UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
----------
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
Commission File Number 0-12289
SEACOR SMIT INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3542736
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11200 WESTHEIMER, SUITE 850
HOUSTON, TEXAS 77042
(713) 782-5990
----------------------
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
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 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.
|X| Yes |_| No
The total number of shares of Common Stock, par value $.01 per share,
outstanding as of August 11, 1997 was 13,823,642. Registrant has no other class
of Common Stock outstanding.
<PAGE>
SEACOR SMIT INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page No.
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
June 30, 1997 and December 31, 1996..........................................1
Condensed Consolidated Statements of Operations For the
Three and Six-Months Ended June 30, 1997 and 1996............................2
Condensed Consolidated Statements of Cash Flows
For the Six-Months Ended June 30, 1997 and 1996..............................3
Notes to Condensed Consolidated Financial Statements.........................4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................................7
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders................16
Item 6. Exhibits and Reports on Form 8-K....................................16
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SEACOR SMIT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA, UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------------------- ------------------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents.......................................... $ 162,213 $ 149,053
Investment securities............................................ - 311
Trade and other receivables, net of allowance for
doubtful accounts of $1,080 and $475, respectively.............. 64,550 46,469
Affiliate receivables.............................................. 5,451 2,224
Inventories........................................................ 1,827 1,559
Prepaid expenses and other......................................... 2,551 1,865
-------------------- ------------------
Total current assets......................................... 236,592 201,481
-------------------- ------------------
Investments in, at Equity, and Receivables from 50%
or Less Owned Companies............................................ 28,982 21,316
-------------------- ------------------
Property and Equipment................................................ 505,070 498,899
Less--Accumulated depreciation...................................... (100,715) (101,123)
-------------------- ------------------
Net property and equipment................................... 404,355 397,776
-------------------- ------------------
Restricted Cash....................................................... 32,495 -
Other Assets.......................................................... 18,286 15,882
-------------------- ------------------
$ 720,710 $ 636,455
==================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities:
Current portion of long-term debt.................................. $ 1,797 $ 1,793
Accounts payable - trade........................................... 14,325 14,690
Accounts payable - affiliates...................................... 2,935 734
Other current liabilities.......................................... 17,568 12,066
-------------------- ------------------
Total current liabilities.................................... 36,625 29,283
-------------------- ------------------
Long-Term Debt........................................................ 217,087 218,659
Deferred Income Taxes................................................. 51,478 33,749
Deferred Gain and Other Liabilities................................... 3,663 2,719
Minority Interests and Indebtedness to Minority Shareholders.......... 714 974
Stockholders' Equity:
Common stock, $.01 par value, 13,987,610 and 13,888,133
shares issued at June 30, 1997, and December 31, 1996,
respectively................................................... 140 139
Additional paid-in capital......................................... 264,391 258,904
Retained earnings.................................................. 158,866 92,005
Less 162,768 and 56,768 shares held in treasury at June 30,
1997 and December 31, 1996, respectively, at cost.............. (5,137) (622)
Less unamortized restricted stock compensation..................... (1,191) (279)
Currency translation adjustments................................... (5,926) 924
--------------------
------------------
Total stockholders' equity................................... 411,143 351,071
-------------------- ------------------
$ 720,710 $ 636,455
==================== ==================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
AND SHOULD BE READ IN CONJUNCTION HEREWITH.
