment
(check one):
(a) |X| will be allowed in accordance with Section 7.10, subject to a
$1,000 minimum amount.
(b) |_| will not be allowed.
14
<PAGE> 15
1.11 DISTRIBUTIONS
(a) Subject to Articles 7 and 8 and (b) below, distributions under the
Plan will be paid (check the appropriate box(es)):
(1) |X| as a lump sum.
(2) |X| under a systematic withdrawal plan (installments).
(b) |X| Check if a Participant will be entitled to receive a
distribution of all or any portion of the following Accounts without
terminating employment upon attainment of age 59 1/2 (check one):
(1) |X| Deferral Contribution Account
(2) |_| All Accounts
(c) |X| Check if the Plan was converted (by plan amendment) from another
defined contribution plan, and the benefits were payable as (check
the appropriate box(es)):
(1) |X| a form of single or joint and survivor life annuity.
(2) |_| an in-service withdrawal of vested Employer Contributions
maintained in a Participant's Account (check (A) and/or (B)):
(A) |_| for at least ______ (24 or more) months.
(B) |_| after the Participant has at least 60 months of
participation.
(3) |X| another distribution option that is a "protected benefit"
under Section 411(d)(6) of the Internal Revenue Code. Please
attach a separate page identifying the distribution option(s).
These additional forms of benefit may be provided for such plans
under Articles 7 or 8.
Note: Under Federal Law, distributions to Participants must
generally begin no later than April 1 following the year in
which the Participant attains age 70 1/2.
15
<PAGE> 16
1.12 TOP HEAVY STATUS
(a) The Plan shall be subject to the Top-Heavy Plan requirements of
Article 9 (check one):
(1) |_| for each Plan Year.
(2) |X| for each Plan Year, if any, for which the Plan is
Top-Heavy as defined in Section 9.02.
(3) |_| Not applicable. (This option is available for plans
covering only employees subject to a collective bargaining
agreement and there are no Employer or Matching Contributions
elected in Section 1.05.)
(b) In determining Top-Heavy status, if necessary, for an employer with
at least one defined benefit plan, the following assumptions shall
apply:
(1) Interest rate: ________% per annum
(2) Mortality table: _______________
(3) |X| Not Applicable.
(c) In the event that the Plan is treated as Top-Heavy for a Plan Year,
each non-key Employee shall receive an Employer Contribution of at
least 3 (3, 4, 5, or 7 1/2) % of Compensation for the Plan Year in
accordance with Section 9.03 (check one):
(1) |X| under this Plan in any event.
(2) |_| under this Plan only if the Participant is not entitled to
such contribution under another qualified plan of the
Employer.
(3) |_| Not applicable. (This option is available for plans
covering only employees subject to a collective bargaining
agreement and there are no Employer or Matching Contributions
elected in Section 1.05.)
Note: Such minimum Employer contribution may be less than the
percentage indicated in (c) above to the extent provided
in Section 9.03(a).
16
<PAGE> 17
(d) In the event that the Plan is treated as Top-Heavy for a Plan Year,
the following vesting schedule shall apply instead of the
schedule(s) elected in Section 1.07(a) for such Plan Year and each
Plan Year thereafter (check one):
(1) |X| 100% vested after 1 (not in excess of 3) years of service
for vesting.
(2) |_| Years of Service
for Vesting Vesting Percentage Must be at Least
0 ______________ 0%
1 ______________ 0%
2 ______________ 20%
3 ______________ 40%
4 ______________ 60%
5 ______________ 80%
6 ______________ 100%
Note: If the schedule(s) elected in Section 1.07(a) is(are) more
favorable in all cases than the schedule elected in (d) above,
then the schedule(s) in Section 1.07(a) will continue to apply
even in Plan Years in which the Plan is Top-Heavy.
1.13 TWO OR MORE PLANS - Code Section 415 limitation on annual additions
If the Employer maintains or ever maintained another qualified plan in
which any Participant in this Plan is (or was) a participant or could
become a participant, the Employer must complete this section. The
Employer must also complete this section if it maintains a welfare benefit
fund, as defined in Section 419(e) of the Code, or an individual medical
account, as defined in Section 415(l)(2) of the Code, under which amounts
are treated as annual additions with respect to any Participant in this
Plan.
(a) If the Employer maintains, or maintained, any other defined
contribution plan which is not a Master or Prototype Plan, Annual
Additions for any Limitation Year to this Plan will be limited
(check one):
(1) |X| in accordance with Section 5.03 of this Plan.
(2) |_| in accordance with another method set forth on an attached
separate sheet.
(3) |_| Not Applicable.
17
<PAGE> 18
(b) If the Employer maintains, or maintained, any defined benefit plan(s), the
sum of the Defined Contribution Fraction and Defined Benefit Fraction for
a Limitation Year may not exceed the limitation specified in Code Section
415(e), modified by section 416(h)(1) of the Code. This combined plan
limit will be met as follows (check one):
(1) |_| Annual Additions to this Plan are limited so that the sum
of the Defined Contribution Fraction and the Defined Benefit
Fraction does not exceed 1.0.
(2) |_| another method of limiting Annual Additions or reducing
projected annual benefits is set forth on an attached
schedule.
(3) |X| Not Applicable.
1.14 ESTABLISHMENT OF TRUST AND INVESTMENT DECISIONS
(a) Investment Directions
Participant Accounts will be invested (check one):
(1) |_| in accordance with investment directions provided to the
Trustee by the Employer for allocating all Participant
Accounts among the options listed in (b) below.
(2) |X| in accordance with investment directions provided to the
Trustee by each Participant for allocating his entire Account
among the options listed in (b) below.
(3) |_| in accordance with investment directions provided to the
Trustee by each Participant for all contribution sources in a
Participant's Account except the following sources shall be
invested as directed by the Employer (check (A) and/or (B)):
(A) |_| Fixed or Discretionary Employer Contributions
(B) |_| Employer Matching Contributions
The Employer must direct the applicable sources among the same
investment options made available for Participant directed
sources listed in (b) below.
18
<PAGE> 19
(b) Plan Investment Options
The Employer hereby establishes a Trust under the Plan in accordance
with the provisions of Article 14, and the Trustee signifies
acceptance of its duties under Article 14 by its signature below.
Participant Accounts under the Trust will be invested among the
Fidelity Funds listed below pursuant to Participant and/or Employer
directions.
Fund Name Fund Number
1 Fidelity Retirement Government Money
Market Portfolio 0631
2 Fidelity Managed Income Portfolio 0632
3 Fidelity Investment Grade Bond Fund 0026
4 Fidelity International Bond Fund 0451
5 Fidelity Growth & Income Portfolio 0027
6 Fidelity Magellan(R)Fund 0021
7 Fidelity Growth Company Fund 0025
8 Fidelity Overseas Fund 0094
9 Fidelity Puritan(R)Fund 0004
10 Fidelity Contrafund 0022
11 Fidelity Low-Priced Stock Fund 0316
12 Spartan(R)U.S. Equity Index Fund 0650
Note: An additional annual recordkeeping fee will be charged for
each fund in excess of seven funds.
To the extent that the Employer selects as an investment
option the Managed Income Portfolio of the Fidelity Group
Trust for Employee Benefit Plans (the "Group Trust"), the
Employer hereby (A) agrees to the terms of the Group Trust and
adopts said terms as a part of this Agreement and (B)
acknowledges that it has received from the Trustee a copy of
the Group Trust, the Declaration of Separate Fund for the
Managed Income Portfolio of the Group Trust, and the Circular
for the Managed Income Portfolio.
Note: The method and frequency for change of investments will be
determined under the rules applicable to the selected funds
or, if applicable, the rules of the Employer adopted in
accordance with Section 6.03. Information will be provided
regarding expenses, if any, for changes in investment options.
19
<PAGE> 20
1.15 RELIANCE ON OPINION LETTER
An adopting Employer may not rely on the opinion letter issued by the
National Office of the Internal Revenue Service as evidence that this Plan
is qualified under Section 401 of the Code. If the Employer wishes to
obtain reliance that his or her Plan(s) are qualified, application for a
determination letter should be made to the appropriate Key District
Director of the Internal Revenue Service. Failure to fill out the Adoption
Agreement properly may result in disqualification of the Plan.
This Adoption Agreement may be used only in conjunction with Fidelity
Prototype Plan Basic Plan Document No. 07. The Prototype Sponsor shall
inform the adopting Employer of any amendments made to the Plan or of the
discontinuance or abandonment of the prototype plan document.
1.16 PROTOTYPE INFORMATION:
Name of Prototype Sponsor: Fidelity Management & Research Co.
Address of Prototype Sponsor: 82 Devonshire Street
Boston, MA 02109
Questions regarding this prototype document may be directed to the
following telephone number: 1-(800) 343-9184.
20
<PAGE> 21
EXECUTION PAGE
(Fidelity's Copy)
IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement to be
executed this 24th day of June, 1994.
Employer Marine Transport Lines, Inc.
-----------------------------------
By Signed by Peter N. Popov
-----------------------------------
Title Secretary
-----------------------------------
Employer Marine Transport Lines, Inc.
-----------------------------------
By Signed by Paul B. Gridley
-----------------------------------
Title President
-----------------------------------
Accepted by
Fidelity Management Trust Company, as Trustee
By Signed by Gary L. Yerke Date July 22, 1994
---------------------------------- -----------------------------
Title Legal Counsel/Authorized Signatory
----------------------------------
21
<PAGE> 22
EXECUTION PAGE
(Employer's Copy)
IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement to be
executed this 24th day of June, 1994.
Employer Marine Transport Lines, Inc.
-----------------------------------
By Signed by Peter N. Popov
-----------------------------------
Title Secretary
-----------------------------------
Employer Marine Transport Lines, Inc.
-----------------------------------
By Signed by Paul B. Gridley
-----------------------------------
Title President
-----------------------------------
Accepted by
Fidelity Management Trust Company, as Trustee
By Signed by Gary L. Yerke Date June 21, 1994
---------------------------------- -----------------------------
Title Legal Counsel/Authorized Signatory
----------------------------------
22
<PAGE> 23
Exhibit 10.17
The CORPORATEplan for Retirement
THE PROFIT SHARING/401(K) PLAN
FIDELITY BASIC PLAN DOCUMENT NO. 07
<PAGE> 24
THE CORPORATE PLAN FOR RETIREMENT
PROFIT SHARING/401(K) PLAN
ARTICLE 1
ADOPTION AGREEMENT
ARTICLE 2
DEFINITIONS
2.01 - Definitions
ARTICLE 3
PARTICIPATION
3.01 - Date of Participation
3.02 - Resumption of Participation Following Reemployment
3.03 - Cessation or Resumption of Participation Following a Change in Status
3.04 - Participation by Owner-Employee; Controlled Businesses
3.05 - Omission of Eligible Employee
ARTICLE 4
CONTRIBUTIONS
4.01 - Deferral Contributions
4.02 - Additional Limit on Deferral Contributions
4.03 - Matching Contributions
4.04 - Limit on Matching Contributions and Employee Contributions
4.05 - Special Rules
4.06 - Fixed/Discretionary Employer Contributions
4.07 - Time of Making Employer Contributions
4.08 - Return of Employer Contributions
4.09 - Employee Contributions
4.10 - Rollover Contributions
4.11 - Deductible Voluntary Employee Contributions
4.12 - Additional Rules for Paired Plans
ARTICLE 5
PARTICIPANTS' ACCOUNTS
5.01 - Individual Accounts
5.02 - Valuation of Accounts
5.03 - Code Section 415 Limitations
ARTICLE 6
INVESTMENT OF CONTRIBUTIONS
6.01 - Manner of Investment
6.02 - Investment Decisions
6.03 - Participant Directions to Trustee
2
<PAGE> 25
ARTICLE 7
RIGHT TO BENEFITS
7.01 - Normal or Early Retirement
7.02 - Late Retirement
7.03 - Disability Retirement
7.04 - Death
7.05 - Other Termination of Employment
7.06 - Separate Account
7.07 - Forfeitures
7.08 - Adjustment for Investment Experience
7.09 - Participant Loans
7.10 - In-Service Withdrawals
7.11 - Prior Plan In-Service Distribution Rules
ARTICLE 8
DISTRIBUTION OF BENEFITS PAYABLE AFTER TERMINATION OF SERVICE
8.01 - Distribution of Benefits to Participants and Beneficiaries
8.02 - Annuity Distributions
8.03 - Joint and Survivor Annuities/Preretirement Survivor Annuities
8.04 - Installment Distributions
8.05 - Immediate Distributions
8.06 - Determination of Method of Distribution
8.07 - Notice to Trustee
8.08 - Time of Distribution
8.09 - Whereabouts of Participants and Beneficiaries
ARTICLE 9
TOP-HEAVY PROVISIONS
9.01 - Application
9.02 - Definitions
9.03 - Minimum Contribution
9.04 - Adjustment to the Limitation on Contributions and Benefits
9.05 - Minimum Vesting
ARTICLE 10
AMENDMENT AND TERMINATION
10.01 - Amendment by Employer
10.02 - Amendment by Prototype Sponsor
10.03 - Amendments Affecting Vested and/or Accrued Benefits
10.04 - Retroactive Amendments
10.05 - Termination
10.06 - Distribution Upon Termination of the Plan
10.07 - Merger or Consolidation of Plan; Transfer of Plan Assets
ARTICLE 11
AMENDMENT AND CONTINUATION OF PREDECESSOR PLAN; TRANSFER OF FUNDS
TO OR FROM OTHER QUALIFIED PLANS
11.01 - Amendment and Continuation of Predecessor Plan
11.02 - Transfer of Funds from an Existing Plan
11.03 - Acceptance of Assets by Trustee
3
<PAGE> 26
11.04 - Transfer of Assets from Trust
ARTICLE 12
MISCELLANEOUS
12.01 - Communication to Participants
12.02 - Limitation of Rights
12.03 - Nonalienability of Benefits and Qualified Domestic Relations Orders
12.04 - Facility of Payment
12.05 - Information Between Employer and Trustee
12.06 - Effect of Failure to Qualify Under Code
12.07 - Notices
12.08 - Governing Law
ARTICLE 13
PLAN ADMINISTRATION
13.01 - Powers and Responsibilities of the Administrator
13.02 - Nondiscriminatory Exercise of Authority
13.03 - Claims and Review Procedures
13.04 - Named Fiduciary
13.05 - Costs of Administration
ARTICLE 14
TRUST AGREEMENT
14.01 - Acceptance of Trust Responsibilities
14.02 - Establishment of Trust Fund
14.03 - Exclusive Benefit
14.04 - Powers of Trustee
14.05 - Accounts
14.06 - Approving of Accounts
14.07 - Distribution from Trust Fund
14.08 - Transfer of Amounts from Qualified Plan
14.09 - Transfer of Assets from Trust
14.10 - Separate Trust or Fund for Existing Plan Assets
14.11 - Voting; Delivery of Information
14.12 - Compensation and Expenses of Trustee
14.13 - Reliance by Trustee on other Persons
14.14 - Indemnification by Employer
14.15 - Consultation by Trustee with Counsel
14.16 - Persons Dealing with the Trustee
14.17 - Resignation or Removal of Trustee
14.18 - Fiscal Year of the Trust
14.19 - Discharge of Duties by Fiduciaries
14.20 - Amendment
14.21 - Plan Termination
14.22 - Permitted Reversion of Funds to Employer
14.23 - Governing Law
4
<PAGE> 27
Article 1. Adoption Agreement.
Article 2. Definitions.
2.01. Definitions.
(a) Wherever used herein, the following terms have the meanings set forth
below, unless a different meaning is clearly required by the context:
(1) "Account" means an account established on the books of the Trust
for the purpose of recording contributions made on behalf of a
Participant and any income, expenses, gains or losses incurred
thereon.
(2) "Administrator" means the Employer adopting this Plan, or other
person designated by the Employer in Section 1.01(c).
(3) "Adoption Agreement" means Article 1, under which the Employer
establishes and adopts, or amends, the Plan and Trust and designates
the optional provisions selected by the Employer, and the Trustee
accepts its responsibilities under Article 14. The provisions of the
Adoption Agreement shall be an integral part of the Plan.
(4) "Annuity Starting Date" means the first day of the first period
for which an amount is payable as an annuity or in any other form.
(5) "Beneficiary" means the person or persons entitled under Section
7.04 to receive benefits under the Plan upon the death of a
Participant, provided that for purposes of Section 7.04 such term
shall be applied in accordance with Section 401(a)(9) of the Code
and the regulations thereunder.
(6) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(7) "Compensation" shall mean
(A) for purposes of Article 4 (Contributions), compensation as
defined in Section 5.03(e)(2) excluding any items elected by
the Employer in Section 1.04(a), reimbursements or other
expense allowances, fringe benefits (cash and non-cash),
moving expenses, deferred compensation and welfare benefits,
but including amounts that are not includable in the gross
income of the Participant under a salary reduction agreement
by reason of the application of Sections 125, 402(a)(8),
402(h), or 403(b) of the Code; and
(B) for purposes of Section 2.01(a)(16) (Highly Compensated
Employees), Section 5.03 (Code Section 415 Limitations), and
Section 9.03 (Top-Heavy Plan Minimum Contribution),
compensation as defined in Section 5.03(e)(2).
<PAGE> 28
Compensation shall generally be based on the amount actually
paid to the Participant during the Plan Year or, for purposes of
Article 4 if so elected by the Employer in Section 1.04(b), during
that portion of the Plan Year during which the Employee is eligible
to participate. Notwithstanding the preceding sentence, compensation
for purposes of Section 5.03 (Code Section 415 Limitations) shall be
based on the amount actually paid or made available to the
Participant during the Limitation Year. Compensation for the initial
Plan Year for a new plan shall be based upon eligible Participant
Compensation, subject to Section 1.04(b), from the Effective Date
listed in Section 1.01(g)(1) through the end of the first Plan Year.
In the case of any Self-Employed Individual, Compensation
shall mean the Individual's Earned Income.
For years beginning after December 31, 1988, the annual
Compensation of each Participant taken into account for determining
all benefits provided under the plan for any determination period
shall not exceed $200,000. This limitation shall be adjusted by the
Secretary at the same time and in the same manner as under Section
415(d) of the Code, except that the dollar increase in effect on
January 1 of any calendar year is effective for years beginning in
such calendar year and the first adjustment to the $200,000
limitation is effected on January 1, 1990. If a plan determines
Compensation on a period of time that contains fewer than 12
calendar months, then the annual Compensation limit is the amount
equal to the annual Compensation limit for the calendar year in
which the Compensation period begins multiplied by the ratio
obtained by dividing the number of full months in the period by 12.
If Compensation for any prior determination period is taken
into account in determining an Employee's allocations or benefits
for the current determination period, the Compensation for such
prior year is subject to the applicable annual compensation limit in
effect for that prior year. For this purpose, for years beginning
before January 1, 1990, the applicable annual compensation limit is
$200,000.
In determining the Compensation of a Participant for purposes
of this limitation, the rules of Section 414(q)(6) of the Code shall
apply, except that in applying such rules, the term "family" shall
include only the spouse of the Participant and any lineal
descendants of the Participant who have not attained age 19 before
the close of the year. If the $200,000 limitation is exceeded as a
result of the application of these rules, then the limitation shall
be prorated among the affected individuals in proportion to each
such individual's Compensation as determined under this Section
prior to the application of this limitation.
2
<PAGE> 29
(8) "Earned Income" means the net earnings of a Self-Employed
Individual derived from the trade or business with respect to which
the Plan is established and for which the personal services of such
individual are a material income-providing factor, excluding any
items not included in gross income and the deductions allocated to
such items, except that for taxable years beginning after December
31, 1989 net earnings shall be determined with regard to the
deduction allowed under Section 164(f) of the Code, to the extent
applicable to the Employer. Net earnings shall be reduced by
contributions of the Employer to any qualified plan, to the extent a
deduction is allowed to the Employer for such contributions under
Section 404 of the Code.
(9) "Eligibility Computation Period" means each 12-consecutive month
period beginning with the Employment Commencement Date and each
anniversary thereof or, in the case of an Employee who, before
completing the eligibility requirements set forth in Section
1.03(a)(1), incurs a break in service for participation purposes and
thereafter returns to the employ of the Employer or Related
Employer, each 12-consecutive month period beginning with the first
day of reemployment and each anniversary thereof.
A "break in service for participation purposes" shall mean an
Eligibility Computation Period during which the participant does not
complete more than 500 Hours of Service with the Employer.
(10) "Employee" means any employee of the Employer, any
Self-Employed Individual or Owner-Employee. The Employer must
specify in Section 1.03(a)(3) any Employee or class of Employees not
eligible to participate in the Plan. If the Employer elects to
exclude collective bargaining employees, the exclusion applies to
any employee of the Employer included in a unit of employees covered
by an agreement which the Secretary of Labor finds to be a
collective bargaining agreement between employee representatives and
one or more employers unless the collective bargaining agreement
requires the employee to be included within the Plan. The term
"employee representatives" does not include any organization more
than half the members of which are owners, officers, or executives
of the Employer.
For purposes of the Plan, an individual shall be considered to
become an Employee on the date on which he first completes an Hour
of Service and he shall be considered to have ceased to be an
Employee on the date on which he last completes an Hour of Service.
The term also includes a Leased Employee, such that contributions or
benefits provided by the leasing organization which are attributable
to services performed for the Employer shall be treated as provided
by the Employer. Notwithstanding the above, a Leased Employee shall
not be considered an Employee if Leased Employees do not constitute
more than 20 percent of the Employer's non-highly compensated
work-force (taking into account all Related Employers) and the
Leased Employee is covered by a money purchase pension plan
maintained by the
3
<PAGE> 30
leasing organization and providing (A) a nonintegrated employer
contribution rate of at least 10 percent of compensation, as defined
for purposes of Section 415(c)(3) of the Code, but including amounts
contributed pursuant to a salary reduction agreement which are
excludable from gross income under Section 125, Section 402(a)(8),
Section 402(h) or Section 403(b) of the Code, (B) full and immediate
vesting, and (C) immediate participation by each employee of the
leasing organization.
(11) "Employer" means the employer named in Section 1.02(a) and any
Related Employers required by this Section 2.01(a)(11). If Article 1
of the Employer's Plan is the Standardized Adoption Agreement, the
term "Employer" includes all Related Employers. If Article 1 of the
Employer's Plan is the Non-standardized Adoption Agreement, the term
"Employer" includes those Related Employers designated in Section
1.02(b).
(12) "Employment Commencement Date" means the date on which the
Employee first performs an Hour of Service.
(13) "ERISA" means the Employee Retirement Income Security Act of
1974, as from time to time amended.
(14) "Fidelity Fund" means any Registered Investment Company or
Managed Income Portfolio of the Fidelity Group Trust for Employee
Benefit Plans which is made available to plans utilizing the
CORPORATEplan for Retirement.
(15) "Fund Share" means the share, unit, or other evidence of
ownership in a Fidelity Fund.
(16) "Highly Compensated Employee" means both highly compensated
active Employees and highly compensated former Employees.
A highly compensated active Employee includes any Employee who
performs service for the Employer during the determination year and
who, during the "look-back year," (A) received compensation from the
Employer in excess of $75,000 (as adjusted pursuant to Section
415(d) of the Code), (B) received compensation from the Employer in
excess of $50,000 (as adjusted pursuant to Section 415(d) of the
Code) and was a member of the top-paid group for such year, or (C)
was an officer of the Employer and received compensation during such
year that is greater than 50 percent of the dollar limitation in
effect under Section 415(b)(1)(A) of the Code. The term "Highly
Compensated Employee" also includes (i) Employees who are both
described in the preceding sentence if the term "determination year"
is substituted for the term "look-back year" and the Employee is one
of the 100 Employees who received the most compensation from the
Employer during the determination year, and (ii) Employees who are
5-percent owners at any time during the look-back year or
determination year.
4
<PAGE> 31
If no officer has satisfied the compensation requirement of
(C) above during either a determination year or look-back year, the
highest paid officer for such year shall be treated as a highly
compensated Employee.
For this purpose, the determination year shall be the Plan
Year. The look-back year shall be the twelve-month period
immediately preceding the determination year. The Employer may elect
to make the look-back year calculation for a determination on the
basis of the calendar year ending with or within the applicable
determination year, as prescribed by Section 414(q) of the Code and
the regulations issued thereunder.
A highly compensated former Employee includes any Employee who
separated from service (or was deemed to have separated) prior to
the determination year, performs no service for the Employer during
the determination year, and was a highly compensated active Employee
for either the separation year or any determination year ending on
or after the Employee's 55th birthday.
If an Employee is, during a determination year or look-back
year, a family member of either a 5-percent owner who is an active
or former Employee or a highly compensated Employee who is one of
the 10 most highly compensated Employees ranked on the basis of
compensation paid by the Employer during such year, then the family
member and the 5-percent owner or top-ten highly compensated
Employee shall be aggregated. In such case, the family member and
5-percent owner or top-ten highly compensated Employee shall be
treated as a single Employee receiving compensation and plan
contributions or benefits equal to the sum of such compensation and
contributions or benefits of the family member and 5-percent owner
or top-ten highly compensated Employee. For purposes of this
Section, family member includes the spouse, lineal ascendants and
descendants of the Employee or former Employee and the spouses of
such lineal ascendants and descendants.
The determination of who is a highly compensated Employee,
including the determinations of the number and identity of Employees
in the top-paid group, the top 100 Employees, the number of
Employees treated as officers, and the compensation that is
considered, will be made in accordance with Section 414(q) of the
Code and the regulations thereunder.
(17) "Hour of Service" means, with respect to any Employee,
(A) Each hour for which the Employee is directly or indirectly
paid, or entitled to payment, for the performance of duties
for the Employer or a Related Employer, each such hour to be
credited to the Employee for the Eligibility Computation
Period in which the duties were performed;
5
<PAGE> 32
(B) Each hour for which the Employee is directly or indirectly
paid, or entitled to payment, by the Employer or Related
Employer (including payments made or due from a trust fund or
insurer to which the Employer contributes or pays premiums) on
account of a period of time during which no duties are
performed (irrespective of whether the employment relationship
has terminated) due to vacation, holiday, illness, incapacity,
disability, layoff, jury duty, military duty, or leave of
absence, each such hour to be credited to the Employee for the
Eligibility Computation Period in which such period of time
occurs, subject to the following rules:
(i) No more than 501 Hours of Service shall be credited
under this paragraph (B) on account of any single
contin-uous period during which the Employee performs no
duties;
(ii) Hours of Service shall not be credited under this
paragraph (B) for a payment which solely reimburses the
Employee for medically-related expenses, or which is
made or due under a plan maintained solely for the
purpose of complying with applicable workmen's
compensation, unemployment compensation or disability
insurance laws; and
(iii) If the period during which the Employee performs
no duties falls within two or more Eligibility
Computation Periods and if the payment made on account
of such period is not calculated on the basis of units
of time, the Hours of Service credited with respect to
such period shall be allocated between not more than the
first two such Eligibility Computation Periods on any
reasonable basis consistently applied with respect to
similarly situated Employees; and
(C) Each hour not counted under paragraph (A) or (B) for which
back pay, irrespective of mitigation of damages, has been
either awarded or agreed to be paid by the Employer or a
Related Employer, shall be credited to the Employee for the
Eligibility Computation Period to which the award or agreement
pertains rather than the Eligibility Computation Period in
which the award agreement or payment is made.