1
<PAGE>
SEACOR SMIT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA, UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- ------------------------------
1997 1996 1997 1996
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Operating Revenue:
Marine.....................................................$ 79,993 $ 44,494 $ 154,948 $ 87,736
Environmental -
Oil spill response........................................ 1,160 3,497 1,637 5,919
Retainer fees and other services.......................... 4,095 4,662 7,842 9,093
------------- ------------- ------------- ------------
85,248 52,653 164,427 102,748
------------- ------------- ------------- ------------
Costs and Expenses:
Costs of oil spill response................................ 1,067 3,346 1,562 5,392
Operating expenses -
Marine.................................................... 40,752 24,605 74,879 50,027
Environmental............................................. 1,316 1,515 2,538 2,764
Administrative and general................................. 7,632 5,586 14,115 11,117
Depreciation and amortization.............................. 8,754 5,842 17,621 11,542
------------- ------------- ------------- ------------
59,521 40,894 110,715 80,842
------------- ------------- ------------- ------------
Operating Income.............................................. 25,727 11,759 53,712 21,906
------------- ------------- ------------- ------------
Other (Expense) Income:
Interest on debt........................................... (2,849) (1,631) (5,641) (3,452)
Interest income............................................ 2,497 360 4,561 1,042
Gain from equipment sales, net............................. 31,123 279 47,010 522
McCall acquisition costs.................................. - (472) - (472)
Other...................................................... 486 49 443 310
------------- ------------- ------------- ------------
31,257 (1,415) 46,373 (2,050)
------------- ------------- ------------- ------------
Income Before Income Taxes, Minority Interests, Equity in
Net Earnings of 50% or Less Owned Companies and
Extraordinary Item......................................... 56,984 10,344 100,085 19,856
Income Tax Expense............................................ 20,321 3,854 35,203 7,205
------------- ------------- ------------- ------------
Income Before Minority Interests, Equity in Net Earnings of
50% or Less Owned Companies and Extraordinary Item......... 36,663 6,490 64,882 12,651
Minority Interests............................................ 113 71 145 147
Equity in Net Earnings of 50% or Less Owned Companies......... 1,648 355 2,159 441
------------- ------------- ------------- ------------
Income Before Extraordinary Item.............................. 38,424 6,916 67,186 13,239
Extraordinary Item - Extinguishment of Debt, net of tax....... (325) - (325) -
------------- ------------- ------------- ------------
Net Income....................................................$ 38,099 $ 6,916 $ 66,861 $ 13,239
============= ============= ============= ============
Earnings Per Common Share -- Assuming No Dilution:
Income Before Extraordinary Item...........................$ 2.77 $ 0.70 $ 4.83 $ 1.35
Extraordinary Item......................................... (0.02) - (0.02) -
------------- ------------- ------------- ------------
Net Income................................................$ 2.75 $ 0.70 $ 4.81 $ 1.35
============= ============= ============= ============
Earnings Per Common Share -- Assuming Full Dilution:
Income Before Extraordinary Item...........................$ 2.37 $ 0.60 $ 4.16 $ 1.16
Extraordinary Item......................................... (0.02) - (0.02) -
------------- ------------- ------------- ------------
Net Income................................................$ 2.35 $ 0.60 $ 4.14 $ 1.16
============= ============= ============= ============
Weighted Average Common Shares:
Assuming No Dilution....................................... 13,854,468 9,840,314 .13,889,663 ..9,835,707
Assuming Full Dilution..................................... 16,932,803 12,424,443 .16,969,634 .12,419,836
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
AND SHOULD BE READ IN CONJUNCTION HEREWITH.
2
<PAGE>
SEACOR SMIT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1997 1996
----------------- ------------------
<S> <C> <C>
Net Cash Provided by Operating Activities............................ $ 39,870 $ 22,669
----------------- ------------------
Cash Flows from Investing Activities:
Purchase of property and equipment................................ (54,429) (9,051)
Proceeds from property and equipment sales........................ 66,460 1,154
Purchase of securities............................................ - (311)
Proceeds from sale of securities.................................. 311 -
Investments in and advances to 50% or less owned companies........ (1,067) (217)
Principal payments on notes due from 50% or less owned
companies........................................................ 273 539
Principal payments received under a sale-type lease............... 104 87
Restricted cash...................................................... (32,495) -
Other................................................................ - 288
----------------- ------------------
Net cash provided (used) in investing activities.............. (20,843) (7,511)
----------------- ------------------
Cash Flows from Financing Activities:
Payments on long-term debt........................................ (1,351) (21,995)
Payments on capital lease obligations............................. (746) -
Payments on stockholders' loans................................... - (1,596)
Payment of public offering costs.................................. - (375)
Proceeds from issuance of long-term debt.......................... 750 7,711
Proceeds from exercise of stock options........................... 21 489
Common stock acquired for treasury................................ (4,515) -
----------------- ------------------
Net cash used in financing activities......................... (5,841) (15,766)
----------------- ------------------
Effect of Exchange Rate Changes
on Cash and Cash Equivalents...................................... (26) 1
----------------- ------------------
Net Increase (Decrease) in Cash and Cash Equivalents................. 13,160 (607)
Cash and Cash Equivalents, Beginning of Period....................... 149,053 28,786
================= ==================
Cash and Cash Equivalents, End of Period............................. $ 162,213 $ 28,179
================= ==================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
AND SHOULD BE READ IN CONJUNCTION HEREWITH.
3
<PAGE>
SEACOR SMIT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION --
The condensed consolidated financial information for the three and
six-month periods ended June 30, 1997, and 1996, has been prepared by the
Company (defined below) and was not audited by its independent public
accountants. In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial
position, results of operations, and cash flows at June 30, 1997, and for all
periods presented have been made. Results of operations for the interim periods
presented are not necessarily indicative of the operating results for the full
year or any future periods.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These condensed consolidated
financial statements should be read in conjunction with the financial statements
and related notes thereto included in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996.