For purposes of determining Hours of Service, Employees
of the Employer and of all Related Employers will be treated
as employed by a single employer. For purposes of paragraphs
(B) and (C) above, Hours of Service will be calculated in
accordance with the provisions of Section 2530.200b-2(b) of
the Department of Labor regulations, which are incorporated
herein by reference.
Solely for purposes of determining whether a break in
service for participation purposes has occurred in a
computation period, an individual who is absent from work for
maternity or paternity reasons shall receive credit for
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<PAGE> 33
the hours of service which would otherwise have been credited
to such individual but for such absence, or in any case in
which such hours cannot be determined, 8 hours of service per
day of such absence. For purposes of this paragraph, an
absence from work for maternity or paternity reasons means an
absence (i) by reason of the pregnancy of the individual, (ii)
by reason of a birth of a child of the individual, (iii) by
reason of the placement of a child with the individual in
connection with the adoption of such child by such individual,
or (iv) for purposes of caring for such child for a period
beginning immediately following such birth or placement. The
hours of service credited under this paragraph shall be
credited (a) in the computation period in which the absence
begins if the crediting is necessary to prevent a break in
service in that period, or (b) in all other cases, in the
following computation period.
(18) "Leased Employee" means any individual who provides services to
the Employer or a Related Employer (the "recipient") but is not
otherwise an employee of the recipient if (A) such services are
provided pursuant to an agreement between the recipient and any
other person (the "leasing organization"), (B) such individual has
performed services for the recipient (or for the recipient and any
related persons within the meaning of Section 414(n)(6) of the Code)
on a substantially full-time basis for at least one year, and (C)
such services are of a type historically performed by employees in
the business field of the recipient.
(19) "Normal Retirement Age" means the normal retirement age
specified in Section 1.06(a) of the Adoption Agreement. If the
Employer enforces a mandatory retirement age, the Normal Retirement
Age is the lesser of that mandatory age or the age specified in
Section 1.06(a).
(20) "Owner-Employee" means, if the Employer is a sole
proprietorship, the individual who is the sole proprietor, or if the
Employer is a partnership, a partner who owns more than 10 percent
of either the capital interest or the profits interest of the
partnership.
(21) "Participant" means any Employee who participates in the Plan
in accordance with Article 3 hereof.
(22) "Plan" means the plan established by the Employer in the form
of the prototype plan, as set forth herein as a new plan or as an
amendment to an existing plan, by executing the Adoption Agreement,
together with any and all amendments hereto.
(23) "Plan Year" means the 12-consecutive-month period ending on the
date designated by the Employer in Section 1.01(f).
(24) "Prototype Sponsor" means Fidelity Management and Research
Company or its successor.
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<PAGE> 34
(25) "Registered Investment Company" means any one or more
corporations, partnerships or trusts registered under the Investment
Company Act of 1940 for which Fidelity Management and Research
Company serves as investment advisor.
(26) "Related Employer" means any employer other than the Employer
named in Section 1.02(a) if the Employer and such other employer are
members of a controlled group of corporations (as defined in Section
414(b) of the Code) or an affiliated service group (as defined in
Section 414(m)), or are trades or businesses (whether or not
incorporated) which are under common control (as defined in Section
414(c)), or such other employer is required to be aggregated with
the Employer pursuant to regulations issued under Section 414(o).
(27) "Self-Employed Individual" means an individual who has Earned
Income for the taxable year from the Employer or who would have had
Earned Income but for the fact that the trade or business had no net
profits for the taxable year.
(28) "Trust" means the trust created by the Employer in accordance
with the provisions of Section 14.01.
(29) "Trust Agreement" means the agreement between the Employer and
the Trustee, as set forth in Article 14, under which the assets of
the Plan are held, administered, and managed.
(30) "Trust Fund" means the property held in Trust by the Trustee
for the Accounts of the Participants and their Beneficiaries.
(31) "Trustee" means the Fidelity Management Trust Company, or its
successor.
(32) "Year of Service for Participation" means, with respect to any
Employee, an Eligibility Computation Period during which the
Employee has been credited with at least 1,000 Hours of Service. If
the Plan maintained by the Employer is the plan of a predecessor
employer, an Employee's Years of Service for Participation shall
include years of service with such predecessor employer. In any case
in which the Plan maintained by the Employer is not the plan
maintained by a predecessor employer, service for such predecessor
shall be treated as service for the Employer, to the extent provided
in Section 1.08.
(33) "Years of Service for Vesting" means, with respect to any
Employee, the number of whole years of his periods of service with
the Employer or a Related Employer (the elapsed time method to
compute vesting service), subject to any exclusions elected by the
Employer in Section 1.07(b). An Employee will receive credit for the
aggregate of all time period(s) commencing with the Employee's
Employment Commencement Date and ending on the date a break in
service begins, unless any such years are excluded by Section
1.07(b). An Employee will also receive credit for any period of
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<PAGE> 35
severance of less than 12 consecutive months. Fractional periods of
a year will be expressed in terms of days.
In the case of a Participant who has 5 consecutive 1-year
breaks in service, all years of service after such breaks in service
will be disregarded for the purpose of vesting the Employer-derived
account balance that accrued before such breaks, but both pre-break
and post-break service will count for the purposes of vesting the
Employer-derived account balance that accrues after such breaks.
Both accounts will share in the earnings and losses of the fund.
In the case of a Participant who does not have 5 consecutive
1-year breaks in service, both the pre-break and post-break service
will count in vesting both the pre-break and post-break
employer-derived account balance.
A break in service is a period of severance of at least 12
consecutive months. Period of severance is a continuous period of
time during which the Employee is not employed by the Employer. Such
period begins on the date the Employee retires, quits or is
discharged, or if earlier, the 12-month anniversary of the date on
which the Employee was otherwise first absent from service.
In the case of an individual who is absent from work for
maternity or paternity reasons, the 12-consecutive month period
beginning on the first anniversary of the first date of such absence
shall not constitute a break in service. For purposes of this
paragraph, an absence from work for maternity or paternity reasons
means an absence (A) by reason of the pregnancy of the individual,
(B) by reason of the birth of a child of the individual, (C) by
reason of the placement of a child with the individual in connection
with the adoption of such child by such individual, or (D) for
purposes of caring for such child for a period beginning immediately
following such birth or placement.
If the Plan maintained by the Employer is the plan of a
predecessor employer, an Employee's Years of Service for Vesting
shall include years of service with such predecessor employer. In
any case in which the Plan maintained by the Employer is not the
plan maintained by a predecessor employer, service for such
predecessor shall be treated as service for the Employer to the
extent provided in Section 1.08.
(b) Pronouns used in the Plan are in the masculine gender but include the
feminine gender unless the context clearly indicates otherwise.
Article 3. Participation.
3.01. Date of Participation. All Employees in the eligible class (as defined in
Section 1.03(a)(3)) who are in the service of the Employer on the Effective Date
will become Participants on the date elected by the Employer in Section 1.03(c).
Any other Employee will become a
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<PAGE> 36
Participant in the Plan as of the first Entry Date on which he first satisfies
the eligibility requirements set forth in Section 1.03(a). In the event that an
Employee who is not a member of an eligible class (as defined in Section
1.03(a)(3)) becomes a member of an eligible class, the individual shall
participate immediately if such individual had already satisfied the eligibility
requirements and would have otherwise previously become a Participant.
If an eligibility requirement other than one Year of Service is elected in
1.03(a)(1), an Employee may not be required to complete a minimum number of
Hours of Service before becoming a Participant. An otherwise eligible Employee
subject to a minimum months of service requirement shall become a Participant on
the first Entry Date following his completion of the required number of
consecutive months of employment measured from his Employment Commencement Date
to the coinciding date in the applicable following month. For purposes of
determining consecutive months of service, the Related Employer and predecessor
employer rules contained in Sections 2.01(a)(17) and 2.01(a)(32) shall apply.
3.02. Resumption of Participation Following Reemployment. If a Participant
ceases to be an Employee and thereafter returns to the employ of the Employer he
will be treated as follows:
(a) he will again become a Participant on the first date on which he
completes an Hour of Service for the Employer following his reemployment
and is in the eligible class of Employees as defined in Section
1.03(a)(3), and
(b) any distribution which he is receiving under the Plan will cease
except as otherwise required under Section 8.08.
3.03. Cessation or Resumption of Participation Following a Change in Status. If
any Participant continues in the employ of the Employer or Related Employer but
ceases to be a member of an eligible class as defined in Section 1.03(a)(3), the
individual shall continue to be a Participant for most purposes until the entire
amount of his benefit is distributed; however, the individual shall not be
entitled to receive an allocation of contributions or forfeitures during the
period that he is not a member of the eligible class. Such Participant shall
continue to receive credit for service completed during the period for purposes
of determining his vested interest in his Accounts. In the event that the
individual subsequently again becomes a member of an eligible class of
Employees, the individual shall resume full participation immediately upon the
date of such change in status.
3.04. Participation by Owner-Employee; Controlled Businesses. If the Plan
provides contributions or benefits for one or more Owner-Employees who control
both the trade or business with respect to which the Plan is established and one
or more other trades or businesses, the Plan and any plan established with
respect to such other trades or businesses must, when looked at as a single
plan, satisfy Sections 401(a) and 401(d) of the Code with respect to the
employees of this and all such other trades or businesses. If the Plan provides
contributions or benefits for one or more Owner-Employees who control one or
more
10
<PAGE> 37
other trades or businesses, the Employees of each such other trade or business
must be included in a plan which satisfies Sections 401(a) and 401(d) of the
Code and which provides contributions and benefits not less favorable than
provided for Owner-Employees under the Plan.
If an individual is covered as an Owner-Employee under the plans of two or
more trades or businesses which are not controlled and the individual controls a
trade or business, then the contributions or benefits of the Employees under the
plan of the trades or businesses which are controlled must be as favorable as
those provided for him under the most favorable plan of the trade or business
which is not controlled.
For purposes of this Section, an Owner-Employee, or two or more
Owner-Employees, shall be considered to control a trade or business if such
Owner-Employee, or such Owner-Employees together, (a) own the entire interest in
an unincorporated trade or business or (b) in the case of a partnership, own
more than 50 percent of either the capital interest or the profits interest in
such partnership. For this purpose, an Owner-Employee, or two or more
Owner-Employees, shall be treated as owning any interest in a partnership which
is owned, directly or indirectly, by a partnership controlled by such
Owner-Employee or such Owner-Employees.
3.05. Omission of Eligible Employee. If any Employee who should be included as a
Participant in the Plan is erroneously omitted and discovery of such omission is
not made until after a contribution by his Employer for the year has been made,
the Employer shall make a subsequent contribution, if necessary, so that the
omitted Employee receives the total amount which the said Employee would have
received had he not been omitted. For purposes of this Section 3.05, the term
"contribution" shall not include Deferral Contributions and Matching
Contributions made pursuant to Sections 4.01 and 4.03, respectively.
Article 4. Contributions.
4.01. Deferral Contributions.
(a) 4.01. If so provided by the Employer in Section 1.05(b), each
Participant may elect to execute a salary reduction agreement with the
Employer to reduce his Compensation by a specified percentage not
exceeding 15% per payroll period, subject to any exceptions elected by the
Employer in Section 1.05(b)(2) and 1.05(b)(3) and equal to a whole number
multiple of one (1) percent. Such agreement shall become effective on the
first day of the first payroll period for which the Employer can
reasonably process the request. The Employer shall make a Deferral
Contribution on behalf of the Participant corresponding to the amount of
said reduction, subject to the restrictions set forth below. Under no
circumstances may a salary reduction agreement be adopted retroactively.
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<PAGE> 38
(b) A Participant may elect to change or discontinue the percentage by
which his Compensation is reduced by notice to the Employer as provided in
Section 1.05(b)(1).
(c) No Participant shall be permitted to have Deferral Contributions made
under the Plan, or any other qualified plan maintained by the Employer,
during the taxable year, in excess of the dollar limitation contained in
Section 402(g) of the Code in effect at the beginning of such taxable
year.
A Participant may assign to the Plan any Excess Deferrals made
during the taxable year of the Participant by notifying the Plan
Administrator on or before March 15 following the taxable year of the
amount of the Excess Deferrals to be assigned to the Plan. A Participant
is deemed to notify the Administrator of any Excess Deferrals that arise
by taking into account only those Deferral Contributions made to the Plan
and any other plan of the Employer. Notwithstanding any other provision of
the Plan, Excess Deferrals, plus any income and minus any loss allocable
thereto, shall be distributed no later than April 15 to any Participant to
whose Account Excess Deferrals were so assigned for the preceding year and
who claims Excess Deferrals for such taxable year.
"Excess Deferrals" shall mean those Deferral Contributions that are
includable in a Participant's gross income under Section 402(g) of the
Code to the extent such Participant's Deferral Contributions for a taxable
year exceed the dollar limitation under such Code section. For purposes of
determining Excess Deferrals, the term "Deferral Contributions" shall
include the sum of all Employer Contributions made on behalf of such
Participant pursuant to an election to defer under any qualified CODA as
described in Section 401(k) of the Code, any simplified employee pension
cash or deferred arrangement as described in Section 402(h)(1)(B) of the
Code, any eligible deferred compensation plan under Section 457 of the
Code, any plan as described under Section 501(c)(18) of the Code, and any
Employer Contributions made on the behalf of a Participant for the
purchase of an annuity contract under Section 403(b) of the Code pursuant
to a salary reduction agreement. Deferral Contributions shall not include
any deferrals properly distributed as excess annual additions. Excess
Deferrals shall be treated as annual additions under the Plan, unless such
amounts are distributed no later than the first April 15 following the
close of the Participant's taxable year.
Excess Deferrals shall be adjusted for any income or loss up to the
date of distribution. The income or loss allocable to Excess Deferrals is
(1) income or loss allocable to the Participant's Deferral Contributions
Account for the taxable year multiplied by a fraction, the numerator of
which is such Participant's Excess Deferrals for the year and the
denominator is the Participant's Account balance attributable to Deferral
Contributions without regard to any income or loss occurring during such
taxable year, or (2) such other amount determined under any reasonable
method, provided that such method is used consistently for all
Participants
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<PAGE> 39
in calculating the distributions required under this Section 4.01(c) and
Sections 4.02(d) and 4.04(d) for the Plan Year, and is used by the Plan in
allocating income or loss to Participants' Accounts. Income or loss
allocable to the period between the end of the Plan Year and the date of
distribution shall be disregarded in determining income or loss.
(d) In order for the Plan to comply with the requirements of Sections
401(k), 402(g) and 415 of the Code and the regulations promulgated
thereunder, at any time in a Plan Year the Administrator may reduce the
rate of Deferral Contributions to be made on behalf of any Participant, or
class of Participants, for the remainder of that Plan Year, or the
Administrator may require that all Deferral Contributions to be made on
behalf of a Participant be discontinued for the remainder of that Plan
Year. Upon the close of the Plan Year or such earlier date as the
Administrator may determine, any reduction or discontinuance in Deferral
Contributions shall automatically cease until the Administrator again
determines that such a reduction or discontinuance of Deferral
Contributions is required.
4.02. Additional Limit on Deferral Contributions.
(a) The Actual Deferral Percentage (hereinafter "ADP") for Participants
who are Highly Compensated Employees for each Plan Year and the ADP for
participants who are Non-highly Compensated Employees for the same Plan
Year must satisfy one of the following tests:
(1) The ADP for Participants who are Highly Compensated Employees
for the Plan Year shall not exceed the ADP for Participants who are
Non-highly Compensated Employees for the same Plan Year multiplied
by 1.25; or
(2) The ADP for Participants who are Highly Compensated Employees
for the Plan Year shall not exceed the ADP for Participants who are
Non-highly Compensated Employees for the same Plan Year multiplied
by 2.0, provided that the ADP for Participants who are Highly
Compensated Employees does not exceed the ADP for Participants who
are Non-highly Compensated Employees by more than two (2) percentage
points.
(b) The following special rules apply for the purposes of this Section:
(1) The ADP for any Participant who is a Highly Compensated Employee
for the Plan Year and who is eligible to have Deferral Contributions
(and Qualified Discretionary Contributions if treated as Deferral
Contributions for purposes of the ADP test) allocated to his or her
accounts under two or more arrangements described in Section 401(k)
of the Code that are maintained by the Employer, shall be determined
as if such Deferral Contributions (and, if applicable, such
Qualified Discretionary Contributions) were made under a single
arrangement. If a
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<PAGE> 40
Highly Compensated Employee participates in two or more cash or
deferred arrangements that have different Plan Years, all cash or
deferred arrangements ending with or within the same calendar year
shall be treated as a single arrangement. Notwithstanding the
foregoing, certain plans shall be treated as separate if mandatorily
disaggregated under regulations under Section 401(k) of the Code.
(2) In the event that this Plan satisfies the requirements of
Sections 401(k), 401(a)(4), or 410(b) of the Code only if aggregated
with one or more other plans, or if one or more other plans satisfy
the requirements of such Sections of the Code only if aggregated
with this plan, then this Section shall be applied by determining
the ADP of Employees as if all such plans were a single plan. For
Plan Years beginning after December 31, 1989, plans may be
aggregated in order to satisfy section 401(k) of the Code only if
they have the same Plan Year.
(3) For purposes of determining the ADP of a Participant who is a
5-percent owner or one of the ten most highly-paid Highly
Compensated Employees, the Deferral Contributions (and Qualified
Discretionary Contributions if treated as Deferral Contributions for
purposes of the ADP test) and Compensation of such Participant shall
include the Deferral Contributions (and, if applicable, Qualified
Discretionary Contributions) and Compensation for the Plan Year of
Family Members (as defined in Section 414(q)(6) of the Code). Family
Members, with respect to between the end of the Plan Year and the
date of distribution shall be disregarded in determining income or
loss.
Excess Contributions shall be distributed from the Participant's
Qualified Discretionary Contribution account only to the extent that such
Excess Contributions exceed the balance in the Participant's Deferral
Contributions account.
(4) For purposes of determining the ADP test, Deferral Contributions
and Qualified Discretionary Contributions must be made before the
last day of the twelve-month period immediately following the Plan
Year to which contributions relate.
(5) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ADP test and the amount of Qualified
Discretionary Contributions used in such test.
(6) The determination and treatment of the ADP amounts of any
Participant shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
(c) The following definitions shall apply for purposes of this Section:
(1) "Actual Deferral Percentage" shall mean, for a specified group
of Participants for a Plan Year, the average of the ratios
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<PAGE> 41
(calculated separately for each Participant in such group) of (A)
the amount of Employer contributions actually paid over to the Trust
on behalf of such Participant for the Plan Year to (B) the
Participant's Compensation for such Plan Year. Employer
contributions on behalf of any Participant shall include (i) any
Deferral Contributions made pursuant to the Participant's deferral
election, including Excess Deferrals of Highly Compensated
Employees, but excluding (a) Excess Deferrals of Non-highly
Compensated Employees that arise solely from Deferral Contributions
made under the Plan or plans of the Employer and (b) Deferral
Contributions that are taken into account in the Contribution
Percentage test (provided the ADP test is satisfied both with and
without exclusion of these Deferral Contributions) and (ii) at the
election of the Employer, Qualified Discretionary Contributions.
Matching Contributions, whether or not non-forfeitable when made,
shall not be considered as Employer Contributions for purposes of
this paragraph. For purposes of computing Actual Deferral
Percentages, an Employee who would be a Participant but for the
failure to make Deferral Contributions shall be treated as a
Participant on whose behalf no Deferral Contributions are made.
(2) "Excess Contributions" shall mean, with respect to any Plan
Year, the excess of
(a) The aggregate amount of Employer contributions actually
taken into account in computing the ADP of Highly Compensated
Employees for such Plan Year, over
(b) The maximum amount of such contributions permitted by the
ADP test (determined by reducing contributions made on behalf
of Highly Compensated Employees in order of the ADPs,
beginning with the highest of such percentages).
(3) "Qualified Discretionary Contributions" shall mean contributions
made by the Employer as elected in Section 1.05(b)(4) and allocated
to Participant Accounts of Non-highly Compensated Employees that
such Participants may not elect to receive in cash until distributed
from the Plan, that are nonforfeitable when made, and that are
distributable only in accordance with the distribution provisions
that are applicable to Deferral Contributions. Participants shall
not be required to satisfy any hours of service or employment
requirement in order to receive an allocation of such contributions.
(d) Notwithstanding any other provision of this Plan, Excess
Contributions, plus any income and minus any loss allocable thereto, shall
be distributed no later than the last day of each Plan Year to
Participants to whose Accounts such Excess Contributions were allocated
for the preceding Plan Year. If such excess amounts are distributed more
than 2 1/2 months after the last day of the Plan Year in which such excess
amounts arose, a ten- (10-) percent excise tax will be imposed on the
Employer maintaining the Plan with respect to such amounts. Such
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<PAGE> 42
distributions shall be made to Highly Compensated Employees on the basis
of the respective portions of the Excess Contributions attributable to
each of such employees. Excess Contributions of Participants who are
subject to the family member aggregation rules of Section 414(q)(6) of the
Code shall be allocated among the family members in proportion to the
Deferral Contributions (and amounts treated as Deferral Contributions) of
each family member that is combined to determine the combined ADP.
Excess Contributions shall be treated as annual additions under the Plan.
Excess Contributions shall be adjusted for any income or loss up to the
date of distribution. The income or loss allocable to Excess Contributions
is (1) income or loss allocable to the Participant's Deferral Contribution
Account (and if applicable, the Qualified Discretionary Contribution
Account) for the Plan Year multiplied by a fraction, the numerator of
which is such Participant's Excess Contributions for the year and the
denominator is the Participant's Account balance attributable to Deferral
Contributions without regard to any income or loss occurring during such
Plan Year, or (2) an amount determined under any reasonable method,
provided that such method is used consistently for all Participants in
calculating any distributions required under Section 4.02(d) and Sections
4.01(c) and 4.04(d) for the Plan Year, and is used by the Plan in
allocating income or loss to the Participants' Accounts. Income or loss
allocable to the period between the end of the Plan Year and the date of
distibution shall be disregarded in determining income or loss.
Excess Contributions shall be distributed from the Participant's Qualified
Discretionary Contribution Account only to the extent that such Excess
Contributions exceed the balance in the Participant's Deferral
Contributions Account.
4.03 Matching Contributions: If so provided by the Employer in Section 1.05(c),
the Employer shall make a Matching Contribution on behalf of each Participant
who had Deferral Contributions made on his behalf during the year and who meets
the requirement, if any, of Section 1.05(c)(4). The amount of the Matching
Contribution shall be determined in accordance with Section 1.05(c), subject to
the limitations set forth in Section 4.04 and Section 404 of the Code. Matching
Contributions will not be allowed to be made by the Employer on any voluntary
non-deductible Employee Contributions.
4.04 Limit on Matching Contributions and Employee Contributions:
(a) The Average Contribution Percentage (hereinafter "ACP") for
Participants who are Highly Compensated Employees for each Plan Year and
the ACP for Participants who are Non-highly Compensated Employees for the
same Plan Year must satisfy one of the following tests:
16
<PAGE> 43
(1) The ACP for Participants who are Highly Compensated Employees
for the Plan Year shall not exceed the ACP for Participants who are
Non-highly Compensated Employees for the same Plan Year multiplied
by 1.25; or
(2) The ACP for Participants who are Highly Compensated Employees
for the Plan Year shall not exceed the ACP for Participants who are
Non-highly Compensated Employees for the same Plan Year multiplied
by two (2), provided that the ACP for Participants who are Highly
Compensated Employees does not exceed the ACP for Participants who
are Non-highly Compensated Employees by more than two (2) percentage
points.
(b) The following special rules apply for purposes of this section:
(1) If one or more Highly Compensated Employees participate in both
a qualified cash or deferred arrangement described in Section 401(k)
of the Code (hereafter "CODA") and a plan subject to the ACP test
maintained by the Employer and the sum of the ADP and ACP of those
Highly Compensated Employees subject to either or both tests exceeds
the Aggregate Limit, then the ACP of those Highly Compensated
Employees who also participate in a CODA will be reduced (beginning
with such Highly Compensated Employee whose ACP is the highest) so
that the limit is not exceeded. The amount by which each Highly
Compensated Employee's Contribution Percentage Amounts is reduced
shall be treated as an Excess Aggregate Contribution. The ADP and
ACP of the Highly Compensated Employees are determined after any
corrections required to meet the ADP and ACP tests. Multiple use
does not occur if either the ADP or ACP of the Highly Compensated
Employees does not exceed 1.25 multiplied by the ADP and ACP of the
Non-highly Compensated Employees.
(2) For purposes of this section, the Contribution Percentage for
any Participant who is a Highly Compensated Employee and who is
eligible to have Contribution Percentage Amounts allocated to his or
her account under two or more plans described in section 401(a) of
the Code, or arrangements described in section 401(k) of the Code
that are maintained by the Employer, shall be determined as if the
total of such Contribution Percentage Amounts was made under each
plan. If a Highly Compensated Employee participates in two or more
cash or deferred arrangements that have different plan years, all
cash or deferred arrangements ending with or within the same
calendar year shall be treated as a single arrangement.
Notwithstanding the foregoing, certain plans shall be treated as
separate if mandatorily disaggregated under regulations under
Section 401(m) of the Code.
(3) In the event that this Plan satisfies the requirements of
Sections 401(m), 401(a)(4) or 410(b) of the Code only if aggregated
with one or more other plans, or if one or more other plans satisfy
the requirements of such sections of the Code only
17
<PAGE> 44
if aggregated with this Plan, then this section shall be applied by
determining the Contribution Percentage of Employees as if all such
plans were a single plan. For plan years beginning after December
31, 1989, plans may be aggregated in order to satisfy Section 401(m)
of the Code only if they have the same Plan Year.
(4) For purposes of determining the Contribution percentage of a
Participant who is a five-percent owner or one of the ten most
highly-paid Highly Compensated Employees, the Contribution
Percentage Amounts and Compensation of such Participant shall
include the Contribution Percentage Amounts and Compensation for the
Plan Year of family members (as defined in Section 414(q)(6) of the
Code). Family members, with respect to Highly Compensated Employees,
shall be disregarded as separate Employees in determining the
Contribution Percentage both for Participants who are Non-highly
Compensated Employees and for Participants who are Highly
Compensated Employees.
(5) For purposes of determining the Contribution Percentage test,
Employee Contributions made pursuant to Section 1.05(d)(1) are
considered to have been made in the Plan Year in which contributed
to the Trust. Matching Contributions and Qualified Discretionary
Contributions will be considered made for a Plan Year if made no
later than the end of the twelve-month period beginning on the day
after the close of the Plan Year.