Unless the context otherwise indicates, any references in this
Quarterly Report on Form 10-Q to the "Company" refer to SEACOR SMIT Inc. and its
consolidated subsidiaries, and any references in this Quarterly Report on Form
10-Q to "SEACOR" refer to SEACOR SMIT Inc.
2. EARNINGS PER SHARE --
Earnings per common share assuming no dilution were computed based on
the weighted average number of unrestricted and restricted common shares issued
and outstanding during the relevant periods. The additional common stock assumed
to be outstanding to reflect the dilutive effect of common stock equivalents was
excluded from the computation as insignificant.
Earnings per common share assuming full dilution was computed based on
the weighted average number of unrestricted and restricted shares issued and
outstanding plus additional shares assumed to be outstanding to reflect the
dilutive effect of common stock equivalents using the treasury stock method and
the assumption that all outstanding convertible subordinated notes were
converted to common stock. For computation purposes, net income was adjusted for
interest expense and applicable debt discount amortization.
3. NEW ACCOUNTING STANDARDS --
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128 (SFAS 128), "Earnings Per Share," that simplifies the
computation of earnings per share. SFAS 128 is effective for financial
statements issued for periods ending after December 15, 1997 and requires
restatement for all prior period earnings per share data presented. Earnings per
share calculated in accordance with SFAS 128 would be unchanged for the periods
presented.
In June 1997, the Financial Accounting Standards Board issued Statement
No. 130 (SFAS 130), "Reporting Comprehensive Income" and Statement No. 131 (SFAS
131), "Disclosures About Segments of an Enterprise and Related Information."
SFAS 130 establishes standards for reporting comprehensive income (defined as
net income and all other non-owner changes in equity) in the financial
statements. SFAS 131 requires companies to disclose segment data based on how
management makes decisions about allocating resources to segments and measuring
their performance. SFAS 130 and 131 are effective for 1998, and adoption of
4
<PAGE>
these standards is expected to result in additional disclosure but will not have
any effect on the Company's reported financial position or results of
operations.
4. RESTRICTED CASH --
In connection with certain of the Company's vessel sales during 1997
(see Note 7), the Company has directed the sale proceeds to be deposited into
escrow accounts pursuant to certain exchange and escrow agreements. Under the
terms of those agreements, for a period of six months, the funds held in escrow
are restricted to be used toward the purchase of replacement vessels that have
been identified. Accordingly, funds in escrow, totaling $32,495,000, are
reflected as restricted cash on the accompanying condensed consolidated balance
sheet at June 30, 1997.
5. LONG-TERM DEBT --
On June 30, 1997, the Company entered into an agreement for an
unsecured reducing revolving credit facility (the "Credit Facility") with Den
norske Bank ASA ("DnB"), as agent for itself and other lenders named therein
(the "Lenders"). This facility replaced the prior revolving credit facility with
DnB. On June 30, 1997, there was $6,991,000 principal amount of borrowings
outstanding thereunder, the proceeds of which were used to pay all outstanding
amounts under the prior revolving credit facility with DnB. Until termination of
the Credit Facility, a commitment fee is payable on a quarterly basis, at rates
ranging from .15 to .45 percent per annum on the average unfunded portion of the
Credit Facility. The commitment fee rate shall vary based upon the percentage
the Company's funded debt bears to earnings before interest, taxes,
depreciation, and amortization ("EBITDA"), as defined.
An extraordinary loss of $325,000 or $0.02 per share was recognized in
connection with the termination of the prior revolving credit facility with DnB
that resulted from the write-off of unamortized debt issue costs.
Under the terms of the Credit Facility, the Company may borrow up to
$100,000,000 aggregate principal amount (the "Maximum Committed Amount") of
unsecured reducing revolving credit loans maturing on June 29, 2002. The Maximum
Committed Amount will automatically decrease semiannually by six and one-quarter
percent beginning June 30, 1998, with the balance payable at maturity.
Outstanding borrowings will bear interest at annual rates ranging from 70 to 160
basis points (the "Margin") above LIBOR. The Margin shall be determined
quarterly and vary based upon the percentage the Company's funded debt bears to
EBITDA, as defined.
The Credit Facility requires the Company, on a consolidated basis, to
maintain a minimum ratio of indebtedness to vessel value, as defined, a minimum
cash and cash equivalent level, a specified interest coverage ratio, specified
debt to capitalization ratios and a minimum net worth requirement. The Credit
Facility limits the amount of secured indebtedness which the Company and its
subsidiaries may incur, provides for a negative pledge with respect to the
Company's and its subsidiaries' assets and restricts the payment of dividends.