(6) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ACP test and the amount of Qualified
Discretionary Contributions used in such test.
(7) The determination and treatment of the Contribution Percentage
of any Participant shall satisfy such other requirements as may be
prescribed by the Secretary of Treasury.
(c) The following definitions shall apply for purposes of this Section:
(1) "Aggregate Limit" shall mean the greater of (A) or (B) where (A)
is the sum of (i) 125 percent of the greater of the ADP of the
Non-highly Compensated Employees for the Plan Year or the ACP of
Non-highly Compensated Employees under the Plan subject to Section
401(m) of the Code for the Plan Year beginning with or within the
Plan Year of the CODA and (ii) the lesser of 200% or two plus the
lesser of such ADP or ACP and where (B) is the sum of (i) 125
percent of the lesser of the ADP of the Non-highly Compensated
Employees for the Plan Year or the ACP of Non-highly Compensated
Employees under the Plan subject to Section 401(m) of the Code for
the Plan Year beginning with or within the Plan Year of the CODA and
(ii) the lesser of 200% or two plus the greater of such ADP or ACP.
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<PAGE> 45
(2) "Average Contribution Percentage" or "ACP" shall mean the
average of the Contribution Percentages of the Eligible Participants
in a group.
(3) "Contribution Percentage" shall mean the ratio (expressed as a
percentage) of the Participant's Contribution Percentage Amounts to
the Participant's Compensation for the Plan Year.
(4) "Contribution Percentage Amounts" shall mean the sum of the
Employee Contributions and Matching Contributions made under the
plan on behalf of the Participant for the Plan Year. Such
Contribution Percentage Amounts shall not include Matching
Contributions that are forfeited either to correct Excess Aggregate
Contributions or because the contributions to which they relate are
Excess Deferrals, Excess Contributions or Excess Aggregate
Contributions. If so elected by the Employer in Section 1.05(b)(4),
the Employer may include Qualified Discretionary Contributions in
the Contribution Percentage Amounts. The Employer also may elect to
use Deferral Contributions in the Contribution Percentage Amounts so
long as the ADP test is met before the Deferral Contributions are
used in the ACP test and continues to be met following the exclusion
of those Deferral Contributions that are used to meet the ACP test.
(5) "Deferral Contribution" shall mean any contribution made at the
election of the Participant pursuant to a salary reduction agreement
in accordance with Section 4.01(a).
(6) "Eligible Participant" shall mean any Employee who is eligible
to make an Employee Contribution, or a Deferral Contribution (if the
Employer takes such contributions into account in the calculation of
the Contribution Percentage), or to receive a Matching Contribution.
(7) "Employee Contribution" shall mean any voluntary non-deductible
contribution made to the plan by or on behalf of a Participant that
is included in the Participant's gross income in the year in which
made and that is maintained in a separate Account to which earnings
and losses are allocated.
(8) "Matching Contribution" shall mean an Employer contribution made
to this or any other defined contribution plan on behalf of a
Participant on account of a Participant's Deferral Contribution.
(9) "Excess Aggregate Contributions" shall mean, with respect to any
Plan Year, the excess of
(A) The aggregate Contribution Percentage Amounts taken into
account in computing the numerator of the Contribution
Percentage actually made on behalf of Highly Compensated
Employees for such Plan Year, over
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<PAGE> 46
(B) The maximum Contribution Percentage Amounts permitted by
the ACP test (determined by reducing contributions made on
behalf of Highly Compensated Employees in the order of their
Contribution Percentages beginning with the highest of such
percentages).
Such determination shall be made after first determining
Excess Deferrals pursuant to Section 4.01 and then determining
Excess Contributions pursuant to Section 4.02.
(d) Notwithstanding any other provision of the Plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable thereto, shall
be forfeited, if forfeitable, or if not forfeitable, distributed no later
than the last day of each Plan Year to Participants to whose Accounts such
Excess Aggregate Contributions were allocated for the preceding Plan Year.
Excess Aggregate Contributions of Participants who are subject to the
family member aggregation rules of Section 414(q)(6) of the Code shall be
allocated among the family members in proportion to the Employee and
Matching Contributions of each family member that is combined to determine
the combined ACP. If such Excess Aggregate Contributions are distributed
more than 2 1/2 months after the last day of the Plan Year in which such
excess amounts arose, a ten (10) percent excise tax will be imposed on the
employer maintaining the Plan with respect to those amounts. Excess
Aggregate Contributions shall be treated as annual additions under the
Plan.
Excess Aggregate Contributions shall be adjusted for any income or
loss up to the date of distribution. The income or loss allocable to
Excess Aggregate Contributions is (1) income or loss allocable to the
Participant's Employee Contribution Account, Matching Contribution Account
(if any, and if all amounts therein are not used in the ADP test) and if
applicable, Qualified Non-elective Contribution Account for the Plan Year
multiplied by a fraction, the numerator of which is such Participant's
Excess Aggregate Contributions for the year and the denominator is the
Participant's Account balance(s) attributable to Contribution Percentage
Amounts without regard to income or loss occurring during such Plan Year,
or (2) such other amount determined under any reasonable method, provided
that such method is used consistently for all Participants in calculating
any distributions required under Section 4.04(d) and Sections 4.01(c) and
4.02(d) for the Plan Year, and is used by the Plan in allocating income or
loss to the Participants' Accounts. Income or loss allocable to the period
between the end of the Plan Year and the date of distribution shall be
disregarded in determining income or loss.
Forfeitures of Excess Aggregate Contributions shall be applied to
reduce Employer contributions; the forfeitures shall be held in the money
market fund, if any, listed in Section 1.14(b) pending such application.
Excess Aggregate Contributions shall be forfeited, if forfeitable,
or distributed on a prorata basis from the
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<PAGE> 47
Participant's Employee Contribution Account, Matching Contribution Account
and if applicable, the Participant's Deferral Contributions Account or
Qualified Discretionary Contribution Account or both.
4.05. Special Rules. Deferral Contributions and Qualified Discretionary
Contributions and income allocable to each are not distributable to a
Participant or his or her Beneficiary or Beneficiaries, in accordance with such
Participant's or beneficiary's or beneficiaries' election, earlier than upon
separation from service, death, or disability, except as otherwise provided in
Section 7.10, 7.11 or 10.06. Such amounts may also be distributed, but after
March 31, 1988, in the form of a lump sum only, upon
(a) Termination of the Plan without establishment of another defined
contribution plan, other than an employee stock ownership plan (as defined
in Section 4975(e) or Section 409 of the Code) or a simplified employee
pension plan as defined in Section 408(k) of the Code.
(b) The disposition by a corporation to an unrelated corporation of
substantially all of the assets (within the meaning of Section 409(d)(2)
of the Code) used in a trade or business of such corporation if such
corporation continues to maintain this Plan after the disposition, but
only with respect to Employees who continue employment with the
corporation acquiring such assets.
(c) The disposition by a corporation to an unrelated entity of such
corporation's interest in a subsidiary (within the meaning of Section
409(d)(2) of the Code) if such corporation continues to maintain this
Plan, but only with respect to Employees who continue employment with such
subsidiary.
The Participant's accrued benefit derived from Deferral Contributions,
Qualified Discretionary Contributions and Employee Contributions (as defined in
Section 4.09) is nonforfeitable. Separate Accounts for Deferral Contributions,
Qualified Discretionary Contributions, Employee Contributions and Matching
Contributions will be maintained for each Participant. Each Account will be
credited with the applicable contributions and earnings thereon.
4.06. Fixed/Discretionary Employer Contributions. If so provided by the Employer
in Sections 1.05(a)(1) or 1.05(a)(2), for the Plan Year in which the Plan is
adopted and for each Plan Year thereafter, the Employer will make Fixed or
Discretionary Employer contributions to the Trust in accordance with Section
1.05 to be allocated as follows:
(a) Fixed Employer contributions shall be allocated among eligible
Participants (as determined in accordance with Section 1.05(a)(3)) in the
manner specified in Section 1.05(a).
(b) Discretionary Employer contributions shall be allocated among
eligible Participants, as determined in accordance with Section
1.05(a)(3), as follows:
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<PAGE> 48
(1) If the Non-Integrated Formula is elected in Section
1.05(a)(2)(A), such contributions shall be allocated to
eligible Participants in the ratio that each Participant's
Compensation bears to the total Compensation paid to all
eligible Participants for the Plan Year; or
(2) If the Integrated Formula is elected in Section
1.05(a)(2)(B), such contributions shall be allocated in the
following steps:
(A) First, to each eligible Participant in the same
ratio that the sum of the Participant's Compensation and
Excess Compensation for the Plan Year bears to the sum
of the Compensation and Excess Compensation of all
Participants for the Plan Year. This allocation as a
percentage of the sum of each Participant's Compensation
and Excess Compensation shall not exceed 5.7%.
(B) Any remaining Discretionary Employer Contribution
shall be allocated to each eligible Participant in the
same ratio that each Participant's Compensation for the
Plan Year bears to the total Compensation of all
Participants for the Plan Year.
For purposes of this Section, "Excess Compensation" means
Compensation in excess of the taxable wage base, as determined
under Section 230 of the Social Security Act, in effect on the
first day of the Plan Year. Further, this Section 4.06(b)(2)
shall be modified as provided in Section 9.03 for years in
which the Plan is top heavy under Article 9.
4.07. Time of Making Employer Contributions. The Employer will pay its
contribution for each Plan Year not later than the time prescribed by law for
filing the Employer's federal income tax return for the fiscal (or taxable) year
with or within which such Plan Year ends (including extensions thereof). The
Trustee will have no authority to inquire into the correctness of the amounts
contributed and paid over to the Trustee, to determine whether any contribution
is payable under this Article 4, or to enforce, by suit or otherwise, the
Employer's obligation, if any, to make a contribution to the Trustee.
4.08. Return of Employer Contributions. The Trustee shall, upon request by the
Employer, return to the Employer the amount (if any) determined under Section
14.22. Such amount shall be reduced by amounts attributable thereto which have
been credited to the Accounts of Participants who have since received
distributions from the Trust, except to the extent such amounts continue to be
credited to such Participants' Accounts at the time the amount is returned to
the Employer. Such amount shall also be reduced by the losses of the Trust
attributable thereto, if and to the extent such losses exceed the gains and
income attributable thereto, but will not be increased by the gains and income
of the Trust
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<PAGE> 49
attributable thereto, if and to the extent such gains and income exceed the
losses attributable thereto. In no event will the return of a contribution
hereunder cause the balance of the individual Account of any Participant to be
reduced to less than the balance which would have been credited to the Account
had the mistaken amount not been contributed.
4.09. Employee Contributions. If the Employer elected to permit Deferral
Contributions in Section 1.05(b) and if so provided by the Employer in Section
1.05(d), each Participant may elect to make Employee Contributions to the Plan
in accordance with the rules and procedures established by the Employer and in
an amount not less than one percent (1%) and not greater than ten percent (10%)
of such Participant's Compensation for the Plan Year. Such contributions and all
Employee Contributions for Plan Years beginning after December 31, 1986, shall
be subject to the nondiscrimination requirements of Section 401(m) of the Code
as set forth in Section 4.04.
For purposes of this Plan, "Employee Contributions" shall mean any
voluntary non-deductible contribution made to a plan by or on behalf of a
Participant that is or was included in the Participant's gross income in the
year in which made and that is maintained under a separate account to which
applicable earnings and losses are allocated. Excess Contributions may not be
recharacterized as Employee Contributions.
Employee Contributions shall be paid over to the Trustee not later than
thirty (30) days following the end of the month in which the Participant makes
the contribution. A Participant shall have a fully vested 100% nonforfeitable
right to his Employee Contributions and the earnings or losses allocated
thereon. Distributions of Employee Contributions shall be made in accordance
with Section 7.10.
4.10. Rollover Contributions.
(a) Rollover of Eligible Rollover Distributions
(1) An Employee who is or was a distributee of an "eligible rollover
distribution"(as defined in Section 402(c)(4) of the Code and the
regulations issued thereunder) from a qualified plan may directly
transfer all or any portion of such distribution to the Trust or
transfer all or any portion of such distribution to the Trust within
sixty (60) days of payment. The transfer shall be made in the form
of cash or allowable Fund Shares only.
(2) The Employer may refuse to accept rollover contributions or
instruct the Trustee not to accept rollover contributions under the
Plan.
(b) Treatment of Rollover Amount.
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<PAGE> 50
(1) An account will be established for the transferring Employee
under Article 5, the rollover amount will be credited to the account
and such amount will be subject to the terms of the Plan, including
Section 8.01, except as otherwise provided in this Section 4.10.
(2) The rollover account will at all times be fully vested in and
nonforfeitable by the Employee.
(c) Entry into Plan by Transferring Employee. Although an amount may be
transferred to the Trust Fund under this Section 4.10 by an Employee who
has not yet become a Participant in accordance with Article 3, and such
amount is subject to the terms of the Plan as described in paragraph (b)
above, the Employee will not become a Participant entitled to share in
Employer contributions until he has satisfied such requirements.
(d) Monitoring of Rollovers.
(1) The Administrator shall develop such procedures and require such
information from transferring Employees as it deems necessary to
insure that amounts transferred under this Section 4.10 meet the
requirements for tax-free rollovers established by such Section and
by Section 402(c) of the Code. No such amount may be transferred
until approved by the Administrator.
(2) If a transfer made under this Section 4.10 is later determined
by the Administrator not to have met the requirements of this
Section or of the Code or Treasury regulations, the Trustee shall,
within a reasonable time after such determination is made, and on
instructions from the Administrator, distribute to the Employee the
amounts then held in the Trust attributable to the transferred
amount.
4.11. Deductible Voluntary Employee Contributions. The Administrator will not
accept deductible Employee Contributions which are made for a taxable year
beginning after December 31, 1986. Contributions made prior to that date will be
maintained in a separate Account which will be nonforfeitable at all times and
which will share in the gains and losses of the trust in the same manner as
described in Section 5.02. No part of the deductible voluntary contribution
Account will be used to purchase life insurance. Subject to Article 8, the
Participant may withdraw any part of the deductible voluntary contribution
Account upon request.
4.12. Additional Rules for Paired Plans. If the Employer has adopted a qualified
plan under Fidelity Basic Plan Document No. 09 which is to be considered as a
paired plan with this Plan, the elections in Section 1.03 must be identical to
the Employer's corresponding elections for the other plan. When the paired plans
are top-heavy or are deemed to be top-heavy as provided in Section 9.01, the
plan paired with this Plan will provide a minimum contribution to each non-key
Employee which is equal to 3 percent (or such other percent elected by the
Employer in Section 1.12(c)) of such Employee's Compensation. Notwithstanding
the
24
<PAGE> 51
preceding sentence, the minimum contribution shall be provided by this Plan if
contributions under the other plan paired with this Plan are frozen.
Article 5. Participants' Accounts.
5.01. Individual Accounts. The Administrator will establish and maintain an
Account for each Participant which will reflect Employer and Employee
Contributions made on behalf of the Participant and earnings, expenses, gains
and losses attributable thereto, and investments made with amounts in the
Participant's Account. The Administrator will establish and maintain such other
accounts and records as it decides in its discretion to be reasonably required
or appropriate in order to discharge its duties under the Plan.
5.02. Valuation of Accounts. Participant Accounts will be valued at their fair
market value at least annually as of a date specified by the Administrator in
accordance with a method consistently followed and uniformly applied, and on
such date earnings, expenses, gains and losses on investments made with amounts
in each Participant's Account will be allocated to such Account. Participants
will be furnished statements of their Account values at least once each Plan
Year.
5.03. Code Section 415 Limitations. Notwithstanding any other provisions of the
Plan:
Subsections (a)(1) through (a)(4)--(These subsections apply to Employers
who do not maintain any qualified plan, including a Welfare Benefit Fund, an
Individual Medical Account, or a simplified employee pension in addition to this
Plan.)
(a)(1) If the Participant does not participate in, and has never
participated in any other qualified plan, Welfare Benefit Fund, Individual
Medical Account, or a simplified employee pension, as defined in section
408(k) of the Code, maintained by the Employer, which provides an annual
addition as defined in Section 5.03(e)(1), the amount of Annual Additions
to a Participant's Account for a Limitation Year shall not exceed the
lesser of the Maximum Permissible Amount or any other limitation contained
in this Plan. If the Employer contribution that would otherwise be
contributed or allocated to the Participant's Account would cause the
Annual Additions for the Limitation Year to exceed the Maximum Permissible
Amount, the amount contributed or allocated will be reduced so that the
Annual Additions for the Limitation Year will equal the Maximum
Permissible Amount.
(a)(2) Prior to the determination of the Participant's actual Compensation
for a Limitation Year, the Maximum Permissible Amount may be determined on
the basis of a reasonable estimation of the Participant's compensation for
such Limitation Year, uniformly determined for all Participants similarly
situated. Any Employer contributions based on estimated annual
compensation shall be reduced by any Excess Amounts carried over from
prior years.
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<PAGE> 52
(a)(3) As soon as is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for such Limitation Year
shall be determined on the basis of the Participant's actual Compensation
for such Limitation Year.
(a)(4) If, pursuant to subsection (a)(3) or as a result of the allocation
of forfeitures or a reasonable error in determining the total Elective
Deferrals there is an Excess Amount with respect to a Participant for a
Limitation Year, such Excess Amount shall be disposed of as follows:
(A) Any nondeductible voluntary employee contributions ("employee
contributions") or Elective Deferrals, to the extent they would reduce the
Excess Amount, will be returned to the Participant. Any gains attributable
to returned employee contributions will also be returned or will be
treated as additional employee contributions for the Limitation Year in
which the employee contributions were made.
(B) If after the application of paragraph (A) an Excess amount still
exists and the Participant is in the service of the Employer which is
covered by the Plan at the end of the Limitation Year, then such Excess
Amount shall be reapplied to reduce future Employer contributions under
this Plan for the next Limitation Year (and for each succeeding year, as
necessary) for such Participant, so that in each such Year the sum of
actual Employer contributions plus the reapplied amount shall equal the
amount of Employer contributions which would otherwise be made to such
Participant's Account.
(C) If after the application of paragraph (A) an Excess Amount still
exists and the Participant is not in the service of the Employer which is
covered by the Plan at the end of a Limitation Year, then such Excess
Amount will be held unallocated in a suspense account. The suspense
account will be applied to reduce future Employer contributions for all
remaining Participants in the next Limitation Year and each succeeding
Limitation Year if necessary.
(D) If a suspense account is in existence at any time during the
Limitation Year pursuant to this subsection, it will not participate in
the allocation of the Trust Fund's investment gains and losses. All
amounts in the suspense account must be allocated to the Accounts of
Participants before any Employer contribution may be made for the
Limitation Year. Except as provided in paragraph (A), Excess Amounts may
not be distributed to Participants or former Participants.
Subsections (b)(1) through (b)(6)--(These subsections apply to Employers
who, in addition to this Plan, maintain one or more plans, all of which are
qualified Master or Prototype defined contribution Plans, any Welfare Benefit
Fund, any Individual Medical Account, or any simplified employee pension.)
26
<PAGE> 53
(b)(1) If, in addition to this Plan, the Participant is covered under any
other qualified defined contribution plans (all of which are qualified
Master or Prototype Plans), Welfare Benefit Funds, Individual Medical
Accounts, or simplified employee pension Plans, maintained by the
Employer, that provide an annual addition as defined in Section
5.03(e)(1), the amount of Annual Additions to a Participant's Account for
a Limitation Year shall not exceed the lesser of
(A) the Maximum Permissible Amount, reduced by the sum of any Annual
Additions to the Participant's accounts for the same Limitation Year under
such other qualified Master or Prototype defined contribution plans, and
Welfare Benefit Funds, Individual Medical Accounts, and simplified
employee pensions, or
(B) any other limitation contained in this Plan.
If the annual additions with respect to the Participant under other
qualified Master or Prototype defined contribution Plans, Welfare Benefit
Funds, Individual Medical Accounts, and simplified employee pensions
maintained by the Employer are less than the maximum permissible amount
and the Employer contribution that would otherwise be contributed or
allocated to the Participant's account under this plan would cause the
annual additions for the limitation year to exceed this limitation, the
amount contributed or allocated will be reduced so that the annual
additions under all such plans and funds for the limitation year will
equal the maximum permissible amount. If the annual additions with respect
to the Participant under such other qualified Master or Prototype defined
contribution Plans, Welfare Benefit Funds, Individual Medical Accounts,
and simplified employee pensions in the aggregate are equal to or greater
than the maximum permissible amount, no amount will be contributed or
allocated to the Participant's account under this plan for the limitation
year.
(b)(2) Prior to the determination of the Participant's actual Compensation
for the Limitation Year, the amounts referred to in (b)(1)(A) above may be
determined on the basis of a reasonable estimation of the Participant's
compensation for such Limitation Year, uniformly determined for all
Participants similarly situated. Any Employer contribution based on
estimated annual compensation shall be reduced by any Excess Amounts
carried over from prior years.
(b)(3) As soon as is administratively feasible after the end of the
Limitation Year, the amounts referred to in (b)(1)(A) shall be determined
on the basis of the Participant's actual Compensation for such Limitation
Year.
(b)(4) If a Participant's Annual Additions under this Plan and all such
other plans result in an Excess Amount, such Excess Amount shall be deemed
to consist of the Annual Additions last allocated, except that Annual
Additions attributable to a simplified employee
27
<PAGE> 54
pension will be deemed to have been allocated first, followed by Annual
Additions to a Welfare Benefit Fund or Individual Medical Account
regardless of the actual allocation date.
(b)(5) If an Excess Amount was allocated to a Participant on an allocation
date of this Plan which coincides with an allocation date of another plan,
the Excess Amount attributed to this Plan will be the product of
(A) the total Excess Amount allocated as of such date (including any
amount which would have been allocated but for the limitations of
Section 415 of the Code), and
(B) the ratio of (i) the Annual Additions allocated to the
Participant as of such date under this Plan, and (ii) the Annual
Additions allocated as of such date under all qualified defined
contribution plans (determined without regard to the limitations of
Section 415 of the Code).
(b)(6) Any Excess Amounts attributed to this Plan shall be disposed of as
provided in subsection (a)(4).
Subsection (c)--(This subsection applies only to Employers who, in
addition to this Plan, maintain one or more qualified plans which are qualified
defined contribution plans other than Master or Prototype Plans.)
(c) If the Employer also maintains another plan which is a qualified
defined contribution plan other than a Master or Prototype Plan, Annual
Additions allocated under this Plan on behalf of any Participant shall be
limited in accordance with the provisions of (b)(1) through (b)(6), as
though the other plan were a Master or Prototype Plan, unless the Employer
provides other limitations in the Adoption Agreement.
Subsection (d)--(This subsection applies only to Employers who, in
addition to this Plan, maintain or at any time maintained a qualified defined
benefit plan.)
(d) If the Employer maintains, or at any time maintained, a qualified
defined benefit plan, the sum of any Participant's Defined Benefit
Fraction and Defined Contribution Fraction shall not exceed the combined
plan limitation of 1.0 in any Limitation Year. The combined plan
limitation will be met as provided by the Employer in the Adoption
Agreement.
Subsections (e)(1) through (e)(11)--(Definitions.)
(e)(1) "Annual Additions" means the sum of the following amounts credited
to a Participant for a Limitation Year:
(A) all Employer contributions,
(B) all Employee Contributions,
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<PAGE> 55
(C) all forfeitures,
(D) amounts allocated, after March 31, 1984, to an Individual
Medical Account which is part of a pension or annuity plan
maintained by the Employer are treated as Annual Additions to a
defined contribution plan. Also, amounts derived from contributions
paid or accrued after December 31, 1985, in taxable years ending
after such date, which are attributable to post-retirement medical
benefits allocated to the separate account of a key employee, as
defined in Section 419A(d)(3) of the Code, under a Welfare Benefit
Fund maintained by the Employer are treated as Annual Additions to a
defined contribution plan, and
(E) allocations under a simplified employee pension.
For purposes of this Section 5.03, amounts reapplied to reduce
Employer contributions under subsection (a)(4) shall also be included as
Annual Additions.
(e)(2) "Compensation" means wages as defined in Section 3401(a) of the
Code and all other payments of compensation to an employee by the employer
(in the course of the employer's trade or business) for which the employer
is required to furnish the employee a written statement under Sections
6041(d) and 6051(a)(3) of the Code. Compensation must be determined
without regard to any rules under Section 3401(a) of the Code that limit
the remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for
agricultural labor in Section 3401(a)(2) of the Code.)
For any Self-Employed Individual compensation will mean Earned Income.
For limitation years beginning after December 31, 1991, for purposes of
applying the limitations of this article, compensation for a limitation
year is the compensation actually paid or made available during such
limitation year.
(e)(3) "Defined Benefit Fraction" means a fraction, the numerator of which
is the sum of the Participant's annual benefits (adjusted to an
actuarially equivalent straight life annuity if such benefit is expressed
in a form other than a straight life annuity or qualified joint and
survivor annuity) under all the defined benefit plans (whether or not
terminated) maintained by the Employer, each such annual benefit computed
on the assumptions that the Participant will remain in employment until
the normal retirement age under each such plan (or the Participant's
current age, if later) and that all other factors used to determine
benefits under such plan will remain constant for all future Limitation
Years, and the denominator of which is the lesser of 125 percent of the
dollar limitation determined for the Limitation Year under Sections
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<PAGE> 56
415(b)(1)(A) and 415(d) of the Code or 140 percent of the Participant's
highest average Compensation for 3 consecutive calendar years of service
during which the Participant was active in each such plan, including any
adjustments under Section 415(b) of the Code. However, if the Participant
was a participant as of the first day of the first Limitation Year
beginning after December 31, 1986, in one or more defined benefit plans
maintained by the Employer which were in existence on May 6, 1986 then the
denominator of the Defined Benefit Fraction shall not be less than 125
percent of the Participant's total accrued benefit as of the close of the
last Limitation Year beginning before January 1, 1987, disregarding any
changes in the terms and conditions of the plan after May 5, 1986, under
all such defined benefit plans that met, individually and in the
aggregate, the requirements of Section 415 of the Code for all Limitation
Years beginning before January 1, 1987.
(e)(4) "Defined Contribution Fraction" means a fraction, the numerator of
which is the sum for the current and all prior Limitation Years of (A) all
Annual Additions (if any) to the Participant's accounts under each defined
contribution plan (whether or not terminated) maintained by the Employer
and (B) all Annual Additions attributable to the Participant's
nondeductible Employee Contributions to all defined benefit plans (whether
or not terminated) maintained by the Employer, and the Participant's
Annual Additions attributable to all Welfare Benefit Funds, Individual
Medical Accounts, and simplified employee pensions, maintained by the
Employer, and the denominator of which is the sum of the maximum aggregate
amounts for the current and all prior Limitation Years during which the
Participant was an Employee (regardless of whether the Employer maintained
a defined contribution plan in any such year).
The maximum aggregate amount in any Limitation Year is the lesser of
125 percent of the dollar limitation in effect under Section 415(c)(1)(A)
of the Code for each such year or 35 percent of the Participant's
Compensation for each such year.
If the Participant was a participant as of the first day of the
first Limitation Year beginning after December 31, 1986, in one or more
defined contribution plans maintained by the Employer which were in
existence on May 6, 1986, then the numerator of the Defined Contribution
Fraction shall be adjusted if the sum of this fraction and the Defined
Benefit Fraction would otherwise exceed 1.0 under the terms of this Plan.
Under the adjustment an amount equal to the product of (i) the excess of
the sum of the fractions over 1.0 and (ii) the denominator of this
fraction will be permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the fractions as they would
be computed as of the end of the last Limitation Year beginning before
January 1, 1987, and disregarding any changes in the terms and conditions
of the plan made after May 6, 1986, but using the Section 415 limitation
applicable to the first Limitation Year beginning on or after January 1,
1987.
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The annual addition for any limitation year beginning before January
1, 1987 shall not be recomputed to treat all employee contributions as
annual additions.
(e)(5) "Employer" means the Employer and any Related Employer that adopts
this Plan. In the case of a group of employers which constitutes a
controlled group of corporations (as defined in Section 414(b) of the Code
as modified by Section 415(h)) or which constitutes trades or businesses
(whether or not incorporated) which are under common control (as defined
in Section 414(c) of the Code as modified by Section 415(h) of the Code)
or which constitutes an affiliated service group (as defined in Section
414(m)of the Code) and any other entity required to be aggregated with the
Employer pursuant to regulations issued under Section 414(o) of the Code,
all such employers shall be considered a single employer for purposes of
applying the limitations of this Section 5.03.
(e)(6) "Excess Amount" means the excess of the Participant's Annual
Additions for the Limitation Year over the Maximum Permissible Amount.
(e)(7) "Individual Medical Account" means an individual medical account as
defined in Section 415(l)(2) of the Code.
(e)(8) "Limitation Year" means the Plan Year. All qualified plans of the
Employer must use the same Limitation Year. If the Limitation Year is
amended to a different 12-consecutive month period, the new Limitation
Year must begin on a date within the Limitation Year in which the
amendment is made.
(e)(9) "Master or Prototype Plan" means a plan the form of which is the
subject of a favorable opinion letter from the Internal Revenue Service.
(e)(10) "Maximum Permissible Amount" means for a Limitation Year with
respect to any Participant the lesser of (A) $30,000 or, if greater, 25
percent of the dollar limitation set forth in Section 415(b)(1) of the
Code, as in effect for the Limitation Year, or (B) 25 percent of the
Participant's Compensation for the Limitation Year. If a short Limitation
Year is created because of an amendment changing the Limitation Year to a
different 12-consecutive-month period, the Maximum Permissible Amount will
not exceed the limitation in (e)(10)(A) multiplied by a fraction whose
numerator is the number of months in the short Limitation Year and whose
denominator is 12.
The compensation limitation referred to in subsection (e)(10)(B)
shall not apply to any contribution for medical benefits within the
meaning of Section 401(h) or Section 419A(f)(2) of the Code after
separation from service which is otherwise treated as an Annual Addition
under Section 419A(d)(2) or Section 415(l)(1) of the Code.
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(e)(11) "Welfare Benefit Fund" means a welfare benefit fund as defined in
Section 419(e) of the Code.
Article 6. Investment of Contributions.
6.01. Manner of Investment. All contributions made to the Accounts of
Participants shall be held for investment by the Trustee. The Accounts of
Participants shall be invested and reinvested only in eligible investments
selected by the Employer in Section 1.14(b), subject to Section 14.10.
6.02. Investment Decisions. Investments shall be directed by the Employer or by
each Participant or both, in accordance with the Employer's election in Section
1.14(a). Pursuant to Section 14.04, the Trustee shall have no discretion or
authority with respect to the investment of the Trust Fund.
(a) With respect to those Participant Accounts for which Employer
investment direction is elected, the Employer has the right to direct the
Trustee in writing with respect to the investment and reinvestment of
assets comprising the Trust Fund in the Fidelity Fund(s) designated in
Section 1.14(b) and as allowed by the Trustee.
(b) If Participant investment direction is elected, each Participant shall
direct the investment of his Account among the Fidelity Funds listed in
Section 1.14(b). The Participant shall file initial investment
instructions with the Administrator, on such form as the Administrator may
provide, selecting the Funds in which amounts credited to his Account will
be invested.
(1) Except as provided in this Section 6.02, only authorized Plan
contacts and the Participant shall have access to a Participant's
Account. While any balance remains in the Account of a Participant
after his death, the Beneficiary of the Participant shall make
decisions as to the investment of the Account as though the
Beneficiary were the Participant. To the extent required by a
qualified domestic relations order as defined in Section 414(p) of
the Code, an alternate payee shall make investment decisions with
respect to a Participant's Account as though such alternate payee
were the Participant.
(2) If the Trustee receives any contribution under the Plan as to
which investment instructions have not been provided, the Trustee
shall promptly notify the Administrator and the Administrator shall
take steps to elicit instructions from the Participant. The Trustee
shall credit any such contribution to the Participant's Account and
such amount shall be invested in the Fidelity Fund selected by the
Employer for such purposes or, absent Employer selection, in the
most conservative Fidelity Fund listed in Section 1.14(b), until
investment instructions have been received by the Trustee.
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(c) All dividends, interest, gains and distributions of any nature
received in respect of Fund Shares shall be reinvested in additional
shares of that Fidelity Fund.
(d) Expenses attributable to the acquisition of investments shall be
charged to the Account of the Participant for which such investment is
made.
6.03. Participant Directions to Trustee. All Participant initial investment
instructions filed with the Administrator pursuant to the provisions of Section
6.02 shall be promptly transmitted by the Administrator to the Trustee. A
Participant shall transmit subsequent investment instructions directly to the
Trustee by means of the telephone exchange system maintained by the Trustee for
such purposes. The method and frequency for change of investments will be
determined under the (a) rules applicable to the investments selected by the
Employer in Section 1.14(b) and (b) the additional rules of the Employer, if
any, limiting the frequency of investment changes, which are included in a
separate written administrative procedure adopted by the Employer and accepted
by the Trustee. The Trustee shall have no duty to inquire into the investment
decisions of a Participant or to advise him regarding the purchase, retention or
sale of assets credited to his Account.
Article 7. Right to Benefits.
7.01. Normal or Early Retirement. Each Participant who attains his Normal
Retirement Age or, if so provided by the Employer in Section 1.06(b), Early
Retirement Age, will have a 100-percent nonforfeitable interest in his Account
regardless of any vesting schedule elected in Section 1.07. If a Participant
retires upon the attainment of Normal or Early Retirement Age, such retirement
is referred to as a normal retirement. Upon his normal retirement the balance of
the Participant's Account, plus any amounts thereafter credited to his Account,
subject to the provisions of Section 7.08, will be distributed to him in
accordance with Article 8.
If a Participant separates from service before satisfying the age
requirements for early retirement, but has satisfied the service requirement,
the Participant will be entitled to elect an early retirement distribution upon
satisfaction of such age requirement.
7.02. Late Retirement. If a Participant continues in the service of the Employer
after attainment of Normal Retirement Age, he will continue to have a
100-percent nonforfeitable interest in his Account and will continue to
participate in the Plan until the date he establishes with the Employer for his
late retirement. Until he retires, he has a continuing election to receive all
or any portion of his Account. Upon the earlier of his late retirement or the
distribution date required under Section 8.08, the balance of his Account, plus
any amounts
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thereafter credited to his Account, subject to the provisions of Section 7.08,
will be distributed to him in accordance with Article 8 below.
7.03. Disability Retirement. If so provided by the Employer in Section 1.06(c),
a Participant who becomes disabled will have a 100-percent nonforfeitable
interest in his Account, the balance of which Account, plus any amounts
thereafter credited to his Account, subject to the provisions of Section 7.08,
will be distributed to him in accordance with Article 8 below. A Participant is
considered disabled if he cannot engage in any substantial, gainful activity
because of a medically determinable physical or mental impairment likely to
result in death or to be of a continuous period of not less than 12 months, and
terminates his employment with the Employer. Such termination of employment is
referred to as a disability retirement. Determinations with respect to
disability shall be made by the Administrator who may rely on the criteria set
forth in Section 1.06(c) as evidence that the Participant is disabled.
7.04. Death. Subject, if applicable, to Section 8.04, if a Participant dies
before the distribution of his Account has commenced, or before such
distribution has been completed, his Account shall become 100 percent vested and
his designated Beneficiary or Beneficiaries will be entitled to receive the
balance or remaining balance of his Account, plus any amounts thereafter
credited to his Account, subject to the provisions of Section 7.08. Distribution
to the Beneficiary or Beneficiaries will be made in accordance with Article 8.
A Participant may designate a Beneficiary or Beneficiaries, or change any
prior designation of Beneficiary or Beneficiaries by giving notice to the
Administrator on a form designated by the Administrator. If more than one person
is designated as the Beneficiary, their respective interests shall be as
indicated on the designation form. In the case of a married Participant, the
Participant's spouse shall be deemed to be the designated Beneficiary unless the
Participant's spouse has consented to another designation in the manner
described in Section 8.03(d).
A copy of the death notice or other sufficient documentation must be filed
with and approved by the Administrator. If upon the death of the Participant
there is, in the opinion of the Administrator, no designated Beneficiary for
part or all of the Participant's Account, such amount will be paid to his
surviving spouse or, if none, to his estate (such spouse or estate shall be
deemed to be the Beneficiary for purposes of the Plan). If a Beneficiary dies
after benefits to such Beneficiary have commenced, but before they have been
completed, and, in the opinion of the Administrator, no person has been
designated to receive such remaining benefits, then such benefits shall be paid
in a lump sum to the deceased Beneficiary's estate.
7.05. Other Termination of Employment. If a Participant terminates his
employment for any reason other than death or normal, late, or disability
retirement, he will be entitled to a termination benefit equal to the sum of (a)
the vested percentage(s) of the value of the Matching and/or Fixed/Discretionary
Contributions to his Account, as
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adjusted for income, expense, gain, or loss, such percentage(s) determined in
accordance with the vesting schedule(s) selected by the Employer in Section
1.07, and (b) the value of the Deferral, Employee, Qualified Discretionary and
Rollover Contributions to his Account as adjusted for income, expense, gain or
loss. The amount payable under this Section 7.05 will be subject to the
provisions of Section 7.08 and will be distributed in accordance with Article 8
below.
7.06. Separate Account. If a distribution from a Participant's Account has been
made to him at a time when he has a nonforfeitable right to less than 100
percent of his Account, the vesting schedule in Section 1.07 will thereafter
apply only to amounts in his Account attributable to Employer contributions
allocated after such distribution. The balance of his Account immediately after
such distribution will be transferred to a separate account which will be
maintained for the purpose of determining his interest therein according to the
following provisions.
At any relevant time prior to a forfeiture of any portion thereof under
Section 7.07, a Participant's nonforfeitable interest in his Account held in a
separate account described in the preceding paragraph will be equal to P(AB +
(RxD))-(RxD), where P is the nonforfeitable percentage at the relevant time
determined under Section 7.05; AB is the account balance of the separate account
at the relevant time; D is the amount of the distribution; and R is the ratio of
the account balance at the relevant time to the account balance after
distribution. Following a forfeiture of any portion of such separate account
under Section 7.07 below, any balance in the Participant's separate account will
remain fully vested and nonforfeitable.
7.07. Forfeitures. If a Participant terminates his employment, any portion of
his Account (including any amounts credited after his termination of employment)
not payable to him under Section 7.05 will be forfeited by him upon the complete
distribution to him of the vested portion of his Account, if any, subject to the
possibility of reinstatement as described in the following paragraph. For
purposes of this paragraph, if the value of an Employee's vested Account balance
is zero, the Employee shall be deemed to have received a distribution of his
vested interest immediately following termination of employment. Such
forfeitures will be applied to reduce the contributions of the Employer next
payable under the Plan (or administrative expenses of the Plan); the forfeitures
shall be held in a money market fund pending such application.
If a Participant forfeits any portion of his Account under the preceding
paragraph but again becomes an Employee after such date, then the amount so
forfeited, without any adjustment for the earnings, expenses, or losses or gains
of the assets credited to his Account since the date forfeited, will be
recredited to his Account (or to a separate account as described in Section
7.06, if applicable) but only if he repays to the Plan before the earlier of
five years after the date of his reemployment or the date he incurs 5
consecutive 1-year breaks in service following the date of the distribution the
amount previously distributed to him, without interest, under Section 7.05. If
an
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Employee is deemed to receive a distribution pursuant to this Section 7.07, and
the Employee resumes employment before 5 consecutive 1-year breaks in service,
the Employee shall be deemed to have repaid such distribution on the date of his
reemployment. Upon such an actual or deemed repayment, the provisions of the
Plan (including Section 7.06) will thereafter apply as if no forfeiture had
occurred. The amount to be recredited pursuant to this paragraph will be derived
first from the forfeitures, if any, which as of the date of recrediting have yet
to be applied as provided in the preceding paragraph and, to the extent such
forfeitures are insufficient, from a special Employer contribution to be made by
the Employer.
If a Participant elects not to receive the nonforfeitable portion of his
Account following his termination of employment, the non-vested portion of his
Account shall be forfeited after the Participant has incurred five consecutive
1-year breaks in service as defined in Section 2.01(a)(33).
No forfeitures will occur solely as a result of a Participant's withdrawal
of Employee contributions.
7.08. Adjustment for Investment Experience. If any distribution under this
Article 7 is not made in a single payment, the amount retained by the Trustee
after the distribution will be subject to adjustment until distributed to
reflect the income and gain or loss on the investments in which such amount is
invested and any expenses properly charged under the Plan and Trust to such
amounts.
7.09. Participant Loans. If permitted under Section 1.09, the Administrator
shall allow Participants to apply for a loan from the Plan, subject to the
following:
(a) Loan Application. All Plan loans shall be administered by the
Administrator. Applications for loans shall be made to the Administrator
on forms available from the Administrator. Loans shall be made available
to all Participants on a reasonably equivalent basis. For this purpose,
the term "Participant" means any Participant or Beneficiary, including an
alternate payee under a qualified domestic relations order, as defined in
Section 414(p) of the Code, who is a party-in-interest (as determined
under ERISA Section 3(14)) with respect to the Plan except no loans will
be made to (1) an Employee who makes a rollover contribution in accordance
with Section 4.10 who has not satisfied the requirements of Section 3.01
or (2) a shareholder-employee or Owner-Employee. For purposes of this
requirement, a shareholder-employee means an employee or officer of an
electing small business (Subchapter S) corporation who owns (or is
considered as owning within the meaning of Section 318(a)(1) of the Code),
on any day during the taxable year of such corporation, more than 5% of
the outstanding stock of the corporation.
A Participant with an existing loan may not apply for another loan
until the existing loan is paid in full and may not refinance an existing
loan or attain a second loan for the purpose of paying
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off the existing loan. A Participant may not apply for more than one loan
during each Plan Year.
(b) Limitation of Loan Amount/Purpose of Loan. Loans shall not be made
available to Highly Compensated Employees in an amount greater than the
amount made available to other Employees. No loan to any Participant or
Beneficiary can be made to the extent that such loan when added to the
outstanding balance of all other loans to the Participant or Beneficiary
would exceed the lesser of (1) $50,000 reduced by the excess (if any) of
the highest outstanding balance of loans during the one-year period ending
on the day before the loan is made over the outstanding balance of loans
from the plan on the date the loan is made, or (2) one-half the present
value of the nonforfeitable Account of the Participant. For the purpose of
the above limitation, all loans from all plans of the Employer and Related
Employers are aggregated. A Participant may not request a loan for less
than $1,000. The Employer may provide that loans only be made from certain
contribution sources within Participant Account(s) by notifying the
Trustee in writing of the restricted source.
Loans may be made for any purpose or if elected by the Employer in
Section 1.09(a), on account of hardship only. A loan will be considered to
be made on account of hardship only if made on account of an immediate and
heavy financial need described in Section 7.10(b)(1).
(c) Terms of Loan. All loans shall bear a reasonable rate of interest as
determined by the Administrator based on the prevailing interest rates
charged by persons in the business of lending money for loans which would
be made under similar circumstances. The determination of a reasonable
rate of interest must be based on appropriate regional factors unless the
Plan is administered on a national basis in which case the Administrator
may establish a uniform reasonable rate of interest applicable to all
regions.
All loans shall by their terms require that repayment (principal and
interest) be amortized in level payments, not less than quarterly, over a
period not extending beyond five years from the date of the loan unless
such loan is for the purchase of a Participant's primary residence, in
which case the repayment period may not extend beyond ten years from the
date of the loan. A Participant may prepay the outstanding loan balance
prior to maturity without penalty.
(d) Security. Loans must be secured by the Participant's Accounts not to
exceed 50 percent of the Participant's vested Account. A Participant must
obtain the consent of his or her spouse, if any, to use a Participant
Account as security for the loan, if the provisions of Section 8.03 apply
to the Participant. Spousal consent shall be obtained no earlier than the
beginning of the 90-day period that ends on the date on which the loan is
to be so secured. The consent must be in writing, must acknowledge the
effect of the loan, and must be witnessed by a Plan representative
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or notary public. Such consent shall thereafter be binding with respect to
the consenting spouse or any subsequent spouse with respect to that loan.
(e) Default. The Administrator shall treat a loan in default if
(1) any scheduled repayment remains unpaid more than 90 days
or
(2) there is an outstanding principal balance existing on a loan
after the last scheduled repayment date.
Upon default or termination of employment, the entire outstanding
principal and accrued interest shall be immediately due and payable. If a
distributable event (as defined by the Code) has occurred, the
Administrator shall direct the Trustee to foreclose on the promissory note
and offset the Participant's vested Account by the outstanding balance of
the loan. If a distributable event has not occurred, the Administrator
shall direct the Trustee to foreclose on the promissory note and offset
the Participant's vested Account as soon as a distributable event occurs.
(f) Pre-existing loans. The provision in paragraph (a) of this Section
7.09 limiting a Participant to one outstanding loan shall not apply to
loans made before the Employer adopted this prototype plan document. A
Participant may not apply for a new loan until all outstanding loans made
before the Employer adopted this prototype plan have been paid in full.
The Trustee may accept any loans made before the Employer adopted this
prototype plan document except such loans which require the Trustee to
hold as security for the loan property other than the Participant's vested
Account.
As of the effective date of amendment of this Plan in Section
1.01(g)(2), the Trustee shall have the right to reamortize the outstanding
principal balance of any Participant loan that is delinquent. Such
reamortization shall be based upon the remaining life of the loan and the
original maturity date may not be extended.
Notwithstanding any other provision of this Plan, the portion of the
Participant's vested Account used as a security interest held by the plan
by reason of a loan outstanding to the Participant shall be taken into
account for purposes of determining the amount of the Account payable at
the time of death or distribution, but only if the reduction is used as
repayment of the loan. If less than 100% of the Participant's vested
Account (determined without regard to the preceding sentence) is payable
to the surviving spouse, then the Account shall be adjusted by first
reducing the vested Account by the amount of the security used as
repayment of the loan, and then determining the benefit payable to the
surviving spouse.
No loan to any Participant or Beneficiary can be made to the extent
that such loan when added to the outstanding balance of all
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other loans to the Participant or Beneficiary would exceed the lesser of
(1) $50,000 reduced by the excess (if any) of the highest outstanding
balance of loans during the one-year period ending on the day before the
loan is made over the outstanding balance of loans from the plan on the
date the loan is made or (2) one-half the present value of the
nonforfeitable Account of the Participant. For the purpose of the above
limitation, all loans from all plans of the Employer and Related Employers
are aggregated.
7.10. In-Service/Hardship Withdrawals. Subject to the provisions of Article 8, a
Participant shall not be permitted to withdraw any Employer or Employee
Contributions (and earnings thereon) prior to retirement or termination of
employment, except as follows:
(a) Age 59 1/2. If permitted under Section 1.11(b), a Participant who has
attained the age of 59 1/2 is permitted to withdraw upon request all or any
portion of the Accounts specified by the Employer in 1.11(b).
(b) Hardship. If permitted under Section 1.10, a Participant may apply to
the Administrator to withdraw some or all of his Deferral Contributions (and
earnings thereon accrued as of December 31, 1988) and, if applicable, Rollover
Contributions and such other amounts allowed by a predecessor plan, if such
withdrawal is made on account of a hardship. For purposes of this Section, a
distribution is made on account of hardship if made on account of an immediate
and heavy financial need of the Employee where such Employee lacks other
available resources. Determinations with respect to hardship shall be made by
the Administrator and shall be conclusive for purposes of the Plan, and shall be
based on the following special rules:
(1) The following are the only financial needs considered immediate
and heavy: expenses incurred or necessary for medical care (within
the meaning of Section 213(d) of the Code) of the Employee, the
Employee's spouse, children, or dependents; the purchase (excluding
mortgage payments) of a principal residence for the Employee;
payment of tuition and related educational fees for the next twelve
(12) months of post-secondary education for the Employee, the
Employee's spouse, children or dependents; or the need to prevent
the eviction of the Employee from, or a foreclosure on the mortgage
of, the Employee's principal residence.
(2) A distribution will be considered as necessary to satisfy an
immediate and heavy financial need of the Employee only if:
(i) The Employee has obtained all distributions, other than
the hardship distributions, and all nontaxable (at the time of
the loan) loans currently available under all plans maintained
by the Employer;
(ii) The Employee suspends Deferral Contributions and Employee
Contributions to the Plan for the 12-month period
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following the date of his hardship distribution. The
suspension must also apply to all elective contributions and
Employee Contributions to all other qualified plans and
non-qualified plans maintained by the Employer, other than any
mandatory employer contribution portion of a defined benefit
plan, including stock option, stock purchase and other similar
plans, but not including health and welfare benefit plans
(other than the cash or deferred arrangement portion of a
cafeteria plan);
(iii) The distribution is not in excess of the amount of an
immediate and heavy financial need (including amounts
necessary to pay any Federal, state or local income taxes or
penalties reasonably anticipated to result from the
distribution); and
(iv) The Employee agrees to limit Deferral Contributions
(elective contributions)to the Plan and any other qualified
plan maintained by the Employer for the Employee's taxable
year immediately following the taxable year of the hardship
distribution to the applicable limit under Section 402(g) of
the Code for such taxable year less the amount of such
Employee's Deferral Contributions for the taxable year of the
hardship distribution.
(3) A Participant must obtain the consent of his or her spouse, if
any, to obtain a hardship withdrawal, if the provisions of Section
8.03 apply to the Participant.
(c) Employee Contributions. A Participant may elect to withdraw, in cash,
up to one hundred percent of the amount then credited to his Employee
Contribution Account. Such withdrawals shall be limited to one (1) per
Plan Year unless this prototype plan document is an amendment of a prior
plan document, in which case the rules and restrictions governing Employee
Contribution withdrawals, if any, are incorporated herein by reference.
7.11. Prior Plan In-Service Distribution Rules. If designated by the Employer in
Section 1.11(b), a Participant shall be entitled to withdraw at anytime prior to
his termination of employment, subject to the provisions of Article 8 and the
prior plan, any vested Employer Contributions maintained in a Participant's
Account for the specified period of time.
Article 8. Distribution of Benefits Payable After Termination of Service.
8.01. Distribution of Benefits to Participants and Beneficiaries.
(a) Distributions from the Trust to a Participant or to the Beneficiary of
the Participant shall be made in a lump sum in cash or, if elected by the
Employer in Section 1.11, under a systematic withdrawal plan
(installment(s)) upon retirement, death,
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disability, or other termination of employment, unless another form of
distribution is required or permitted in accordance with paragraph (d) of
this Section 8.01 or Sections 1.11(c), 8.02, 8.03, 8.04 or 11.02. A
distribution may be made in Fund Shares, at the election of the
Participant, pursuant to the qualifying rollover of such distribution to a
Fidelity Investments individual retirement account.
(b) Distributions under a systematic withdrawal plan must be made in
substantially equal annual, or more frequent, installments, in cash, over
a period certain which does not extend beyond the life expectancy of the
Participant or the joint life expectancies of the Participant and his
Beneficiary, or, if the Participant dies prior to the commencement of his
benefits the life expectancy of the Participant's Beneficiary, as further
described in Section 8.04.
(c) Notwithstanding the provisions of Section 8.01(b) above, if a
Participant's Account is, and at the time of any prior distribution(s)
was, $3,500 or less, the balance of such Account shall be distributed in a
lump sum as soon as practicable following retirement, disability, death or
other termination of employment.
(d) This paragraph (d) applies to distributions made on or after January
1, 1993. Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this Article 8, a
distributee may elect, at the time and in the manner prescribed by the
Administrator, to have any portion of an eligible rollover distribution
paid directly to an eligible retirement plan specified by the distributee
in a direct rollover. The following definitions shall apply for purposes
of this paragraph (d):
(1) Eligible rollover distribution: An eligible rollover
distribution is any distribution of all or any portion of the
balance to the credit of the distributee, except that an eligible
rollover distribution does not include: any distribution that is one
of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of
the distributee or the joint lives (or joint life expectancies) of
the distributee and the distributee's designated beneficiary, or for
a specified period of ten years or more; any distribution to the
extent such distribution is required under Section 401(a)(9) of the
Code; and the portion of any distribution that is not includable in
gross income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).
(2) Eligible retirement plan: An eligible retirement plan is an
individual retirement account described in Section 408(a) of the
Code, an individual retirement annuity described in Section 408(b)
of the Code, an annuity plan described in Section 403(a) of the
Code, or a qualified trust described in Section 401(a) of the Code,
that accepts the distributee's eligible rollover distribution.
However, in the case of an eligible rollover
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distribution to a surviving spouse, an eligible retirement plan is
an individual retirement account or individual retirement annuity.
(3) Distributee: A distributee includes an Employee or former
Employee. In addition, the Employee's or former Employee's surviving
spouse and the Employee's or former Employee's spouse or former
spouse who is the alternate payee under a qualified domestic
relations order, as defined in Section 414(p) of the Code, are
distributees with regard to the interest of the spouse or former
spouse.
(4) Direct rollover: A direct rollover is a payment by the plan to
the eligible retirement plan specified by the distributee.
8.02. Annuity Distributions. If so provided in Section 1.11(c), a Participant
may elect distributions made in whole or in part in the form of an annuity
contract subject to the provisions of Section 8.03.
(a) An annuity contract distributed under the Plan must be purchased from
an insurance company and must be nontransferable. The terms of an annuity
contract shall comply with the requirements of the Plan and distributions
under such contract shall be made in accordance with Section 401(a)(9) of
the Code and the regulations thereunder.
(b) The payment period of an annuity contract distributed to the
Participant pursuant to this Section may be as long as the Participant
lives. If the annuity is payable to the Participant and his spouse or
designated Beneficiary, the payment period of an annuity contract may be
for as long as either the Participant or his spouse or designated
Beneficiary lives. Such an annuity may provide for an annuity certain
feature for a period not exceeding the life expectancy of the Participant.