6. SHARES HELD IN TREASURY --
During the six months ended June 30, 1997, SEACOR repurchased 106,000
shares of its common stock. The shares were acquired at an aggregate cost of
$4,515,000. On February 24, 1997, SEACOR's Board of Directors authorized the
repurchase, from time to time, of up to $35,000,000 of the Company's common
stock and/or 5-3/8% Convertible Subordinated Notes Due November 15, 2006, and
the amount may be increased up to $50,000,000 under certain circumstances.
5
<PAGE>
7. GAIN FROM EQUIPMENT SALES --
During the three and six-month periods ended June 30, 1997, gain from
equipment sales primarily related to the Company's sale of 10 and 22 vessels,
respectively. Vessels sold in the second quarter included five supply/towing
supply, three anchor handling towing supply, and two utility. Vessels sold in
the six months ended June 30, 1997, included 11 supply/towing supply, five
utility, three anchor handling towing supply, two crew, and one freight.
8. COMMITMENT AND CONTINGENCY --
At July 31, 1997, the Company has committed to build vessels over the
next two years for an aggregate capital expenditure of approximately
$133,300,000. Approximately $22,400,000 has been funded and approximately
$6,000,000 is committed to be paid by Transportacion Maritima Mexicana S.A. de
C.V. ("TMM"), the Company's joint venture partner in Mexico, pursuant to a
Memorandum of Understanding, dated September 25, 1996, between TMM and the
Company relating to the construction of several vessels.
On December 19, 1996, in connection with the acquisition of all of the
offshore vessel assets, vessel spare parts, and certain related joint venture
interests owned by Smit Internationale N.V. ("Smit"), the Company agreed to the
payment to Smit of up to $47,200,000 of additional consideration in cash and
non-convertible notes based upon the earnings performance during 1997 and 1998
by certain of those assets. Based upon operations since the date of acquisition
and estimated future rates per day worked, management believes it is probable
that additional purchase consideration will be payable to Smit. When the
contingency is resolved and additional consideration is distributable, the
Company will record the additional consideration issued or issuable in
accordance with generally accepted accounting principles as an additional cost
of certain of the assets to be depreciated over their remaining lives.
9. SUBSEQUENT EVENT --
On August 5, 1997, SEACOR Offshore Rigs Inc., a Delaware corporation
and a wholly owned subsidiary of SEACOR ("SEACOR Rigs"), together with COI LLC,
a Delaware limited liability company ("COI"), formed Chiles Offshore LLC, a
Delaware limited liability company ("Chiles Offshore") for the purpose of
managing and investing in partnerships to construct, own and operate two jack-up
drilling rigs. For their respective 50% membership interest in Chiles Offshore,
SEACOR Rigs has contributed $8,850,000 in cash and COI has contributed its
interest in certain rig construction contracts (including certain progress
payments thereunder) and approximately $364,000 in cash. SEACOR Rigs has also
advanced a short-term loan to Chiles Offshore in the principal amount of
$5,465,000, which loan bears interest at 10% per annum and is expected to be
repaid out of additional capital contributions. It is anticipated that SEACOR
Rigs will contribute up to an additional $26,000,000 (for an aggregate
investment of $35,000,000) in such drilling rig partnerships to partially fund
the rig construction. Total rig construction costs are presently estimated to be
approximately $160,000,000.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
When included in this Quarterly Report on Form 10-Q or in documents
incorporated herein by reference, the words "expects," "intends," "anticipates,"
"believes," "estimates," and analogous expressions are intended to identify
forward-looking statements. Such statements inherently are subject to a variety
of risks and uncertainties that could cause actual results to differ materially
from those projected. Such risk and uncertainties include, among others, general
economic and business conditions, industry fleet capacity, changes in foreign
and domestic oil and gas exploration and production activity, competition,
changes in foreign political, social and economic conditions, regulatory
initiatives and compliance with governmental regulations, customer preferences
and various other matters, many of which are beyond the Company's control. These
forward-looking statements speak only as of the date of this Quarterly Report on
Form 10-Q. The Company expressly disclaims any obligation or undertaking to
release publicly any updates or any change in the Company's expectations with
regard thereto or any change in events, conditions or circumstances on which any
statement is based.
OFFSHORE MARINE SERVICES
The Company provides marine transportation and related services largely
dedicated to supporting offshore oil and gas exploration and production through
the operation, domestically and internationally, of offshore support vessels.