If the annuity is payable to the Participant and his spouse such period
may not exceed the joint life and last survivor expectancy of the
Participant and his spouse, or, if the annuity is payable to the
Participant and a designated Beneficiary, the joint life and last survivor
expectancy of the Participant and such Beneficiary. If the Participant
dies prior to the commencement of his benefits, the payment period of an
annuity contract distributed to the Beneficiary of the Participant may be
as long as the Participant's Beneficiary lives, and may provide for an
annuity certain feature for a period not exceeding the life expectancy of
the Beneficiary. Any annuity contract distributed under the Plan must
provide for nonincreasing payments.
8.03. Joint and Survivor Annuities/Preretirement Survivor Annuities.
(a) Application. The provisions of this Section supersede any conflicting
provisions of the Plan; however, paragraph (b) of this Section shall not
apply if the Participant's Account does not exceed or at the time of any
prior distribution did not exceed
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$3,500. A Participant is described in this Section only if (i) the
Participant has elected distribution of his Account in the form of an
Annuity Contract in accordance with Section 8.02, or (ii) the Trustee has
directly or indirectly received a transfer of assets from another plan
(including a predecessor plan) to which Section 401(a)(11) of the Code
applies with respect to such Participant.
(b) Retirement Annuity. Unless the Participant elects to waive the
application of this subsection in a manner satisfying the requirements of
subsection (d) below, to the extent applicable to the Participant, within
the 90-day period preceding his Annuity Starting Date (which election may
be revoked, and if revoked, remade, at any time in such period), the
vested Account due any Participant to whom this subsection (b) applies
will be paid to him by the purchase and delivery to him of an annuity
contract described in Section 8.02 providing a life annuity only form of
benefit or, if the Participant is married as of his Annuity Starting Date,
providing an immediate annuity for the life of the Participant with a
survivor annuity for the life of the Participant's spouse (determined as
of the date of distribution of the contract) which is 50 percent of the
amount of the annuity which is payable during the joint lives of the
Participant and such spouse. The Participant may elect to receive
distribution of his benefits in the form of such annuity as of the
earliest date on which he could elect to receive retirement benefits under
the Plan. Within the period beginning 90 days prior to the Participant's
Annuity Starting Date and ending 30 days prior to such Date, the
Administrator will provide such Participant with a written explanation of
(1) the terms and conditions of the annuity contract described herein, (2)
the Participant's to make, and the effect of, an election to waive
application of this subsection, (3) the rights of the Participant's spouse
under subsection (d), and (4) the right to revoke and the period of time
necessary to revoke the election to waive application of this subsection.
(c) Annuity Death Benefit. Unless the Participant elects to waive the
application of this subsection in a manner satisfying the requirements of
subsection (d) below at any time within the applicable election period
(which election may be revoked, and if revoked, remade, at any time in
such period), if a married Participant to whom this Section applies dies
before his Annuity Starting Date, then notwithstanding any designation of
a Beneficiary to the contrary, 50 percent of his vested Account will be
applied to purchase an annuity contract described in Section 8.02
providing an annuity for the life of the Participant's surviving spouse,
which contract will then be promptly distributed to such spouse. In lieu
of the purchase of such an annuity contract, the spouse may elect in
writing to receive distributions under the Plan as if he or she had been
designated by the Participant as his Beneficiary with respect to 50
percent of his Account. For purposes of this subsection, the applicable
election period will commence on the first day of the Plan Year in which
the Participant attains age 35 and will end on the date of the
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Participant's death, provided that in the case of a Participant who
terminates his employment the applicable election period with respect to
benefits accrued prior to the date of such termination will in no event
commence later than the date of his termination of employment. A
Participant may elect to waive the application of this subsection prior to
the Plan Year in which he attains age 35, provided that any such waiver
will cease to be effective as of the first day of the Plan Year in which
the Participant attains age 35.
The Administrator will provide a Participant to whom this subsection
applies with a written explanation with respect to the annuity death
benefit described in this subsection (c) comparable to that required under
subsection (b) above. Such explanation shall be furnished within whichever
of the following periods ends last: (1) the period beginning with the
first day of the Plan Year in which the Participant reaches age 32 and
ending with the end of the Plan Year preceding the Plan Year in which he
reaches age 35, (2) a reasonable period ending after the Employee becomes
a Participant, (3) a reasonable period ending after this Section 8.04
first becomes applicable to the Participant in accordance with Section
8.04(a), (4) in the case of a Participant who separates from service
before age 35, a reasonable period of time ending after separation from
service. For purposes of the preceding sentence, the two-year period
beginning one year prior to the date of the event described in clause (2),
(3) or (4), whichever is applicable, and ending one year after such date
shall be considered reasonable, provided, that in the case of a
Participant who separates from service under (4) above and subsequently
recommences employment with the Employer, the applicable period for such
Participant shall be redetermined in accordance with this subsection.
(d) Requirements of Elections. This subsection will be satisfied with
respect to a waiver or designation which is required to satisfy this
subsection if such waiver or designation is in writing and either
(1) the Participant's spouse consents thereto in writing, which
consent must acknowledge the effect of such waiver or designation
and be witnessed by a notary public or Plan representative, or
(2) the Participant establishes to the satisfaction of the
Administrator that the consent of the Participant's spouse cannot be
obtained because there is no spouse, because the spouse cannot be
located, or because of such other circumstances as the Secretary of
Treasury may prescribe.
Any consent by a spouse, or establishment that the consent of
a spouse may not be obtained, will be effective only with respect to
a specific Beneficiary (including any class of Beneficiaries or any
contingent Beneficiaries) or form of benefits identified in the
Participant's waiver or designation, unless the consent of the
spouse expressly permits designations
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by the Participant without any requirement of further consent by the
spouse. A consent which permits such designations by the Participant
shall acknowledge that the spouse has the right to limit consent to
a specific Beneficiary and form of benefits and that the spouse
voluntarily elects to relinquish both such rights. A consent by a
spouse shall be irrevocable once made. Any such consent, or
establishment that such consent may not be obtained, will be
effective only with respect to such spouse. For purposes of
subsections (b) and (c) above, no consent of a spouse shall be valid
unless the notice required by whichever subsection is applicable has
been provided to the Participant.
(e) Former Spouse. For purposes of this Section 8.03, a former spouse of a
Participant will be treated as the spouse or surviving spouse of the
Participant, and a current spouse will not be so treated, to the extent
required under a qualified domestic relations order, as defined in Section
414(p) of the Code.
(f) Vested Account Balance. For purposes of this Section, vested Account
shall include the aggregate value of the Participant's vested Account
derived from Employer and Employee Contributions (including rollovers),
whether vested before or upon death. The provisions of this Section shall
apply to a Participant who is vested in amounts attributable to Employer
contributions, Employee Contributions, or both, upon death or at the time
of distribution.
8.04 Installment Distributions. This Section shall be interpreted and applied in
accordance with the regulations under Section 401(a)(9) of the Code, including
the minimum distribution incidental benefit requirement of Section 1.401(a)(9)-2
of the Proposed Treasury Regulations, or any successor regulations of similar
import.
(a) In General. If a Participant's benefit may be distributed in
accordance with Section 8.01(b), the amount to be distributed for each
calendar year for which a minimum distribution is required shall be at
least an amount equal to the quotient obtained by dividing the
Participant's interest in his Account by the life expectancy of the
Participant or Beneficiary or the joint life and last survivor expectancy
of the Participant and his Beneficiary, whichever is applicable. For
calendar years beginning before January 1, 1989, if a Participant's
Beneficiary is not his spouse, the method of distribution selected must
insure that at least 50 percent of the present value of the amount
available for distribution is paid within the life expectancy of the
Participant. For calendar years beginning after December 31, 1988, the
amount to be distributed for each calendar year shall not be less than an
amount equal to the quotient obtained by dividing the Participant's
interest in his Account by the lesser of (1) the applicable life
expectancy under Section 8.01(b), or (2) if a Participant's Beneficiary is
not his spouse, the applicable divisor determined under Section
1.401(a)(9)-2, Q&A 4 of the Proposed Treasury Regulations, or any
successor regulations of similar import. Distributions after the death of
the Participant shall be made
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using the applicable life expectancy under (1) above, without regard to
Section 1.401(a)(9)-2 of such regulations.
The minimum distribution required under this subsection (a) for the
calendar year immediately preceding the calendar year in which the
Participant's required beginning date, as determined under Section
8.08(b), occurs shall be made on or before the Participant's required
beginning date, as so determined. Minimum distributions for other calendar
years shall be made on or before the close of such calendar year.
(b) Additional Requirements for Distributions After Death of Participant.
(1) Distribution beginning before Death. If the Participant dies
before distribution of his benefits has begun, distributions shall
be made in accordance with the provisions of this paragraph.
Distributions under Section 8.01(a) shall be completed by the close
of the calendar year in which the fifth anniversary of the death of
the Participant occurs. Distributions under Section 8.01(b) shall
commence, if the Beneficiary is not the Participant's spouse, not
later than the close of the calendar year immediately following the
calendar year in which the death of the Participant occurs.
Distributions under Section 8.01(b) to a Beneficiary who is the
Participant's surviving spouse shall commence not later than the
close of the calendar year in which the Participant would have
attained age 70 1/2 or, if later, the close of the calendar year
immediately following the calendar year in which the death of the
Participant occurs. In the event such spouse dies prior to the date
distribution to him or her commences, he or she will be treated for
purposes of this subsection (other than the preceding sentence) as
if he or she were the Participant. If the Participant has not
designated a Beneficiary, or the Participant or Beneficiary has not
effectively selected a method of distribution, distribution of the
Participant's benefit shall be completed by the close of the
calendar year in which the fifth anniversary of the death of the
Participant occurs.
Any amount paid to a child of the Participant will be treated as if
it had been paid to the surviving spouse if the amount becomes
payable to the surviving spouse when the child reaches the age of
majority.
For purposes of this subsection (b)(1), the life expectancy of a
Beneficiary who is the Participant's surviving spouse shall be
recalculated annually unless the Participant's spouse irrevocably
elects otherwise prior to the time distributions are required to
begin. Life expectancy shall be computed in accordance with the
provisions of subsection (a) above.
(2) Distribution beginning after Death. If the Participant dies
after distribution of his benefits has begun, distributions to the
Participant's Beneficiary will be made at least as
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rapidly as under the method of distribution being used as of the
date of the Participant's death.
For purposes of this Section 8.04(b), distribution of a
Participant's interest in his Account will be considered to begin as of
the Participant's required beginning date, as determined under Section
8.08(b). If distribution in the form of an annuity irrevocably commences
prior to such date, distribution will be considered to begin as of the
actual date distribution commences.
(c) Life Expectancy. For purposes of this Section, life expectancy shall
be recalculated annually in the case of the Participant or a Beneficiary
who is the Participant's spouse unless the Participant or Beneficiary
irrevocably elects otherwise prior to the time distributions are required
to begin. If not recalculated in accordance with the foregoing, life
expectancy shall be calculated using the attained age of the Participant
or Beneficiary, whichever is applicable, as of such individual's birth
date in the first year for which a minimum distribution is required
reduced by one for each elapsed calendar year since the date life
expectancy was first calculated. For purposes of this Section, life
expectancy and joint life and last survivor expectancy shall be computed
by use of the expected return multiples in Table V and VI of section
1.72-9 of the income tax Regulations.
A Participant's interest in his Account for purposes of this Section
8.04 shall be determined as of the last valuation date in the calendar
year immediately preceding the calendar year for which a minimum
distribution is required, increased by the amount of any contributions
allocated to, and decreased by any distributions from, such Account after
the valuation date. Any distribution for the first year for which a
minimum distribution is required made after the close of such year shall
be treated as if made prior to the close of such year.
8.05. Immediate Distributions. If the Account distributable to a Participant
exceeds, or at the time of any prior distribution exceeded, $3,500, no
distribution will be made to the Participant before he reaches his Normal
Retirement Age (or age 62, if later), unless the written consent of the
Participant has been obtained. Such consent shall be made in writing within the
90-day period ending on the Participant's Annuity Starting Date. Within the
period beginning 90 days before the Participant's Annuity Starting Date and
ending 30 days before such Date, the Administrator will provide such Participant
with written notice comparable to the notice described in Section 8.03(b)
containing a general description of the material features and an explanation of
the relative values of the optional forms of benefit available under the Plan
and informing the Participant of his right to defer receipt of the distribution
until his Normal Retirement Age (or age 62, if later).
The consent of the Participant's spouse must also be obtained if the
Participant is subject to the provisions of Section 8.03(a), unless the
distribution will be made in the form of the applicable retirement
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annuity contract described in Section 8.03(b). A spouse's consent to early
distribution, if required, must satisfy the requirements of Section 8.03(d).
Neither the consent of the Participant nor the Participant's spouse shall
be required to the extent that a distribution is required to satisfy Section
401(a)(9) or Section 415 of the Code. In addition, upon termination of the Plan
if it does not offer an annuity option (purchased from a commercial provider)
and if the Employer or any Related Employer does not maintain another defined
contribution plan (other than an employee stock ownership plan as defined in
Code Section 4975(e)(7)) the Participant's Account will, without the
Participant's consent, be distributed to the Participant. However, if any
Related Employer maintains another defined contribution plan (other than an
employee stock ownership plan as defined in Section 4975(e)(7) of the Code) then
the Participant's Account will be transferred, without the Participant's
consent, to the other plan if the Participant does not consent to an immediate
distribution.
8.06. Determination of Method of Distribution. The Participant will determine
the method of distribution of benefits to himself and may determine the method
of distribution to his Beneficiary. Such determination will be made prior to the
time benefits become payable under the Plan. If the Participant does not
determine the method of distribution to his Beneficiary or if the Participant
permits his Beneficiary to override his determination, the Beneficiary, in the
event of the Participant's death, will determine the method of distribution of
benefits to himself as if he were the Participant. A determination by the
Beneficiary must be made no later than the close of the calendar year in which
distribution would be required to begin under Section 8.04(b) or, if earlier,
the close of the calendar year in which the fifth anniversary of the death of
the Participant occurs.
8.07. Notice to Trustee. The Administrator will notify the Trustee in writing
whenever any Participant or Beneficiary is entitled to receive benefits under
the Plan. The Administrator's notice shall indicate the form of benefits that
such Participant or Beneficiary shall receive and (in the case of distributions
to a Participant) the name of any designated Beneficiary or Beneficiaries.
8.08. Time of Distribution. In no event will distribution to a Participant be
made latest than the earlier of the dates described in (a) and (b) below:
(a) Absent the consent of the Participant (and his spouse, if
appropriate), the 60th day after the close of the Plan Year in which
occurs the later of the date on which the Participant attains age 65, the
date on which the Participant ceases to be employed by the Employer, or
the 10th anniversary of the year in which the Participant commenced
participation in the Plan; and
(b) April 1 of the calendar year first following the calendar year in
which the Participant attains age 70 1/2 or, in the case of a Participant
who had attained age 70 1/2 before January 1, 1988,
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the required beginning date determined in accordance with (1) or (2)
below:
(1) The required beginning date of a Participant who is not a
5-percent owner is the first day of April of the calendar year
following the calendar year in which the later of retirement or
attainment of age 70 1/2 occurs.
(2) The required beginning date of a Participant who is a 5-percent
owner during any year beginning after December 31, 1979, is the
first day of April following the later of
(A) the calendar year in which the Participant attains age 70
1/2, or
(B) the earlier of the calendar year with or within which ends
the Plan Year in which the Participant becomes a 5-percent
owner, or the calendar year in which the Participant retires.
Notwithstanding the foregoing, in the case of a Participant who attained
age 70 1/2 during 1988 and who had not retired prior to January 1, 1989, the
required beginning date described in this paragraph shall be April 1, 1990.
Notwithstanding (a) above, the failure of a Participant (and spouse) to
consent to a distribution while a benefit is immediately distributable, within
the meaning of Section 8.05, shall be deemed to be an election to defer
commencement of payment of any benefit sufficient to satisfy (a) above.
Once distributions have begun to a 5-percent owner under (b) above, they
must continue to be distributed, even if the Participant ceases to be a
5-percent owner in a subsequent year.
For purposes of (b) above, a Participant is treated as a 5-percent owner
if such Participant is a 5-percent owner as defined in Section 416(i) of the
Code (determined in accordance with Section 416 but without regard to whether
the Plan is top-heavy) at any time during the Plan Year ending with or within
the calendar year in which such owner attains age 66 1/2 or any subsequent Plan
Year.
The Administrator shall notify the Trustee in writing whenever a
distribution is necessary in order to comply with the minimum distribution rules
set forth in this Section.
8.09. Whereabouts of Participants and Beneficiaries. The Administrator will at
all times be responsible for determining the whereabouts of each Participant or
Beneficiary who may be entitled to benefits under the Plan and will at all times
be responsible for instructing the Trustee in writing as to the current address
of each such Participant or Beneficiary. The Trustee will be entitled to rely on
the latest written statement received from the Administrator as to such
addresses. The Trustee will be under no duty to make any distributions under the
Plan
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unless and until it has received written instructions from the Administrator
satisfactory to the Trustee containing the name and address of the distributee,
the time when the distribution is to occur, and the form which the distribution
will take. Notwithstanding the foregoing, if the Trustee attempts to make a
distribution in accordance with the Administrator's instructions but is unable
to make such distribution because the whereabouts of the distributee is unknown,
the Trustee will notify the Administrator of such situation and thereafter the
Trustee will be under no duty to make any further distributions to such
distributee until it receives further written instructions from the
Administrator. If a benefit is forfeited because the Administrator determines
that the Participant or Beneficiary cannot be found, such benefit will be
reinstated by the Sponsor if a claim is filed by the Participant or Beneficiary
with the Administrator and the Administrator confirms the claim to the Sponsor.
Article 9. Top-Heavy Provisions.
9.01 Application. If the Plan is or becomes a Top-Heavy Plan in any Plan Year or
is automatically deemed to be Top-Heavy in accordance with the Employer's
election in Section 1.12(a)(1) of the Adoption Agreement, the provisions of this
Article 9 shall supersede any conflicting provision in the Plan.
9.02 Definitions. For purposes of this Article 9, the following terms have the
meanings set forth below:
(a) Key Employee. Any Employee or former Employee (and the Beneficiary of
any such Employee) who at any time during the determination period was (1)
an officer of the Employer whose annual Compensation exceeds 50 percent of
the dollar limitation under Section 415(b)(1)(A) of the Code, (2) an owner
(or considered an owner under Section 318 of the Code) of one of the ten
largest interests in the Employer if such individual's annual Compensation
exceeds the dollar limitation under Section 415(c)(1)(A) of the Code, (3)
a 5-percent owner of the Employer, or (4) a 1-percent owner of the
Employer who has annual Compensation of more than $150,000. For purposes
of this paragraph, the determination period is the Plan Year containing
the Determination Date and the four preceding Plan Years. The
determination of who is a Key Employee shall be made in accordance with
Section 416(i)(1) of the Code and the regulations thereunder. Annual
Compensation means compensation as defined in Section 5.03(e)(2), but
including amounts contributed by the Employer pursuant to a salary
reduction agreement which are excludable from the employee's gross income
under Section 125, Section 402(a)(8), and Section 403(b) of the Code.
(b) Top-Heavy Plan. The Plan is a Top-Heavy Plan if any of the following
conditions exists:
(1) the Top-Heavy Ratio for the Plan exceeds 60 percent and the Plan
is not part of any Required Aggregation Group or Permissive
Aggregation Group,
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(2) the Plan is a part of a Required Aggregation Group but not part
of a Permissive Aggregation Group and the Top-Heavy Ratio for the
Required Aggregation Group exceeds 60 percent, or
(3) the Plan is a part of a Required Aggregation Group and a
Permissive Aggregation Group and the Top-Heavy Ratio for both Groups
exceeds 60 percent.
(c) Top-Heavy Ratio.
(1) With respect to this Plan, or with respect to any Required
Aggregation Group or Permissive Aggregation Group that consists
solely of defined contribution plans (including any simplified
employee pension plans) and the Employer has not maintained any
defined benefit plan which during the 5-year period ending on the
determination date(s) has or has had accrued benefits, the Top-Heavy
Ratio is a fraction, the numerator of which is the sum of the
account balances of all Key Employees under the plans as of the
Determination Date (including any part of any account balance
distributed in the 5-year period ending on the Determination Date),
and the denominator of which is the sum of all account balances
(including any part of any account balance distributed in the 5-year
period ending on the Determination Date) of all participants under
the plans as of the Determination Date. Both the numerator and
denominator of the Top-Heavy Ratio shall be increased, to the extent
required by Section 416 of the Code, to reflect any contribution
which is due but unpaid as of the Determination Date.
(2) With respect to any Required Aggregation Group or Permissive
Aggregation Group that includes one or more defined benefit plans
which, during the 5-year period ending on the Determination Date,
has covered or could cover a Participant in this Plan, the Top-Heavy
Ratio is a fraction, the numerator of which is the sum of the
account balances under the defined contribution plans for all Key
Employees and the present value of accrued benefits under the
defined benefit plans for all Key Employees, and the denominator of
which is the sum of the account balances under the defined
contribution plans for all participants and the present value of
accrued benefits under the defined benefit plans for all
participants. Both the numerator and denominator of the Top-Heavy
Ratio shall be increased for any distribution of an account balance
or an accrued benefit made in the 5-year period ending on the
Determination Date and any contribution due but unpaid as of the
Determination Date.
(3) For purposes of (1) and (2) above, the value of Accounts and the
present value of accrued benefits will be determined as of the most
recent Valuation Date that falls within or ends with the 12-month
period ending on the Determination Date, except as provided in
Section 416 of the Code and the regulations thereunder for the first
and second plan years of a defined benefit plan. The Account and
accrued benefits of a Participant
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(A) who is not a Key Employee but who was a Key Employee in a prior
year, or (B) who has not been credited with at least one Hour of
Service with the Employer at any time during the 5-year period
ending on the Determination Date, will be disregarded. The
calculation of the Top-Heavy Ratio, and the extent to which
distributions, rollovers, and transfers are taken into account,
shall be made in accordance with Section 416 of the Code and the
regulations thereunder. Deductible employee contributions shall not
be taken into account for purposes of computing the Top-Heavy Ratio.
When aggregating plans, the value of Accounts and accrued benefits
shall be calculated with reference to the Determination Dates that
fall within the same calendar year.
For purposes of determining if the Plan, or any other plan
included in a Required Aggregation Group of which this Plan is a
part, is a Top-Heavy Plan, the accrued benefit in a defined benefit
plan of an Employee other than a Key Employee shall be determined
under (i) the method, if any, that uniformly applies for accrual
purposes under all plans maintained by the Employer, or (ii) if
there is no such method, as if such benefit accrued not more rapidly
than the slowest accrual rate permitted under the fractional accrual
rate of Section 411(b)(1)(C) of the Code.
(d) Permissive Aggregation Group. The Required Aggregation Group plus any
other qualified plans of the Employer or a Related Employer which, when
considered as a group with the Required Aggregation Group, would continue
to satisfy the requirements of Sections 401(a)(4) and 410 of the Code.
(e) Required Aggregation Group.
(1) Each qualified plan of the Employer or Related Employer in which
at least one Key Employee participates, or has participated at any
time during the determination period (regardless of whether the plan
has terminated), and
(2) any other qualified plan of the Employer or Related Employer
which enables a plan described in (1) above to meet the requirements
of Sections 401(a)(4) or 410 of the Code.
(f) Determination Date. For any Plan Year of the Plan subsequent to the
first Plan Year, the last day of the preceding Plan Year. For the first
Plan Year of the Plan, the last day of that Plan Year.
(g) Valuation Date. The Determination Date.
(h) Present Value. Present value shall be based only on the interest rate
and mortality table specified in the Adoption Agreement.
9.03. Minimum Contribution.
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(a) Except as otherwise provided in (b) and (c) below, the
Fixed/Discretionary Contributions made on behalf of any Participant who is
not a Key Employee shall not be less than the lesser of 3 percent (or such
other percent elected by the Employer in Section 1.12(c)) of such
Participant's Compensation or, in the case where the Employer has no
defined benefit plan which designates this Plan to satisfy Section 401 of
the Code, the largest percentage of Employer contributions, as a
percentage of the first $200,000 of the Key Employee's Compensation, made
on behalf of any Key Employee for that year. If the Employer selected the
Integrated Formula in Section 1.05(a)(2), the minimum contribution shall
be determined under paragraph (e) of this Section 9.03. Further, the
minimum contribution under this Section 9.03 shall be made even though,
under other Plan provisions, the Participant would not otherwise be
entitled to receive a contribution, or would have received a lesser
contribution for the year, because (1) the Participant failed to complete
1,000 Hours of Service or any equivalent service requirement provided in
the Adoption Agreement; or (2) the Participant's Compensation was less
than a stated amount.
(b) The provisions of (a) above shall not apply to any Participant who was
not employed by the Employer on the last day of the Plan Year.
(c) The Employer contributions for the Plan Year made on behalf of each
Participant who is not a Key Employee and who is a participant in a
defined benefit plan maintained by the Employer shall not be less than 5
percent of such Participant's Compensation, unless the Employer has
provided in Section 1.12(c) that the minimum contribution requirement will
be met in the other plan or plans of the Employer.
(d) The minimum contribution required under (a) above (to the extent
required to be nonforfeitable under Section 416(b) of the Code) may not be
forfeited under Section 411(a)(3)(B) or 411(a)(3)(D) of the Code.
(e) If the Employer elected an Integrated Formula in Section 1.05(a)(2),
the allocation steps in Section 4.06(b)(2) shall be preceded by the
following steps:
(1) The Discretionary Employer Contributions will be allocated
to each eligible Participant (as determined under this Section 9.03)
in the ratio that the Participant's Compensation bears to all
Participants' Compensation, but not in excess of 3%(or such other
percent elected by the Employer in Section 1.12(c).
(2) Any Discretionary Employer Contributions remaining after
(e)(1) above will be allocated to each eligible Participant in the
ratio that the Participant's Excess Compensation for the Plan Year
bears to the Excess Compensation of all eligible Participants, but
not in excess of 3%(or such other percent elected by the Employer in
Section 1.12(c)).
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9.04. Adjustment to the Limitation on Contributions and Benefits. If this Plan
is in Top-Heavy status, the number 100 shall be substituted for the number 125
in subsections (e)(3) and (e)(4) of Section 5.03. However, this substitution
shall not take effect with respect to this Plan in any Plan Year in which the
following requirements are satisfied:
(a) The Employer contributions for such Plan Year made on behalf of each
Participant who is not a Key Employee and who is a participant in a
defined benefit plan maintained by the Employer is not less than 7 1/2
percent of such Participant's Compensation.
(b) The sum of the present value as of the Determination Date of (1) the
aggregate accounts of all Key Employees under all defined contribution
plans of the Employer and (2) the cumulative accrued benefits of all Key
Employees under all defined benefit plans of the Employer does not exceed
90 percent of the same amounts determined for all Participants under all
plans of the Employer that are Top-Heavy Plans, excluding Accounts and
accrued benefits for Employees who formerly were but are no longer Key
Employees.
The substitutions of the number 100 for 125 shall not take effect in
any Limitation Year with respect to any Participant for whom no benefits
are accrued or contributions made for such Year.
9.05. Minimum Vesting. For any Plan Year in which the Plan is a Top-Heavy Plan
and all Plan Years thereafter, the Top-Heavy vesting schedule elected in Section
1.12(d) will automatically apply to the Plan. The Top-Heavy vesting schedule
applies to all benefits within the meaning of Section 411(a)(7) of the Code
except those attributable to Employee Contributions or those already subject to
a vesting schedule which vests at least as rapidly in all cases as the schedule
elected in Section 1.12(d), including benefits accrued before the Plan becomes a
Top-Heavy Plan. Further, no decrease in a Participant's nonforfeitable
percentage may occur in the event the Plan's status as a Top-Heavy Plan changes
for any Plan Year. However, this Section 9.05 does not apply to the Account of
any Employee who does not have an Hour of Service after the Plan has initially
become a Top-Heavy Plan and such Employee's Account attributable to Employer
Contributions will be determined without regard to this Section 9.05.
Article 10. Amendment and Termination.
10.01 Amendment by Employer. The Employer reserves the authority, subject to the
provisions of Article 1 and Section 10.03, to amend the Plan:
(a) Changes to Elections Contained in the Adoption Agreement. By filing
with the Trustee an amended Adoption Agreement, executed by the Employer
only, on which said Employer has indicated a change or changes in
provisions previously elected by it. Such changes are to be effective on
the effective date of such amended Adoption
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Agreement except that retroactive changes to a previous election or
elections pursuant to the regulations issued under Section 401(a)(4) of
the Code shall be permitted. Any such change notwithstanding, no
Participant's Account shall be reduced by such change below the amount to
which the Participant would have been entitled if he had voluntarily left
the employ of the Employer immediately prior to the date of the change.
The Employer may from time to time make any amendment to the Plan that may
be necessary to satisfy Sections 415 or 416 of the Code because of the
required aggregation of multiple plans by completing overridingplan
language in the Adoption Agreement. The Employer may also add certain
model amendments published by the Internal Revenue Service which
specifically provide that their adoption will not cause the Plan to be
treated as an individually designed plan; or
(b) Other Changes. By amending any provision of the Plan for any reason
other than those specified in (a) above. However, upon making such
amendment, including a waiver of the minimum funding requirement under
Section 412(d) of the Code, the Employer may no longer participate in this
prototype plan arrangement and will be deemed to have an individually
designed plan. Following such amendment, the Trustee may transfer the
assets of the Trust to the trust forming part of such newly adopted plan
upon receipt of sufficient evidence (such as a determination letter or
opinion letter from the Internal Revenue Service or an opinion of counsel
satisfactory to the Trustee) that such trust will be a qualified trust
under the Code.
10.02. Amendment by Prototype Sponsor. The Prototype Sponsor may in its
discretion amend the Plan or the Adoption Agreement at any time, subject to the
provisions of Article 1 and Section 10.03, and provided that the Prototype
Sponsor mails a copy of such amendment to the Employer at its last known address
as shown on the books of the Prototype Sponsor.
10.03. Amendments Affecting Vested and/or Accrued Benefits.
(a) Except as permitted by Section 10.04, no amendment to the Plan shall
be effective to the extent that it has the effect of decreasing a
Participant's Account or eliminating an optional form of benefit with
respect to benefits attributable to service before the amendment.
Furthermore, if the vesting schedule of the Plan is amended, the
nonforfeitable interest of a Participant in his Account, determined as of
the later of the date the amendment is adopted or the date it becomes
effective, will not be less than the Participant's nonforfeitable interest
in his Account determined without regard to such amendment.
(b) If the Plan's vesting schedule is amended, including any amendment
resulting from a change to or from Top-Heavy Plan status, or the Plan is
amended in any way that directly or indirectly affects the computation of
a Participant's nonforfeitable interest in his Account, each Participant
with at least three (3) Years of Service for Vesting with the Employer may
elect, within a
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reasonable period after the adoption of the amendment, to have the
nonforfeitable percentage of his Account computed under the Plan without
regard to such amendment. The Participant's election may be made within 60
days from the latest of (1) the date the amendment is adopted, (2) the
date the amendment becomes effective, or (3) the date the Participant is
issued written notice of the amendment by the Employer or the
Administrator.
10.04. Retroactive Amendments. An amendment made by the Prototype Sponsor in
accordance with Section 10.02 may be made effective on a date prior to the first
day of the Plan Year in which it is adopted if such amendment is necessary or
appropriate to enable the Plan and Trust to satisfy the applicable requirements
of the Code or to conform the Plan to any change in federal law, or to any
regulations or ruling thereunder. Any retroactive amendment by the Employer
shall be subject to the provisions of Section 10.01.
10.05. Termination. The Employer has adopted the Plan with the intention and
expectation that contributions will be continued indefinitely. However, said
Employer has no obligation or liability whatsoever to maintain the Plan for any
length of time and may discontinue contributions under the Plan or terminate the
Plan at any time by written notice delivered to the Trustee without any
liability hereunder for any such discontinuance or termination.
10.06. Distribution upon Termination of the Plan. Upon termination or partial
termination of the Plan or complete discontinuance of contributions thereunder,
each Participant (including a terminated Participant with respect to amounts not
previously forfeited by him) who is affected by such termination or partial
termination or discontinuance will have a fully vested interest in his Account,
and, subject to Section 4.05 and Article 8, the Trustee will distribute to each
Participant or other person entitled to distribution the balance of the
Participant's Account in a single lump sum payment. In the absence of such
instructions, the Trustee will notify the Administrator of such situation and
the Trustee will be under no duty to make any distributions under the Plan until
it receives written instructions from the Administrator. Upon the completion of
such distributions, the Trust will terminate, the Trustee will be relieved from
all liability under the Trust, and no Participant or other person will have any
claims thereunder, except as required by applicable law.
10.07. Merger or Consolidation of Plan; Transfer of Plan Assets. In case of any
merger or consolidation of the Plan with, or transfer of assets and liabilities
of the Plan to, any other plan, provision must be made so that each Participant
would, if the Plan then terminated, receive a benefit immediately after the
merger, consolidation or transfer which is equal to or greater than the benefit
he would have been entitled to receive immediately before the merger,
consolidation or transfer if the Plan had then terminated.
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Article 11. Amendment and Continuation of Predecessor Plan; Transfer of Funds to
or from Other Qualified Plans.
11.01. Amendment and Continuation of Predecessor Plan. In the event the Employer
has previously established a plan (the "predecessor plan") which is a defined
contribution plan under the Code and which on the date of adoption of the Plan
meets the applicable requirements of section 401(a) of the Code, the Employer
may, in accordance with the provisions of the predecessor plan, amend and
continue the predecessor plan in the form of the Plan and become the Employer
hereunder, subject to the following:
(a) Subject to the provisions of the Plan, each individual who was a
Participant or former Participant in the predecessor plan immediately
prior to the effective date of such amendment and continuation will become
a Participant or former Participant in the Plan;
(b) No election may be made under the vesting provisions of the Adoption
Agreement if such election would reduce the benefits of a Participant
under the Plan to less than the benefits to which he would have been
entitled if he voluntarily separated from the service of the Employer
immediately prior to such amendment and continuation;
(c) No amendment to the Plan shall decrease a Participant's accrued
benefit or eliminate an optional form of benefit and if the amendment of
the predecessor plan in the form of the Plan results in a change in the
method of crediting service for vesting purposes between the general
method set forth in Section 2530.200b-2 of the Department of Labor
Regulations and the elapsed-time method in Section 2.01(a)(33) of the
Plan, each Participant with respect to whom the method of crediting
vesting service is changed shall be treated in the manner set forth by the
provisions of Section 1.410(a)-7(f)(1) of the Treasury Regulations which
are incorporated herein by reference;
(d) The amounts standing to the credit of a Participant's Account
immediately prior to such amendment and continuation which represent the
amounts properly attributable to (1) contributions by the Participant and
(2) contributions by the Employer and forfeitures will constitute the
opening balance of his Account or Accounts under the Plan;
(e) Amounts being paid to a former Participant or to a Beneficiary in
accordance with the provisions of the predecessor plan will continue to be
paid in accordance with such provisions;
(f) Any election and waiver of the qualified pre-retirement annuity in
effect after August 23, 1984, under the predecessor plan immediately
before such amendment and continuation will be deemed a valid election and
waiver of Beneficiary under Section 8.04 if such designation satisfies the
requirements of Section 8.04(d), unless
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and until the Participant revokes such election and waiver under the Plan;
and
(g) Unless the Employer and the Trustee agree otherwise, all assets of the
predecessor trust will be deemed to be assets of the Trust as of the
effective date of such amendment. Such assets will be invested by the
Trustee as soon as reasonably practicable pursuant to Article 6. The
Employer agrees to assist the Trustee in any way requested by the Trustee
in order to facilitate the transfer of assets from the predecessor trust
to the Trust Fund.
11.02. Transfer of Funds from an Existing Plan. The Employer may from time to
time direct the Trustee, in accordance with such rules as the Trustee may
establish, to accept cash, allowable Fund Shares or participant loan promissory
notes transferred for the benefit of Participants from a trust forming part of
another qualified plan under the Code, provided such plan is a defined
contribution plan. Such transferred assets will become assets of the Trust as of
the date they are received by the Trustee. Such transferred assets will be
credited to Participants' Accounts in accordance with their respective interests
immediately upon receipt by the Trustee. A Participant's interest under the Plan
in transferred assets which were fully vested and nonforfeitable under the
transferring plan will be fully vested and nonforfeitable at all times. Such
transferred assets will be invested by the Trustee in accordance with the
provisions of paragraph (g) of Section 11.01 as if such assets were transferred
from a predecessor plan. No transfer of assets in accordance with this Section
may cause a loss of an accrued or optional form of benefit protected by Section
411(d)(6) of the Code.
11.03. Acceptance of Assets by Trustee. The Trustee will not accept assets which
are not either in a medium proper for investment under the Plan, as set forth in
Section 1.14(b), or in cash. Such assets shall be accompanied by written
instructions showing separately the respective contributions by the prior
employer and by the Employee, and identifying the assets attributable to such
contributions. The Trustee shall establish such accounts as may be necessary or
appropriate to reflect such contributions under the Plan. The Trustee shall hold
such assets for investment in accordance with the provisions of Article 6, and
shall in accordance with the written instructions of the Employer make
appropriate credits to the Accounts of the Participants for whose benefit assets
have been transferred.
11.04. Transfer of Assets from Trust. The Employer may direct the Trustee to
transfer all or a specified portion of the Trust assets to any other plan or
plans maintained by the Employer or the employer or employers of a former
Participant or Participants, provided that the Trustee has received evidence
satisfactory to it that such other plan meets all applicable requirements of the
Code. The assets so transferred shall be accompanied by written instructions
from the Employer naming the persons for whose benefit such assets have been
transferred, showing separately the respective contributions by the Employer and
by each Participant, if any, and identifying the assets
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attributable to the various contributions. The Trustee shall have no further
liabilities with respect to assets so transferred.
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Article 12. Miscellaneous.
12.01. Communication to Participants. The Plan will be communicated to all
Participants by the Employer promptly after the Plan is adopted.
12.02. Limitation of Rights. Neither the establishment of the Plan and the
Trust, nor any amendment thereof, nor the creation of any fund or account, nor
the payment of any benefits, will be construed as giving to any Participant or
other person any legal or equitable right against the Employer, Administrator or
Trustee, except as provided herein; and in no event will the terms of employment
or service of any Participant be modified or in any way affected hereby. It is a
condition of the Plan, and each Participant expressly agrees by his
participation herein, that each Participant will look solely to the assets held
in the Trust for the payment of any benefit to which he is entitled under the
Plan.
12.03. Nonalienability of Benefits and Qualified Domestic Relations Orders. The
benefits provided hereunder will not be subject to alienation, assignment,
garnishment, attachment, execution or levy of any kind, either voluntarily or
involuntarily, and any attempt to cause such benefits to be so subjected will
not be recognized, except to such extent as may be required by law. The
preceding sentence shall also apply to the creation, assignment, or recognition
of a right to any benefit payable with respect to a Participant pursuant to a
domestic relations order, unless such order is determined by the Plan
Administrator to be a qualified domestic relations order, as defined in Section
414(p) of the Code, or any domestic relations order entered before January 1,
1985. The Administrator must establish reasonable procedures to determine the
qualified status of a domestic relations order. Upon receiving a domestic
relations order, the Administrator will promptly notify the Participant and any
alternate payee named in the order, in writing, of the receipt of the order and
the Plan's procedures for determining the qualified status of the order. Within
a reasonable period of time after receiving the domestic relations order, the
Administrator must determine the qualified status of the order and must notify
the Participant and each alternate payee, in writing, of its determination. The
Administrator must provide notice under this paragraph by mailing to the
individual's address specified in the domestic relations order, or in a manner
consistent with the Department of Labor regulations.
If any portion of the Participant's Account is payable during the period
the Administrator is making its determination of the qualified status of the
domestic relations order, the Administrator must make a separate accounting of
the amounts payable. If the Administrator determines the order is a qualified
domestic relations order within 18 months of the date amounts first are payable
following receipt of the order, the Administrator will direct the Trustee to
distribute the payable amounts in accordance with the order. If the
Administrator does not make his determination of the qualified status of the
order within the 18-month determination period, the Administrator will direct
the Trustee to distribute the payable amounts in the manner the Plan would
distribute if the order did not exist and will apply the order
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prospectively if the Administrator later determines the order is a qualified
domestic relations order.
A domestic relations order will not fail to be deemed a qualified domestic
relations order merely because it requires the distribution or segregation of
all or part of a Participant's Account with respect to an alternate payee prior
to the Participant's earliest retirement age (as defined in Section 414(p) of
the Code) under the Plan. A distribution to an alternate payee prior to the
Participant's attainment of the earliest retirement age is available only if (a)
the order specifies distribution at that time and (b) if the present value of
the alternate payee's benefits under the Plan exceeds $3,500, and the order
requires, and the alternate payee consents to, a distribution occurring prior to
the Participant's attainment of earliest retirement age.
12.04. Facility of Payment. In the event the Administrator determines, on the
basis of medical reports or other evidence satisfactory to the Administrator,
that the recipient of any benefit payments under the Plan is incapable of
handling his affairs by reason of minority, illness, infirmity or other
incapacity, the Administrator may direct the Trustee to disburse such payments
to a person or institution designated by a court which has jurisdiction over
such recipient or a person or institution otherwise having the legal authority
under state law for the care and control of such recipient. The receipt by such
person or institution of any such payments shall be complete acquittance
therefore, and any such payment to the extent thereof, shall discharge the
liability of the Trust for the payment of benefits hereunder to such recipient.
12.05. Information between Employer and Trustee. The Employer agrees to furnish
the Trustee, and the Trustee agrees to furnish the Employer, with such
information relating to the Plan and Trust as may be required by the other in
order to carry out their respective duties hereunder, including without
limitation information required under the Code and any regulations issued or
forms adopted by the Treasury Department thereunder or under the provisions of
ERISA and any regulations issued or forms adopted by the Labor Department
thereunder.
12.06. Effect of Failure to Qualify Under Code. Notwithstanding any other
provision contained herein, if the Employer fails to obtain or retain approval
of the Plan by the Internal Revenue Service as a qualified Plan under the Code,
the Employer may no longer participate in this prototype Plan arrangement and
will be deemed to have an individually designed plan.
12.07. Notices. Any notice or other communication in connection with this Plan
shall be deemed delivered in writing if addressed as provided below and if
either actually delivered at said address or, in the case of a letter, three
business days shall have elapsed after the same shall have been deposited in the
United States mails, first-class postage prepaid and registered or certified:
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(a) If to the Employer or Administrator, to it at the address set forth in
the Adoption Agreement, to the attention of the person specified to
receive notice in the Adoption Agreement;
(b) If to the Trustee, to it at the address set forth in the Adoption
Agreement;
or, in each case at such other address as the addressee shall have specified by
written notice delivered in accordance with the foregoing to the addressor's
then effective notice address.
12.08. Governing Law. The Plan and the accompanying Adoption Agreement will be
construed, administered and enforced according to ERISA, and to the extent not
preempted thereby, the laws of the Commonwealth of Massachusetts.
Article 13. Plan Administration.
13.01. Powers and Responsibilities of the Administrator. The Administrator has
the full power and the full responsibility to administer the Plan in all of its
details, subject, however, to the requirements of ERISA. The Administrator's
powers and responsibilities include, but are not limited to, the following:
(a) To make and enforce such rules and regulations as it deems necessary
or proper for the efficient administration of the Plan;
(b) To interpret the Plan, its interpretation thereof in good faith to be
final and conclusive on all persons claiming benefits under the Plan;
(c) To decide all questions concerning the Plan and the eligibility of any
person to participate in the Plan;
(d) To administer the claims and review procedures specified in Section
13.03;
(e) To compute the amount of benefits which will be payable to any
Participant, former Participant or Beneficiary in accordance with the
provisions of the Plan;
(f) To determine the person or persons to whom such benefits will be paid;
(g) To authorize the payment of benefits and provide for the distribution
of Code Section 402(f) notices;
(h) To comply with the reporting and disclosure requirements of Part 1 of
Subtitle B of Title I of ERISA;
(i) To appoint such agents, counsel, accountants, and consultants as may
be required to assist in administering the Plan;
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(j) By written instrument, to allocate and delegate its fiduciary
responsibilities in accordance with Section 405 of ERISA including the
formation of an Administrative Committee to administer the Plan;
(k) To provide bonding coverage as required under Section 412 of ERISA.
13.02. Nondiscriminatory Exercise of Authority. Whenever, in the administration
of the Plan, any discretionary action by the Administrator is required, the
Administrator shall exercise its authority in a nondiscriminatory manner so that
all persons similarly situated will receive substantially the same treatment.
13.03. Claims and Review Procedures.
(a) Claims Procedure. If any person believes he is being denied any rights
or benefits under the Plan, such person may file a claim in writing with
the Administrator. If any such claim is wholly or partially denied, the
Administrator will notify such person of its decision in writing. Such
notification will contain (1) specific reasons for the denial, (2)
specific reference to pertinent Plan provisions, (3) a description of any
additional material or information necessary for such person to perfect
such claim and an explanation of why such material or information is
necessary, and (4) information as to the steps to be taken if the person
wishes to submit a request for review. Such notification will be given
within 90 days after the claim is received by the Administrator (or within
180 days, if special circumstances require an extension of time for
processing the claim, and if written notice of such extension and
circumstances is given to such person within the initial 90-day period).
If such notification is not given within such period, the claim will be
considered denied as of the last day of such period and such person may
request a review of his claim.
(b) Review Procedure. Within 60 days after the date on which a person
receives a written notice of a denied claim (or, if applicable, within 60
days after the date on which such denial is considered to have occurred),
such person (or his duly authorized representative) may (1) file a written
request with the Administrator for a review of his denied claim and of
pertinent documents and (2) submit written issues and comments to the
Administrator. The Administrator will notify such person of its decision
in writing. Such notification will be written in a manner calculated to be
understood by such person and will contain specific reasons for the
decision as well as specific references to pertinent Plan provisions. The
decision on review will be made within 60 days after the request for
review is received by the Administrator (or within 120 days, if special
circumstances require an extension of time for processing the request,
such as an election by the Administrator to hold a hearing, and if written
notice of such extension and circumstances is given to such person within
the initial 60-day period). If the decision on review is not made within
such period, the claim will be considered denied.
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13.04. Named Fiduciary. The Administrator is a "named fiduciary" for purposes of
Section 402(a)(1) of ERISA and has the powers and responsibilities with respect
to the management and operation of the Plan described herein.
13.05. Costs of Administration. Unless some or all are paid by the Employer, all
reasonable costs and expenses (including legal, accounting, and employee
communication fees) incurred by the Administrator and the Trustee in
administering the Plan and Trust will be paid first from the forfeitures (if
any) resulting under Section 7.07, then from the remaining Trust Fund. All such
costs and expenses paid from the Trust Fund will, unless allocable to the
Accounts of particular Participants, be charged against the Accounts of all
Participants on a prorata basis or in such other reasonable manner as may be
directed by the Employer.
Article 14. Trust Agreement.
14.01. Acceptance of Trust Responsibilities. By executing the Adoption
Agreement, the Employer establishes a trust to hold the assets of the Plan. By
executing the Adoption Agreement, the Trustee agrees to accept the rights,
duties and responsibilities set forth in this Article 14.
14.02. Establishment of Trust Fund. A trust is hereby established under the Plan
and the Trustee will open and maintain a trust account for the Plan and, as part
thereof, Participants' Accounts for such individuals as the Employer shall from
time to time give written notice to the Trustee are Participants in the Plan.
The Trustee will accept and hold in the Trust Fund such contributions on behalf
of Participants as it may receive from time to time from the Employer. The Trust
Fund shall be fully invested and reinvested in accordance with the applicable
provisions of the Plan in Fund Shares or as otherwise provided in Section 14.10.
14.03. Exclusive Benefit. The Trustee shall hold the assets of the Trust Fund
for the exclusive purpose of providing benefits to Participants and
Beneficiaries and defraying the reasonable expenses of administering the Plan.
No assets of the Plan shall revert to the Employer except as specifically
permitted by the terms of the Plan.
14.04. Powers of Trustee. The Trustee shall have no discretion or authority with
respect to the investment of the Trust Fund but shall act solely as a directed
trustee of the funds contributed to it. In addition to and not in limitation of
such powers as the Trustee has by law or under any other provisions of the Plan,
the Trustee will have the following powers, each of which the Trustee exercises
solely as directed Trustee in accordance with the written direction of the
Employer except to the extent a Plan asset is subject to Participant direction
of investment and provided that no such power shall be exercised in any manner
inconsistent with the provisions of ERlSA:
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(a) to deal with all or any part of the Trust Fund and to invest all or a
part of the Trust Fund in investments available under the Plan, without regard
to the law of any state regarding proper investment;
(b) to retain uninvested such cash as it may deem necessary or advisable,
without liability for interest thereon, for the administration of the Trust;
(c) to sell, convert, redeem, exchange, or otherwise dispose of all or any
part of the assets constituting the Trust Fund;
(d) to enforce by suit or otherwise, or to waive, its rights on behalf of
the Trust, and to defend claims asserted against it or the Trust, provided that
the Trustee is indemnified to its satisfaction against liability and expenses;
(e) to employ such agents and counsel as may be reasonably necessary in
collecting, managing, administering, investing, distributing and protecting the
Trust Fund or the assets thereof and to pay them reasonable compensation;
(f) to compromise, adjust and settle any and all claims against or in
favor of it or the Trust;
(g) to oppose, or participate in and consent to the reorganization,
merger, consolidation, or readjustment of the finances of any enterprise, to pay
assessments and expenses in connection therewith, and to deposit securities
under deposit agreements;
(h) to apply for or purchase annuity contracts in accordance with Section
8.02;
(i) to hold securities unregistered, or to register them in its own name
or in the name of nominees;
(j) to appoint custodians to hold investments within the jurisdiction of
the district courts of the United States and to deposit securities with stock
clearing corporations or depositories or similar organizations;
(k) to make, execute, acknowledge and deliver any and all instruments that
it deems necessary or appropriate to carry out the powers herein granted; and
(l) generally to exercise any of the powers of an owner with respect to
all or any part of the Trust Fund.
The Employer specifically acknowledges and authorizes that affiliates of
the Trustee may act as its agent in the performance of ministerial, nonfiduciary
duties under the Trust. The expenses and compensation of such agent shall be
paid by the Trustee.
The Trustee shall provide the Employer with reasonable notice of any claim
filed against the Plan or Trust or with regard to any related
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matter, or of any claim filed by the Trustee on behalf of the Plan or Trust or
with regard to any related matter.
14.05. Accounts. The Trustee will keep full accounts of all receipts and
disbursements and other transactions hereunder. Within 60 days after the close
of each Plan Year, within 60 days after termination of the Trust, and at such
other times as may be appropriate, the Trustee will determine the then net fair
market value of the Trust Fund as of the close of the Plan Year, as of the
termination of the Trust, or as of such other time, whichever is applicable, and
will render to the Employer and Administrator an account of its administration
of the Trust during the period since the last such accounting, including all
allocations made by it during such period.
14.06. Approving of Accounts. To the extent permitted by law, the written
approval of any account by the Employer or Administrator will be final and
binding, as to all matters and transactions stated or shown therein, upon the
Employer, Administrator, Participants and all persons who then are or thereafter
become interested in the Trust. The failure of the Employer or Administrator to
notify the Trustee within six (6) months after the receipt of any account of its
objection to the account will, to the extent permitted by law, be the equivalent
of written approval. If the Employer or Administrator files any objections
within such six (6) month period with respect to any matters or transactions
stated or shown in the account, and the Employer or Administrator and the
Trustee cannot amicably settle the question raised by such objections, the
Trustee will have the right to have such questions settled by judicial
proceedings. Nothing herein contained will be construed so as to deprive the
Trustee of the right to have judicial settlement of its accounts. In any
proceeding for a judicial settlement of any account or for instructions, the
only necessary parties will be the Trustee, the Employer and the Administrator.
14.07. Distribution from Trust Fund. The Trustee shall make such distribution
from the Trust Fund as the Employer or Administrator may in writing direct, as
provided by the terms of the Plan, upon certification by the Employer or
Administrator that the same is for the exclusive benefit of Participants or
their Beneficiaries, or for the payment of expenses of administering the Plan.
14.08. Transfer of Amounts from Qualified Plan. If the Plan provides that
amounts may be transferred to the Plan from another qualified plan or trust
under Section 401(a) of the Code, such transfer shall be made in accordance with
the provisions of the Plan and with such rules as may be established by the
Trustee. The Trustee will only accept assets which are in a medium proper for
investment under this agreement or in cash. Such amounts shall be accompanied by
written instructions showing separately the respective contributions by the
prior employer and the transferring Employee, and identifying the assets
attributable to such contributions. The Trustee shall hold such assets for
investment in accordance with the provisions of this agreement.
14.09. Transfer of Assets from Trust. Subject to the provisions of the Plan, the
Employer may direct the Trustee to transfer all or a specified
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portion of the Trust assets to any other plan or plans maintained by the
Employer or the employer or employers of a former Participant or Participants,
provided that the Trustee has received evidence satisfactory to it that such
other plan meets all applicable requirements of the Code. The assets so
transferred shall be accompanied by written instructions from the Employer
naming the persons for whose benefit such assets have been transferred, showing
separately the respective contributions by the Employer and by each Participant,
if any, and identifying the assets attributable to the various contributions.
The Trustee shall have no further liabilities with respect to assets so
transferred.
14.10. Separate Trust or Fund for Existing Plan Assets. With the consent of the
Trustee, the Employer may maintain a trust or fund (including a group annuity
contract) under this prototype plan document separate from the Trust Fund for
Plan assets purchased prior to the adoption of this prototype plan document
which are not Fidelity Funds listed in Section 1.14(b). The Trustee shall have
no authority and no responsibility for the Plan assets held in such separate
trust or fund. The duties and responsibilities of the trustee of a separate
trust shall be provided by a separate trust agreement, between the Employer and
the trustee.
Notwithstanding the preceding paragraph, the Trustee or an affiliate of
the Trustee may agree in writing to provide ministerial recordkeeping services
for guaranteed investment contracts held in the separate trust or fund. The
guaranteed investment contract(s) shall be valued as directed by the Employer or
the Trustee of the separate trust.
The trustee of the separate trust (hereafter referred to as "trustee")
will be the owner of any insurance contract purchased prior to the adoption of
this prototype plan document. The insurance contract(s) must provide that
proceeds will be payable to the trustee; however the trustee shall be required
to pay over all proceeds of the contract(s) to the Participant's designated
Beneficiary in accordance with the distribution provisions of this plan. A
Participant's spouse will be the designated Beneficiary of the proceeds in all
circumstances unless a qualified election has been made in accordance with
Article 8. Under no circumstances shall the trust retain any part of the
proceeds. In the event of any conflict between the terms of this plan and the
terms of any insurance contract purchased hereunder, the plan provisions shall
control.
Any life insurance contracts held in the Trust Fund or in the separate
trust are subject to the following limits:
(a) Ordinary life - For purposes of these incidental insurance provisions,
ordinary life insurance contracts are contracts with both nondecreasing
death benefits and nonincreasing premiums. If such contracts are held,
less than 1/2 of the aggregate employer contributions allocated to any
Participant will be used to pay the premiums attributable to them.
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<PAGE> 94
(b) Term and universal life - No more than 1/4 of the aggregate employer
contributions allocated to any participant will be used to pay the
premiums on term life insurance contracts, universal life insurance
contracts, and all other life insurance contracts which are not ordinary
life.
(c) Combination - The sum of 1/2 of the ordinary life insurance premiums
and all other life insurance premiums will not exceed 1/4 of the aggregate
employer contributions allocated to any Participant.
14.11. Voting; Delivery of Information. The Trustee shall deliver, or cause to
be executed and delivered, to the Employer or Plan Administrator all notices,
prospectuses, financial statements, proxies and proxy soliciting materials
received by the Trustee relating to securities held by the Trust or, if
applicable, deliver these materials to the appropriate Participant or the
Beneficiary of a deceased Participant. The Trustee shall not vote any securities
held by the Trust except in accordance with the written instructions of the
Employer, Participant or the Beneficiary of the Participant, if the Participant
is deceased; however, the Trustee may, in the absence of instructions, vote
"present" for the sole purpose of allowing such shares to be counted for
establishment of a quorum at a shareholders' meeting. The Trustee shall have no
duty to solicit instructions from Participants, Beneficiaries, or the Employer.
14.12. Compensation and Expenses of Trustee. The Trustee's fee for performing
its duties hereunder will be such reasonable amounts as the Trustee may from
time to time specify by written agreement with the Employer. Such fee, any taxes
of any kind which may be levied or assessed upon or with respect to the Trust
Fund, and any and all expenses, including without limitation legal fees and
expenses of administrative and judicial proceedings, reasonably incurred by the
Trustee in connection with its duties and responsibilities hereunder will,
unless some or all have been paid by said Employer, be paid first from
forfeitures resulting under Section 7.07, then from the remaining Trust Fund and
will, unless allocable to the Accounts of particular Participants, be charged
against the respective Accounts of all Participants, in such reasonable manner
as the Trustee may determine.
14.13. Reliance by Trustee on Other Persons. The Trustee may rely upon and act
upon any writing from any person authorized by the Employer or Administrator to
give instructions concerning the Plan and may conclusively rely upon and be
protected in acting upon any written order from the Employer or Administrator or
upon any other notice, request, consent, certificate, or other instructions or
paper reasonably believed by it to have been executed by a duly authorized
person, so long as it acts in good faith in taking or omitting to take any such
action. The Trustee need not inquire as to the basis in fact of any statement in
writing received from the Employer or Administrator.
The Trustee will be entitled to rely on the latest certificate it has
received from the Employer or Administrator as to any person or persons
authorized to act for the Employer or Administrator hereunder
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<PAGE> 95
and to sign on behalf of the Employer or Administrator any directions or
instructions, until it receives from the Employer or Administrator written
notice that such authority has been revoked.
Notwithstanding any provision contained herein, the Trustee will be under
no duty to take any action with respect to any Participant's Account (other than
as specified herein) unless and until the Employer or Administrator furnishes
the Trustee with written instructions on a form acceptable to the Trustee, and
the Trustee agrees thereto in writing. The Trustee will not be liable for any
action taken pursuant to the Employer's or Administrator's written instructions
(nor for the collection of contributions under the Plan, nor the purpose or
propriety of any distribution made thereunder).
14.14. Indemnification by Employer. The Employer shall indemnify and save
harmless the Trustee from and against any and all liability to which the Trustee
may be subjected by reason of any act or conduct (except willful misconduct or
negligence) in its capacity as Trustee, including all expenses reasonably
incurred in its defense.
14.15. Consultation by Trustee with Counsel. The Trustee may consult with legal
counsel (who may be but need not be counsel for the Employer or the
Administrator) concerning any question which may arise with respect to its
rights and duties under the Plan and Trust, and the opinion of such counsel
will, to the extent permitted by law, be full and complete protection in respect
of any action taken or omitted by the Trustee hereunder in good faith and in
accordance with the opinion of such counsel.
14.16. Persons Dealing with the Trustee. No person dealing with the Trustee will
be bound to see to the application of any money or property paid or delivered to
the Trustee or to inquire into the validity or propriety of any transactions.
14.17. Resignation or Removal of Trustee. The Trustee may resign at any time by
written notice to the Employer, which resignation shall be effective 60 days
after delivery to the Employer. The Trustee may be removed by the Employer by
written notice to the Trustee, which removal shall be effective 60 days after
delivery to the Trustee.
Upon resignation or removal of the Trustee, the Employer may appoint a
successor trustee. Any such successor trustee will, upon written acceptance of
his appointment, become vested with the estate, rights, powers, discretion,
duties and obligations of the Trustee hereunder as if he had been originally
named as Trustee in this Agreement.
Upon resignation or removal of the Trustee, the Employer will no longer
participate in this prototype plan and will be deemed to have adopted an
individually designed plan. In such event, the Employer shall appoint a
successor trustee within said 60-day period and the Trustee will transfer the
assets of the Trust to the successor trustee upon receipt of sufficient evidence
(such as a determination letter or opinion letter from the Internal Revenue
Service or an opinion of
69
<PAGE> 96
counsel satisfactory to the Trustee) that such trust will be a qualified trust
under the Code.
The appointment of a successor trustee shall be accomplished by delivery
to the Trustee of written notice that the Employer has appointed such successor
trustee, and written acceptance of such appointment by the successor trustee.
The Trustee may, upon transfer and delivery of the Trust Fund to a successor
trustee, reserve such reasonable amount as it shall deem necessary to provide
for its fees, compensation, costs and expenses, or for the payment of any other
liabilities chargeable against the Trust Fund for which it may be liable. The
Trustee shall not be liable for the acts or omissions of any successor trustee.
14.18. Fiscal Year of the Trust. The fiscal year of the Trust will coincide with
the Plan Year.
14.19. Discharge of Duties by Fiduciaries. The Trustee and the Employer and any
other fiduciary shall discharge their duties under the Plan and this Trust
Agreement solely in the interests of Participants and their Beneficiaries in
accordance with the requirements of ERISA.
14.20. Amendment. In accordance with provisions of the Plan, and subject to the
limitations set forth therein, this Trust Agreement may be amended by an
instrument in writing signed by the Employer and the Trustee. No amendment to
this Trust Agreement shall divert any part of the Trust Fund to any purpose
other than as provided in Section 2 hereof.
14.21. Plan Termination. Upon termination or partial termination of the Plan or
complete discontinuance of contributions thereunder, the Trustee will make
distributions to the Participants or other persons entitled to distributions as
the Employer or Administrator directs in accordance with the provisions of the
Plan. In the absence of such instructions and unless the Plan otherwise
provides, the Trustee will notify the Employer or Administrator of such
situation and the Trustee will be under no duty to make any distributions under
the Plan until it receives written instructions from the Employer or
Administrator. Upon the completion of such distributions, the Trust will
terminate, the Trustee will be relieved from all liability under the Trust, and
no Participant or other person will have any claims thereunder, except as
required by applicable law.
14.22. Permitted Reversion of Funds to Employer. If it is determined by the
Internal Revenue Service that the Plan does not initially qualify under Section
401 of the Code, all assets then held under the Plan will be returned by the
Trustee, as directed by the Administrator, to the Employer, but only if the
application for determination is made by the time prescribed by law for filing
the Employer's return for the taxable year in which the Plan was adopted or such
later date as may be prescribed by regulations. Such distribution will be made
within one year after the date the initial qualification is denied. Upon such
distribution the Plan will be considered to be rescinded and to be of no force
or effect.
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<PAGE> 97
Contributions under the Plan are conditioned upon their deductibility
under Section 404 of the Code. In the event the deduction of a contribution made
by the Employer is disallowed under Section 404 of the Code, such contribution
(to the extent disallowed) must be returned to the Employer within one year of
the disallowance of the deduction.
Any contribution made by the Employer because of a mistake of fact must be
returned to the Employer within one year of the contribution.
14.23. Governing Law. This Trust Agreement will be construed, administered and
enforced according to ERISA and, to the extent not preempted thereby, the laws
of the Commonwealth of Massachusetts.
71
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ADDENDUM
to
CORPORATEplan for Retirement
THE PROFIT SHARING/401(K) PLAN
FIDELITY BASIC PLAN DOCUMENT No. 07
Re: Retroactive Effective Dates
This Addendum is intended to clarify and set forth the effective dates of
certain provisions of the Plan with respect to the adopting Employer. This
Addendum applies only to the extent that the Employer has not amended the Plan
with respect to the applicable provisions of the Tax Reform Act of 1986 ("TRA
'86"). Unless otherwise specifically provided by the terms of the Plan, this
amendment and restatement is effective with respect to each change made to
satisfy the provisions of (i) TRA '86, (ii) any other change in the Code or
ERISA, or (iii) regulations, rulings, or other published guidance issued under
the Code, ERISA, or TRA '86, the first day of the first period (which may or may
not be the first day of a Plan year) with respect to which such change became
required because of such provision (including any day that became such as a
result of an election or waiver by an Employer or a waiver or exemption issued
under the Code, ERISA, or TRA `86), including, but not limited to, the
following:
(a) The following changes as required by TRA '86 are effective for Plan Years
beginning after December 31, 1986, unless a delayed effective date applies
because the Plan is collectively-bargained or because of an applicable exemption
or waiver:
(1) Changes in the definition of Employee in Section 2.01(a)(10) to
reflect changes in the safe harbor exclusion for Leased Employees;
(2) Changes in the definition of Highly Compensated Employee in Section
2.01(a)(16)
(3) Addition of the aggregate deferral limit under Section 402(g) of the
Code in Section 4.01(c);
(4) Changes to the Code Section 401(k) discrimination test in Section
4.02;
(5) Addition of the Code Section 401(m) discrimination test and
application of the Aggregate Limit in Section 4.04;
(6) Compliance with the Code Section 414(s) compensation definition
requirements in Sections 5.03 and 9.03;
(7) Changes in the Participant Loan provisions in Section 7.09; if
applicable, to reflect new dollar limitations, repayment
requirements, and restrictions applicable to Highly Compensated
Employees under Section 72(p) of the Code;
(8) Changes in the definition of Key Employee in Section 9.02(a); and
<PAGE> 99
(9) Changes in the definition of Top-Heavy Ratio in Section 9.02(c)(3)
to provide for ratable accrual.
(b) Changes in the 415 limitations in Section 5.03 as required by TRA '86 are
effective for limitation years beginning after December 31, 1986, unless a
delayed effective date applies because the Plan is collectively-bargained or
because of an applicable waiver or exemption; provided, however, that Annual
Additions shall not be recalculated to take into account all Employee
contributions for limitation years beginning before the effective date.
(c) The following changes as required by TRA '86 are effective for Plan years
beginning After December 31, 1987, unless a delayed effective date applies
because the Plan is collectively-bargained or because of an applicable waiver or
exemption:
(1) Changes required to provide that allocations shall not be decreased
or discontinued because of attainment of any age, if any; and
(2) Changes in the definition of Normal Retirement Age in Section
1.06(a), if any, to reflect the five years of participation rule.
(d) The following changes as required by TRA '86 are effective for Plan Years
beginning after December 31, 1988, unless a delayed effective date applies
because the Plan is collectively-bargained or because of an applicable waiver or
exemption:
(1) Changes in the vesting schedule specified in Section 1.07, if
applicable;
(2) Changes in the permitted disparity rules in Section 4.06(b0(2), if
applicable; and
(3) Changes in the requirements for electing a former vesting schedule
in Section 10.03, if applicable.
Notwithstanding the foregoing and subject to applicable law, with respect to
Plan years beginning after December 31, 1986, and before the date of this
restatement of the Plan, the Employer may elect to operate the Plan in
accordance with any transitional rule published by the Internal Revenue Service
or a reasonable, good faith interpretation of TRA '86 and related applicable
law, in which event such transitional rule or good faith interpretation shall
prevail over the provisions in this restatement of the Plan with respect to such
Plan Year.
Each other change made under the Plan is effective as of the date specified in
Section 1.01(g) of the Adoption Agreement, unless otherwise specifically
provided by the terms of the Plan.
2
<PAGE> 100
CORPORATEplan for Retirement(SM)
Profit Sharing/401(k) Plan
Fidelity Basic Plan Document No. 07
Amendment One
Section 2.01(a)(7) "Compensation" is amended to include:
In addition to other applicable limitations set forth in the plan, and
notwithstanding any other provision of the plan to the contrary, for plan years
beginning on or after January 1, 1994, the annual compensation of each Employee
taken into account under the plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding 12
months, over which compensation is determined (determination period) beginning
in such calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation will be multiplied by a fraction, the
numerator of which is the number of months in the determination period, and the
denominator of which is 12.
For plan years beginning on or after January 1, 1994, any reference in
this plan to the limitation under section 401(a)(17) of the Code shall mean the
OBRA '93 annual compensation limit set forth in this provision. Notwithstanding
2.01(a)(7)(A), for purpose of Section 4.02 (Additional Limit on Deferral
Contributions) and Section 4.04 (Limit on Matching Contributions), the Employer
may use Compensation as defined in Section 5.03(e)(2) excluding reimbursements
or other expense allowances, fringe benefits (cash and non-cash), moving
expenses, deferred compensation and welfare benefits, but including amounts that
are not includable in the gross income of the Participant under a salary
reduction agreement by reason of the application of Section 125, 402(a)(8),
402(h) or 403(b) of the Code.
If compensation for any prior determination period is taken into account
in determining an Employee's benefits accruing in the current plan year, the
compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first plan year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
Section 8.01(d) "Distribution of Benefits to Participants and Beneficiaries" is
amended to include:
(5) If a distribution is one to which sections 401(a)(11) and 417 of the
Internal Revenue Code do not apply, such distribution may commence less than 30
days after the notice required under section 1.411(a)-11(c) of the Income Tax
Regulations is given, provided that:
(1) the administrator clearly informs the Participant that the
Participant has a right to a period of at least 30 days after
receiving the notice to consider the decision of whether or
not to elect a distribution (and, if applicable, a particular
distribution option), and
3
<PAGE> 101
the Participant, after receiving the notice, affirmatively
elects a distribution.
4
<PAGE> 102
Model Amendment to
The CORPORATEplan FOR RETIREMENT(SM)
PROFIT SHARING / 401 (k) PLAN
(Document No. 07)
This amendment is effective for plan years beginning after December 11,
1994.
Notwithstanding any provision of this plan to the contrary, to the extent
any optional form of benefit under this plan permits a distribution prior to the
employee's retirement, death, disability, or severance from employment, and
prior to plan termination, the optional form of benefit is not available with
respect to benefits attributable to assets (including the post-transfer earnings
thereon) and liabilities that are transferred, within the meaning of ss. 414 (1)
of the Internal Revenue Code, to this plan from a money purchase pension plan
qualified under ss. 401(a) of the Internal Revenue Code (other than any portion
of those assets and liabilities attributable to voluntary employee
contributions).
5
<PAGE> 103
CORPORATEplan for Retirement(SM)
Profit Sharing/401(k) Plan
Fidelity Basic Plan Document No. 07
Amendment Two
Effective December 1, 1996, Section 2.01(a)(25) shall be amended to read as
follows:
(25) "Registered Investment Company" means any one or more corporations,
partnerships or trusts registered under the Investment Company Act of
1940.
6
<PAGE> 104
SUMMARY PLAN DESCRIPTION
MARINE TRANSPORT LINES, INC. SALARIED EMPLOYEES
RETIREMENT INCOME PLAN
[LOGO]
<PAGE> 105
SUMMARY PLAN DESCRIPTION
MARINE TRANSPORT LINES, INC. SALARIED EMPLOYEES
RETIREMENT INCOME PLAN
MARINE TRANSPORT LINES, INC. SALARIED EMPLOYEES RETIREMENT INCOME PLAN
<TABLE>
<S> <C>
I. BASIC PLAN INFORMATION....................................................................... 1
A. Account............................................................................. 2
B. Employer............................................................................ 2
C. Participant......................................................................... 2
D. Plan Administrator.................................................................. 2
E. Plan Number......................................................................... 2
F. Plan Qualification.................................................................. 2
G. Plan Year........................................................................... 2
H. Service of Process.................................................................. 2
I. Trust Fund.......................................................................... 2
J. Trustee............................................................................. 3
II. PARTICIPATION............................................................................... 3
A. Eligibility Requirements............................................................ 3
III. CONTRIBUTIONS.............................................................................. 3
A. Employee Pretax Contributions....................................................... 4
B. Employee After-Tax Contributions.................................................... 5
C. Employer Matching Contributions..................................................... 5
D. Employer Contributions.............................................................. 5
E. Limit on Contributions.............................................................. 5
F. Rollover Contributions.............................................................. 5
IV. INVESTMENTS................................................................................. 6
A. Investments......................................................................... 7
B. Statement of Account................................................................ 8
V. VESTING...................................................................................... 9
VII. HARDSHIP WITHDRAWALS....................................................................... 10
VIII. IN-SERVICE WITHDRAWALS.................................................................... 11
</TABLE>
<PAGE> 106
<TABLE>
<S> <C>
A. Withdrawals After Age 59-1/2........................................................ 11
IX. TOTAL DISTRIBUTION OF BENEFITS.............................................................. 11
A. Benefit on Termination of Employment................................................ 12
B. Death Benefit....................................................................... 12
C. Retirement Benefit.................................................................. 12
D. Payment and Form of Benefits........................................................ 12
X. MISCELLANEOUS INFORMATION.................................................................... 14
A. Benefits Not Insured by PBGC........................................................ 15
B. Nontransferable Account............................................................. 15
C. Plan Amendment...................................................................... 15
D. Plan Termination.................................................................... 15
E. Interpretation of Plan.............................................................. 15
XI. INTERNAL REVENUE SERVICE TEST............................................................... 15
A. Non-Discrimination Test............................................................. 16
B. Top Heavy Test...................................................................... 16
XII. PARTICIPANT RIGHTS......................................................................... 16
A. Claims.............................................................................. 17
B. Statement of ERISA Rights........................................................... 17
</TABLE>
<PAGE> 107
SUMMARY PLAN DESCRIPTION
MARINE TRANSPORT LINES, INC. SALARIED EMPLOYEES RETIREMENT INCOME PLAN
The Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan (the
'Plan') of Marine Transport Lines, Inc. (the 'Employer') has been amended as of
October 1, 1994 (the 'Effective Date'). This Plan is intended to be a qualified
retirement plan under the Internal Revenue Code.
The purpose of the Plan is to enable eligible Employees to save for retirement.
It may also provide certain benefits in the event of death, disability, or other
termination of employment. The Plan is for the exclusive benefit of eligible
Employees and their beneficiaries.
This booklet is called a Summary Plan Description (SPD) and it contains a
summary in understandable language of your rights and benefits under the Plan.
If you have difficulty understanding any part of this SPD, you should contact
the Plan Administrator identified on page two during normal business hours for
assistance.
This SPD is a brief description of the Plan and Trust Agreement (Plan Document).
It is not meant to interpret, extend or change the Plan Document in any way. A
copy of the Plan Document is on file with the Plan Administrator and may be read
by any Employee at any reasonable time. The Plan Document shall govern in the
event of any discrepancy between this SPD and the actual provisions of the Plan.
- --------------------------------------------------------------------------------
Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 1
<PAGE> 108
I. BASIC PLAN INFORMATION
A. ACCOUNT
This is an Account established by the Trustee for the purpose of recording
contributions made on your behalf and any income, expenses, gains or losses
thereon. It may also be referred to as 'Account' balance.
B. EMPLOYER
The name, address and business telephone number of the Employer is:
Marine Transport Lines, Inc.
1200 Harbor Blvd.
Weehawken, NJ 07087-0901
(201) 330-0200
The Employer's Identification Number is 51-0115513.
C. PARTICIPANT
A participant is an eligible Employee who has satisfied the eligibility and
entry date requirements and is eligible to participate in the Plan.
D. PLAN ADMINISTRATOR
The Plan Administrator is responsible for the administration of the Plan. The
Plan Administrator's duties are specifically identified in the Plan Document.
The name, address and business telephone number of the Plan Administrator is:
Marine Transport Lines, Inc.
1200 Harbor Blvd.
Weehawken, NJ 07087-0901
(201) 330-0200
E. PLAN NUMBER
The Plan number is 001.
F. PLAN QUALIFICATION
The Employer intends to request an individual Determination Letter from the
Internal Revenue Service for the qualification of the Plan.
G. PLAN YEAR
The Plan Year is the twelve-month period ending on the last day of December.
H. SERVICE OF PROCESS
The Plan's agent for service of legal process is the Plan Administrator.
I. TRUST FUND
The Plan is administered under a trust fund arrangement. There is a written Plan
and Trust Agreement entered into between the Trustee and the Employer.
- --------------------------------------------------------------------------------
Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 2
<PAGE> 109
J. TRUSTEE
The trustee is responsible for holding the Plan assets. The trustee's duties are
specifically identified in the Plan Document and relate only to the assets in
its possession. The name and address of the Plan's Trustee is:
Fidelity Management Trust Company
82 Devonshire Street, L10A
Boston, MA 02109.
II. PARTICIPATION
A. ELIGIBILITY REQUIREMENTS
You are eligible to participate in the Plan if you are an Employee of the
Employer. You will become eligible to participate in the Plan on the first day
of the following month. However, if you are employed as of October 1, 1994 then
you will become eligible to participate on that date.
- --------------------------------------------------------------------------------
Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 3
<PAGE> 110
III. CONTRIBUTIONS
For purposes of computing contributions under the Plan, as listed below, your
Employer must first define 'compensation'. Eligible compensation generally means
the taxable compensation for a Plan Year reportable by your Employer on your IRS
Form W-2 for a Plan Year. Your compensation will also include any Employee
pretax contributions you made under the Plan and any salary reductions you made
under your Employer's cafeteria plan, 401(k) plan or other similar plan, if any.
Compensation does not include any taxable fringe benefits or taxable Employee
moving and other expense reimbursements reportable on your annual IRS Form W-2.
Compensation for your first year of eligible Plan participation will be based
upon compensation paid for the entire Plan Year. Tax laws limit the amount of
compensation that may be taken into account each Plan Year and the maximum
amount for the 1999 Plan Year is $160,000 (this amount is subject to adjustment
each year).
A. EMPLOYEE PRETAX CONTRIBUTIONS
(1). REGULAR CONTRIBUTIONS
You may elect to contribute a percentage of your eligible compensation
into the Plan after you satisfy the Plan's eligibility requirements.
The percentage of your compensation you elect will be withheld from
each payroll on a pretax basis and contributed to the Plan on your
behalf. You may defer, in whole percentages, up to an annual maximum of
the lesser of 15% of eligible compensation or $10,000 in a calendar
year (in 1999 and thereafter as adjusted by the Secretary of the
Treasury). Your Employee pretax contributions belong to you and cannot
be forfeited for any reason. However, there are special Internal
Revenue Code rules which must be satisfied and may require that the
amount of your contributions be reduced. If a reduction in your
contribution is necessary, you will be notified by the Plan
Administrator. You may increase or decrease the amount you contribute
as of the first day of each month. You may completely suspend your
contributions with sufficient notice to the Plan Administrator.
Thereafter, if you want to resume your Employee pretax contributions as
of January 1 and July 1, you must complete a new election form.
(2). BONUS CONTRIBUTIONS
You may make Employee pretax contributions on any Employer-paid bonus.
You may defer a whole percentage from 1 to 100% of any bonus designated
by the Employer into the Plan on a pretax basis by completing a special
election form. The total amount of your bonus, catch up and Employee
pretax contributions for the Plan Year may not exceed 15% of your
eligible compensation or other applicable Internal Revenue Code limits.
The Employer may refuse to accept any or all of your bonus contribution
if it will have an adverse effect on the Plan's Non-Discrimination
Test.
(3). CATCH UP CONTRIBUTIONS
You may make 'catch up' Employee pretax contributions in December. You
may defer a whole percentage between 1 to 100% of your eligible
compensation in December into the Plan on a pretax basis by completing
a special election form. The total amount of your catch up, bonus, and
Employee pretax contributions for the Plan Year may not exceed 15% of
your eligible compensation or other applicable Internal Revenue Code
limits. The Employer may refuse to accept any or all of your catch up
contribution if it will have an adverse effect on the Plan's
Non-Discrimination Test.
- --------------------------------------------------------------------------------
Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 4
<PAGE> 111
B. EMPLOYEE AFTER-TAX CONTRIBUTIONS
After you satisfy the Plan's eligibility requirements, you may elect to
contribute a percentage of your compensation into the Plan on an after-tax
basis. You may contribute, in whole percentages, up to an annual maximum of 10%
of eligible compensation. However, there are special Internal Revenue Code rules
which must be satisfied and the maximum may be a lower percentage. If a
reduction in your contribution is necessary, you will be notified by the Plan
Administrator. The Employer may refuse to accept your after-tax contributions if
they will have an adverse effect on the Plan's Non-Discrimination Test. Your
after-tax contributions belong to you and cannot be forfeited for any reason.
C. EMPLOYER MATCHING CONTRIBUTIONS
Each Plan Year the Employer will make matching contributions in an amount equal
to 100% of your employee pretax contributions but subject to a maximum of 3% of
your eligible compensation contributed to the Plan. You become eligible for the
matching contribution only if you make a pretax Employee contribution.
D. EMPLOYER CONTRIBUTIONS
After you satisfy the Plan's eligibility requirements, the Employer will make
profit sharing contributions in an amount equal to 3%. Additionally, the
Employer may make annual discretionary profit sharing contributions in an amount
to be determined at Plan Year-end by the Board of Directors Profit sharing
contributions will be allocated in the ratio that your eligible compensation
bears to the total compensation paid to all eligible participants for the Plan
Year. You must be employed as of the last day of the Plan Year to be eligible
for any profit sharing contributions that may be made for that Plan Year.
Employer contributions must be made within prescribed legal time limits.
E. LIMIT ON CONTRIBUTIONS
Federal law requires that amounts contributed by you and on your behalf by your
Employer for a given limitation year generally may not exceed the lesser of:
- $30,000 (or such amount as may be prescribed by the Secretary
of the Treasury); or
- 25% of your annual compensation, excluding any salary
reductions to an employer sponsored cafeteria plan, a 401(k)
plan, a simplified employee pension or a tax-deferred annuity.
Contributions under this Plan may not exceed the above limits. If this does
occur then excess contributions in your Account may be forfeited or refunded to
you. Income tax consequences may apply to you on any refund. You will be
notified by the Plan Administrator if you will be subject to reduced
contributions on your behalf.
The limitation year for purposes of applying the above limits is the twelve
month period ending December 31. Rollover contributions are not included in the
limits on Employee and Employer contributions.
F. ROLLOVER CONTRIBUTIONS
You can rollover part or all of an 'eligible rollover distribution' you received
from a prior employer's qualified plan, if allowed by the Plan Administrator.
(The Plan Administrator reserves the right to refuse to accept any rollover
contribution.) Alternatively, you may rollover a distribution you received from
a rollover Individual Retirement Account (IRA) which consisted solely of an
eligible rollover distribution and earnings thereon. If the rollover to the Plan
is not a direct rollover (i.e. you received a cash distribution from your prior
employer's plan or from your rollover IRA), then it must be received by the
Trustee within 60 DAYS of your receipt of the distribution.
- --------------------------------------------------------------------------------
Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 5
<PAGE> 112
You may make a rollover contribution to the Plan before becoming a Participant.
However, you will not become a Participant entitled to make Employee pretax
contributions and share in Employer contributions until you have met the Plan's
eligibility and entry date requirements. Your rollover contribution Account will
be subject to the terms of this Plan and will always be fully vested and
nonforfeitable.
- --------------------------------------------------------------------------------
Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 6
<PAGE> 113
IV. INVESTMENTS
A. INVESTMENTS
The Employee Retirement Income Security Act of 1974 (ERISA) imposes certain
duties on the parties who are responsible for the operation of the plan. These
parties, called fiduciaries, have a duty to invest plan assets in a prudent
manner. However, an exception exists for plans which comply with ERISA Section
404(c) and permit a participant to exercise control over the assets in his/her
Account and choose from a broad range of investment alternatives. This Plan is
intended to be a Section 404(c) plan. This means that you and not the Plan
fiduciaries are responsible for the investment decisions relating to the assets
in your individual Account under the Plan.
You will have the opportunity to direct the investments of your Account among
the following Fidelity Investments Funds (the Fidelity Fund Number assigned to
each fund is identified in parentheses):
1. Fidelity Retirement Government Money Market Portfolio (0631)
Objective: Seeks a high current income, preservation of capital,
and liquidity from money market instruments issued by
the U.S. Government or its agencies.
2. Managed Income Portfolio (0632)
Objective: Seeks the preservation of capital and high current
income from GIC's, BIC's and money market
instruments.
3. Fidelity Investment Grade Bond Fund (0026)
Objective: Seeks a high current income consistent with
reasonable investment risk. The Fund also seeks
capital appreciation where appropriate.
4 Fidelity Growth & Income Portfolio (0027)
Objective: Seeks high total return through a combination of
current income and capital appreciation. Invests
mainly in equity securities of companies that pay
current dividends and offer potential growth of
earnings.
5. Fidelity Growth Company Fund (0025)
Objective: Seeks long-term capital appreciation through
investments in companies with above-average growth
potential.
6. Fidelity Magellan Fund (0021)
Objective: Seeks growth of capital through investments in common
stocks or securities convertible into common stocks.
7. Fidelity Global Bond Fund (0451)
Objective: Seeks high total return by investing principally in
debt securities issued anywhere in the world.
8. Fidelity Overseas Fund (0094)
Objective: Long-term capital appreciation; invests mainly in
foreign securities of issuers whose principal
activities are outside of the U.S.
9. Fidelity Puritan Fund (0004)
- --------------------------------------------------------------------------------
Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 7
<PAGE> 114
Objective: High income consistent with preservation of capital;
invests in a broadly diversified portfolio of
high-yeilding common stocks, preferred stocks, and
bonds of any quality.
10. Fidelity Contrafund (0022)
Objective: Capital appreciation; a broad -based stock fund that
seeks out undervalued or out-of-favor companies both
in the U.S. and abroad.
11. Fidelity Low-Priced Stock (0316)
Objective: Capital appreciation; invests mainly in a portfolio
of low-priced stocks ($25 or less at time of
purchase) that may be undervalued,overlooked or
out-of-favor.
12. Spartan U.S. Equity Index Portfolio (0650)
Objective: Seeks investment results that correspond to the total
return performance of the Standard and Poor's 500
Index by duplicating the investment composition.
You may obtain a prospectus or financial report for each of the above mutual
funds by calling Fidelity at 1-800-544-8888. You may redirect the investment of
your future contributions or exchange your existing Account balance among the
above Fidelity mutual funds by calling 1-800-835-5097 on any business day
between 8:30 AM (ET) and 8:00 PM (ET). Exchanges of your existing Account
balance may only be made . You may call this same number 24 hours per day, seven
days per week to check Account balances, prices or yields. All telephone calls
will be recorded. You have the right to vote any mutual funds proxies based on
the number of shares you own.
Exchanges requested before 4:00 PM (ET) will be processed on that same business
day based on the closing price of the mutual fund. Exchanges requested after
4:00 PM (ET) will be processed based on the next business day's closing price of
the mutual fund. The minimum exchange is the lesser of $250 or 100% of your
Account balance in the mutual fund. If your exchange is less than $250 then it
may only be exchanged into one mutual fund. A written confirmation of your
exchange will be mailed to you within seven business days. Fidelity reserves the
right to change, restrict, or terminate participant exchange procedures to
protect mutual fund shareholders.
Exchanges from the Managed Income Portfolio* to certain bond or money market
funds (considered "competing funds"), must first be exchanged to an option that
is "non-competing", such as an equity mutual fund. After 90-days, you can then
exchange to a "competing fund". Please contact your Plan Administrator or a
Fidelity Participant Services Group representative at 1-800-835-5097 for more
information.
* The Managed Income Portfolio is not a mutual fund, but it is a commingled pool
of the Fidelity Group Trust for Employee Benefit Plan. It is managed by Fidelity
Management Trust Company.
B. STATEMENT OF ACCOUNT
Your Account will be updated each business day to reflect any investment
earnings or losses on each Fidelity Investments mutual fund. A quarterly
statement disclosing the value of your Account will be mailed to you within 20
days of the following dates: January 31, April 30, July 31 and October 31
- --------------------------------------------------------------------------------
Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 8
<PAGE> 115
V. VESTING
The term 'vesting' refers to your nonforfeitable right to the money in your
Account. You receive vesting credit for the number of year(s) that you have
worked for the Employer and any other legally related Employer. If you terminate
your employment with the Employer, then you may be able to receive a portion or
all of your Account based on your vested percentage. You are always 100% vested
in your own Employee pretax Account, after-tax Account, Employer match, Employer
profit sharing contribution Account, rollover Account and earnings thereon.
- --------------------------------------------------------------------------------
Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 9
<PAGE> 116
VII. HARDSHIP WITHDRAWALS
If approved by the Plan Administrator, you may withdraw your Employee pretax
contributions, and rollover contributions if applicable, to satisfy any of the
following immediate and heavy financial needs: (1) unreimbursed medical expenses
for you, your spouse, children or dependents; (2) the purchase of your principal
residence; (3) to prevent your eviction from or foreclosure on your principal
residence; or (4) to pay for post-secondary education expenses for you, your
spouse, children or dependents for the next twelve months.
In accordance with Internal Revenue Service regulations you must first withdraw
your Employee after-tax contributions Account and exhaust all other assets
available to you prior to obtaining a hardship withdrawal. This includes
obtaining a withdrawal of any Employee after-tax contribution in your Account
and a loan from any other qualified plan maintained by your Employer. Your
Employee pretax contributions to this Plan and any other Employer-sponsored
qualified or non-qualified plan will be suspended for twelve months after your
receipt of the hardship withdrawal. If you are married your spouse's consent
will be required on the hardship withdrawal form. Your spouse's consent must be
witnessed by a Plan representative or a Notary Public. The minimum hardship
withdrawal is $1,000.
The Plan Administrator will provide you with the appropriate form upon request.
Hardship withdrawals will be withdrawn from available investment options in the
order established by the Trustee. Consult your Plan Administrator for more
information.
You will be taxed on the amount of any hardship withdrawal under Internal
Revenue Code rules and a 10% IRS premature distribution penalty tax may also be
imposed on your withdrawal. Your hardship withdrawal will also be subject to the
mandatory 20% Federal income tax withholding. You should refer to the 'Total
Distribution of Benefits' section of this SPD.
- --------------------------------------------------------------------------------
Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 10
<PAGE> 117
VIII. IN-SERVICE WITHDRAWALS
A. WITHDRAWALS AFTER AGE 59-1/2
If you have reached age 59-1/2 then you may elect to withdraw all or a portion
of your entire Account while you are still employed by your Employer. The Plan
Administrator will provide you with the appropriate form upon request.
- --------------------------------------------------------------------------------
Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 11
<PAGE> 118
IX. TOTAL DISTRIBUTION OF BENEFITS
A. BENEFIT ON TERMINATION OF EMPLOYMENT
If you terminate your employment with your Employer, then you may elect to
receive a distribution of your vested Account balance from the Plan. You should
contact the Plan Administrator to obtain the appropriate form to complete to
request a distribution.
B. DEATH BENEFIT
If you die while a Participant in the Plan or before any or all benefits are
paid to you, then your beneficiary or beneficiaries will be entitled to receive
your Account balance. You may designate a beneficiary or beneficiaries on a
designation form. The completed beneficiary designation form must be filed with
the Plan Administrator. If you are married and want to designate someone other
than your spouse as your primary beneficiary, then your spouse must consent to
this designation by signing the form. His/her signature must be witnessed by a
Plan representative or a Notary Public. You should contact the Plan
Administrator to obtain a beneficiary designation form.
C. RETIREMENT BENEFIT
You do not have to terminate your employment with your Employer just because you
attain your early retirement age of 55 or you attain your normal retirement age
of 65.
D. PAYMENT AND FORM OF BENEFITS
The Plan is designed to provide you with benefits at the time of your
retirement. However, if your employment with your Employer is terminated because
of death, disability, retirement, or for any other reason, then you may request
a distribution of your vested Account balance upon proper written direction
delivered to the Plan Administrator. You should contact the Plan Administrator
to obtain the appropriate form to request a distribution and a copy of the
'Special Tax Notice Regarding Plan Payments'. Even if your employment with the
Employer has not terminated, the Plan Administrator will direct the Trustee to
begin distributions to you no later than April 1 of the calendar year after you
attain the age of 70-1/2.
The Plan Administrator will direct the Trustee to make a lump sum distribution
to you if you terminate your employment and your vested Account balance is less
than $5,000 regardless of whether you request the distribution. Your written
consent and your spouse's written consent will be required for any distribution
before age 65 if your vested Account balance is greater than $5,000. Properly
authorized distribution requests will be processed by the Trustee on a monthly
basis. The following forms of benefits are available under the Plan:
- - LUMP SUM DISTRIBUTIONS
Your entire vested Account balance will be paid to you within one
calendar year. If your vested Account balance is greater than
$5,000 and you are a married Participant, spousal consent for a
lump sum distribution will be required on the Payout Request Form.
The consent must be witnessed by a Plan representative or a Notary
Public.
- - INSTALLMENT DISTRIBUTIONS
Your vested Account balance will be paid to you in periodic
payments if your Account balance is greater than $5,000. If you are
a married Participant, spousal consent for an installment
distribution will be required on the Payout Request Form and must
be witnessed by a Plan representative or a Notary Public.
- - PURCHASE OF AN ANNUITY
- --------------------------------------------------------------------------------
Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 12
<PAGE> 119
The normal form of payment under this Plan is an annuity. This
means that your vested Account balance as of your annuity starting
date will be used to purchase a life annuity contract from an
insurance company if you are single, or a qualified joint and
survivor annuity if you are married. (The annuity starting date is
the date that is ninety days prior to the initial annuity payment.)
The insurance company will make monthly payments to you for your
life based upon the type of annuity purchased. Upon your death,
your spouse, if he/she is still living at your death, will receive
50% of the monthly amount you received. The annuity will stop once
your spouse dies and all payments will cease.
You may choose a form of payment other than the annuity only upon
proper election by you and your spouse, if applicable. Any election
to waive the qualified joint and survivor annuity must be made in
writing by you and your spouse. Your spouse's signature must be
witnessed by a Plan representative or a Notary Public. You may
obtain the appropriate waiver election form from the Plan
Administrator.
If you are 35 or older and die while you are still employed by the
Employer then your surviving spouse will be entitled to a qualified
pre-retirement survivor annuity. Your Account balance may be used
to purchase an annuity contract from an insurance company. Monthly
benefit payments will then be made from the insurance company
directly to your spouse for his/her lifetime. You and your spouse
may waive the qualified pre-retirement survivor annuity upon proper
election and choose another form of payment or another beneficiary.
Any waiver must be made in writing by you and your spouse. Your
spouse's signature must be witnessed by a Plan representative or a
Notary Public. You can obtain the appropriate waiver election form
from the Plan Administrator.
Lump sum distributions and in certain situations installment distributions will
be subject to the following rules:
(1). CASH DISTRIBUTION
Any taxable distribution paid by the Trustee directly to you will
be subject to mandatory Federal income tax withholding of 20% of
the requested distribution. You will receive 80% of the taxable
distribution and the other 20% will be sent to the IRS as Federal
income tax withholding for that year. You cannot elect out of this
tax withholding. This withholding is not a penalty but rather a
prepayment of your Federal income taxes.
You may rollover the taxable distribution you receive to an IRA or
your new employer's qualified Plan, if it accepts rollover
contributions. However, you must rollover this distribution within
60 DAYS after receipt. You will not be taxed on any amounts rolled
over directly into the IRA or your new employer's qualified Plan
until those amounts are later distributed to you.
(2). DIRECT ROLLOVER DISTRIBUTION
As an alternative to a cash distribution, you may request that your
entire distribution be rolled directly into a Fidelity IRA, a
non-Fidelity IRA or to your new employer's qualified plan if it
accepts rollover contributions. Federal income taxes will not be
withheld on any direct rollover distribution.
(a). Rollover to a Fidelity IRA - You must complete a Fidelity
'SEE' Rollover IRA application. Attach this application to
the completed Payout form. After authorizing your
distribution, the Plan Administrator will forward this
material to the Trustee. Your vested Account balance will
be transferred to a Fidelity Rollover IRA.
- --------------------------------------------------------------------------------
Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 13
<PAGE> 120
(b). Rollover to a Non-Fidelity IRA - You must complete a Payout
form and indicate the name and address of the custodian or
trustee, and Account number for your IRA. After authorizing
your distribution, the Plan Administrator will forward the
form to the Trustee. A check will be issued by the Trustee
payable to the IRA custodian or trustee for your benefit.
The check will contain the notation 'Direct Rollover' and
it will be mailed directly to you. You will be responsible
for forwarding it on to the custodian or trustee. You must
provide the Plan Administrator with complete information to
facilitate your direct rollover distribution.
(c). Rollover to your New Employer's Qualified Plan - You
should check with your new employer to determine if
its plan will accept rollover contributions. If
allowed, then you must complete a Payout form and
indicate the name, address and plan number of your
new employer's qualified plan. After authorizing your
distribution, the Plan Administrator will forward the
form to the Trustee. A check will be issued by the
Trustee payable to the trustee of your new employer's
qualified plan. The check will contain the notation
'Direct Rollover' and it will be mailed directly to
you. You will be responsible for forwarding it on to
the new trustee. You must provide the Plan
Administrator with complete information to facilitate
your direct rollover distribution.
(3). COMBINATION CASH DISTRIBUTION AND DIRECT ROLLOVER DISTRIBUTION
You may request that part of your distribution be paid directly to
you and the balance to be rolled into an IRA or your new employer's
qualified Plan. Any cash distribution you receive will be subject
to the Federal income tax withholding rules referred to in (1). Any
direct rollover distribution will be made in accordance with (2).
You will pay income tax on the amount of any taxable distribution
you receive from the Plan unless it is rolled into an IRA or your
new employer's qualified Plan. A 10% IRS premature distribution
penalty tax may also apply to your taxable distribution unless it
is rolled into an IRA or another qualified plan. The 20% Federal
income tax withheld under this section may not cover your entire
income tax liability. Consult with your tax advisor for further
details.
- --------------------------------------------------------------------------------
Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 14
<PAGE> 121
X. MISCELLANEOUS INFORMATION
A. BENEFITS NOT INSURED BY PBGC
Benefits provided by the Plan are not insured or guaranteed by the Pension
Benefit Guaranty Corporation (PBGC) under Title IV of the Employee Retirement
Income Security Act of 1974 (ERISA) because the insurance provisions under ERISA
are not applicable to this particular Plan. You will only be entitled to the
vested benefits in your Account based upon the provisions of the Plan.
B. NONTRANSFERABLE ACCOUNT
Your Account may not be transferred, assigned or used as collateral for a loan
except to the extent required by law. Creditors may not attach, garnish or
otherwise interfere with your Account balance except in the case of a Qualified
Domestic Relations Order (QDRO). A QDRO is a special order issued by the court
in a divorce, child support or similar proceeding. In this situation, your
spouse (or former spouse) or someone other than you or your beneficiary, may be
entitled to a portion or all of your Account balance.
C. PLAN AMENDMENT
Certain provisions of the Plan are subject to amendment by the Employer that may
directly or indirectly modify certain Plan rights and benefits. Any amendment
changing the vesting schedule cannot reduce the existing vested percentage of
your Account balance derived from Employer contributions. If you have three or
more years of service with the Employer and the vesting schedule is amended then
you will be given a choice to have the vested percentage of future Employer
contributions made to your Account computed under the new or the old vesting
schedule. The Plan Administrator will provide you with the appropriate
information to make an informed decision if the Plan's vesting schedule is
amended.
D. PLAN TERMINATION
The Employer has no legal or contractual obligation to make annual contributions
to or to continue the Plan. With the approval of the Board of Directors, the
Employer may at any time reduce or suspend its contributions, if applicable. In
the event the Plan should terminate, the Plan Administrator will facilitate the
distribution of Account balances under the provisions of the Plan and Trust
Agreement until all assets have been distributed by the Trustee. While the
Employer intends to continue the Plan, it reserves the right to change or
terminate the Plan at any time as circumstances may dictate.
E. INTERPRETATION OF PLAN
The Plan Administrator has the power and discretionary authority to construe the
terms of the Plan and to determine all questions that arise under it. Such power
and authority include, for example, the administrative discretion necessary to
resolve issues with respect to an Employee's eligibility for benefits, credited
services, disability, and retirement, or to interpret any other term contained
in Plan documents. The Plan Administrator's interpretations and determinations
are binding on all participants, employees, former employees, and their
beneficiaries.
- --------------------------------------------------------------------------------
Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 15
<PAGE> 122
XI. INTERNAL REVENUE SERVICE TEST
A. NON-DISCRIMINATION TEST
Your Plan is intended to qualify under Section 401(k) of the Internal Revenue
Code. The Internal Revenue Service requires the Plan to meet special
non-discrimination test as of the last day of each Plan Year. This test is
intended to ensure that there is a fair level of participation by all eligible
participants.
In order to meet the test, the Employer encourages participation from all
eligible Employees. Depending upon the results of the test, the Plan
Administrator may have to refund Employee pretax contributions contributed to
the Plan to certain highly compensated employees, as determined under Internal
Revenue Service regulations. Employee pretax contributions will be refunded on a
prorata basis from each investment option. You will be notified by the Plan
Administrator if any of your contributions will be refunded to you.
B. TOP HEAVY TEST
The Plan is subject to strict Internal Revenue Service rules. One of these rules
involves a 'Top-Heavy' test. Each Plan Year, the Plan Administrator tests this
Plan together with all other Employer-sponsored qualified plans to make sure
that no more than 60% of the benefits are for 'Key' Employees. If this Plan is
Top-Heavy, then the Employer may be required to make minimum annual
contributions to this Plan for you if you are employed as of Plan Year-end.
- --------------------------------------------------------------------------------
Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 16
<PAGE> 123
XII. PARTICIPANT RIGHTS
A. CLAIMS
(1). CLAIM PROCEDURE
You or your Beneficiary should make a request to obtain any
benefits you are entitled to under the Plan in the event of your
termination of employment. The Plan Administrator will provide you
with a request form to complete. Your request will be considered a
claim and will be subject to a full and fair review by the Plan
Administrator. If your claim is wholly or partially denied by the
Plan Administrator then you may appeal it in accordance with the
claim review procedure.
(2). CLAIM REVIEW PROCEDURE
You or your Beneficiary may file a claim for benefits under the
Plan with the Plan Administrator on a form supplied by the
Employer. The Plan Administrator will provide you with written
notice of the disposition of your claim within 90 days after it has
been filed (or, in certain circumstances, within 180 days). In the
event the claim is denied then the reasons shall be disclosed
and/or provisions of the Plan shall be cited as appropriate.
You or your Beneficiary upon request to the Plan Administrator may
appeal the denial of your claim. If you wish further consideration
of your position then you must provide the Plan Administrator with
a written request for a hearing. You must also provide a detailed
written statement of your position for your claim and file it with
the Plan Administrator no later than 60 days after requesting a
hearing. The Plan Administrator shall make a decision on your claim
and it will be communicated to you in writing within 60 days (or,
in certain circumstances, within 120 days). It will advise you if
you have any right to appeal the decision.
B. STATEMENT OF ERISA RIGHTS
As a participant in this Plan you are entitled to certain rights and protections
under ERISA that provides that all Plan Participants shall be entitled to the
following:
- Examine, without charge, at the Plan Administrator's office and at
other specified locations such as work sites and union halls, all
Plan Documents, including insurance contracts, collective
bargaining agreements and copies of all documents filed by the Plan
with the U.S. Department of Labor, such as detailed annual reports
and Plan descriptions.
- Obtain copies of all Plan Documents and other Plan information upon
written request to the Plan Administrator; the Plan Administrator
may make a reasonable charge for the copies.
- Receive a summary of the Plan's annual financial report. The Plan
Administrator is required by law to furnish you with a copy of this
summary annual report.
- Obtain a statement of your Account under the Plan. You must direct
this request in writing to the Plan Administrator. You may request
a statement only once a year and the Plan must provide the
statement free of charge.
In addition to creating rights for Plan Participants, ERISA imposes duties upon
the people who are responsible for the operation of the employee benefit plan.
The people who operate your Plan, called 'fiduciaries' of the Plan, have a duty
to do so prudently and in the interest of you and other Plan Participants and
beneficiaries. No one, including your Employer, your union, or any other person,
may fire you or otherwise discriminate against you in any way to prevent you
from obtaining a pension benefit or exercising your rights under ERISA.
- --------------------------------------------------------------------------------
Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 17
<PAGE> 124
If your claim for a benefit is denied, in whole or in part, you must receive a
written explanation of the reason for the denial. You have the right to have the
Plan Administrator review and reconsider your claim. Under ERISA, there are
steps you can take to enforce the above rights. For instance, if you request
materials from the Plan and do not receive them within 30 days, you may file
suit in a federal court. In such a case, the court may require the Plan
Administrator to provide the materials and pay you up to $100 a day until you
receive the materials, unless the materials were not sent for reasons beyond the
control of the Plan Administrator.
If you have a claim for benefits which is denied or ignored, in whole or in
part, you may file suit in a state or federal court. If it should happen that
Plan fiduciaries misuse the Plan's money, or if you are discriminated against
for asserting your rights, you may seek assistance from the U.S. Department of
Labor, or you may file suit in a federal court. If you are successful, the court
may order the person you have sued to pay these costs and fees. If you lose, the
court may order you to pay these costs and fees; for example, if it finds your
claim frivolous. If you have any questions about your Plan, you should contact
the Plan Administrator. If you have any questions about your rights under ERISA,
you should contact the nearest area office of the U.S. Labor-Management Services
Administration, Department of Labor.
- --------------------------------------------------------------------------------
Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 18
<PAGE> 1
Exhibit 21
SUBSIDIARIES
OF
MARINE TRANSPORT CORPORATION
DELAWARE SUBSIDIARIES:
Hanover Marine Carriers, Inc.
Harlink Corp.
Intrepid Ship Management, Inc.
Marine Alaska, Inc.
Marine Barge Company
Marine Car Carriers, Inc.
Marine Chemical Carriers Corporation
Marine Chemical Trading, Inc.
Marine Chemical Navigation Corporation
Marine Navigation Company, Inc.
Marine Navigation Sulphur Carriers, Inc.
Marine Personnel & Provisioning, Inc.
Marine Purchasing Corporation
Marine Sulphur Shipping Corporation
Marine Technical Services Corporation
Marine Transport Lines, Inc.
Marine Transport Management, Inc.
MTL Petrolink, Corp.
Nuelink Corp.
Offshore Marine Services, Inc.
OMI Challenger Transport, Inc.
Oswego Shipping Corporation
Patriot Transport, Inc.
Rover Transport, Inc.
LIBERIAN SUBSIDIARIES:
Oswego Chemical Carriers Corporation
Oswego Corporation
Oswego Shipbuilding Corporation
MARSHALLL ISLANDS SUBSIDIARY:
Marine Car Carriers, Inc. (MI)
NEW YORK:
Courier Transport Inc.
TEXAS:
OMIP Inc.
<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> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 8,652
<SECURITIES> 0
<RECEIVABLES> 13,624
<ALLOWANCES> 509
<INVENTORY> 0
<CURRENT-ASSETS> 28,940
<PP&E> 106,481
<DEPRECIATION> 67,703
<TOTAL-ASSETS> 106,470
<CURRENT-LIABILITIES> 20,730
<BONDS> 24,111
0
0
<COMMON> 3,277
<OTHER-SE> 12,692
<TOTAL-LIABILITY-AND-EQUITY> 106,470
<SALES> 0
<TOTAL-REVENUES> 184,778
<CGS> 0
<TOTAL-COSTS> 151,930
<OTHER-EXPENSES> 38,803
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,378
<INCOME-PRETAX> (6,913)
<INCOME-TAX> (39,985)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,072
<EPS-PRIMARY> 6.31
<EPS-DILUTED> 6.31
</TABLE>