The Company's vessels deliver cargo and personnel to offshore installations, tow
and handle the anchors of drilling rigs and other marine equipment, support
offshore construction and maintenance work, and provide standby safety support.
The Company's vessels are also used for special projects, such as well
stimulation, seismic data gathering, freight hauling, line handling, and oil
spill emergencies.
The Company's operating revenue is affected by rates per day worked and
utilization. These performance measures are closely aligned with the offshore
oil and gas exploration industry and are a function of demand and availability
of marine vessels. The level of exploration and development of offshore areas is
affected by both short-term and long-term trends in oil and gas prices which, in
turn, are related to the demand for petroleum products and the current
availability of oil and gas resources.
7
<PAGE>
The table below sets forth rates per day worked and utilization data
for the Company during the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- ----------------------------
1997 1996 1997 1996
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Rates Per Day Worked ($): (1) (2)
Supply/Towing Supply....................... 6,307 4,118 6,069 3,918
Anchor Handling Towing Supply.............. 10,634 6,277 9,738 5,819
Crew....................................... 2,163 1,675 2,114 1,653
Standby Safety............................. 5,962 4,561 5,669 4,604
Utility/Line Handling...................... 1,356 1,129 1,327 1,118
Project and Geophysical/Freight............ 4,654 4,153 4,692 4,244
Overall Fleet........................... 3,548 2,411 3,422 2,359
Overall Utilization (%): (1)
Supply/Towing Supply....................... 90.1 94.6 93.1 96.0
Anchor Handling Towing Supply.............. 79.0 90.7 82.5 93.7
Crew....................................... 97.1 98.5 97.6 98.0
Standby Safety............................. 97.2 82.6 91.6 85.6
Utility/Line Handling...................... 97.7 79.2 97.5 76.7
Project and Geophysical/Freight............ 97.5 79.3 95.0 89.0
Overall Fleet........................... 94.2 89.4 95.0 89.1
</TABLE>
- ---------------------
(1) Rates per day worked is the ratio of total charter revenue to the total
number of vessel days worked. Rates per day worked and overall utilization
figures exclude owned vessels that are bareboat chartered-out, vessels owned
by corporations that participate in pooling arrangements with the Company,
joint venture vessels and managed/operated vessels and include vessels
bareboat and time chartered-in by the Company.
(2) Certain of the Company's vessels earn revenue in foreign currencies which
have been converted to U.S. dollars for reporting purposes at the weighted
average exchange rates of those foreign currencies for the periods
indicated.
A significant factor affecting operating revenues, other than average
rates per day worked and overall utilization, is the number of vessels owned and
bareboat chartered-in by the Company. Operating revenues and associated expenses
for vessels owned and bareboat chartered-in are incurred at similar rates.
However, operating expenses associated with vessels bareboat chartered-in
include bareboat charter hire expenses that, in turn, are included in vessel
expenses, but exclude depreciation expense.
The Company may also bareboat charter-out vessels. Operating revenues
for these vessels are lower than for vessels owned and operated or bareboat
chartered-in by the Company, because vessel expenses, normally recovered through
charter revenue, are the burden of the charterer. Operating expenses include
depreciation expense if the vessels which are chartered-out are owned. At June
30, 1997 and 1996, the Company had seven and two vessels, respectively, bareboat
chartered-out.
The table below sets forth the Company's marine fleet structure at the dates
indicated:
FLEET STRUCTURE At June 30,
------------------------
1997 1996
------------------------
Owned...................................... 256 226
Bareboat and Time Chartered-In (1)......... 5 3
Joint Ventured (2)......................... 33 10
Pooled (3)................................. 12 5
========================
Overall Fleet.......................... 306 244
========================
- -----------------------
(1) A bareboat charter is a vessel lease under which the entity chartering-in a
vessel is typically responsible for all crewing, insurance, and operating
expenses, as well as the payment of bareboat charter hire to the vessel
owner. A time charter is a vessel lease under which the entity providing the
vessel is responsible for all crewing, insurance, and operating expenses. At
June 30, 1997, the Company bareboat chartered-in two vessels and time
chartered-in three vessels. At June 30, 1996, the Company bareboat
chartered-in two vessels and time chartered-in one vessel.
(2) 1997 and 1996 include twelve and ten vessels, respectively, owned by a joint
venture between Transportacion Maritima Mexicana S.A. de C.V. ("TMM") and
the Company (the "TMM Joint Venture"). 1997 also includes 21 vessels owned
by corporations in which the Company acquired an equity interest pursuant to
a transaction with Smit Internationale N.V. ("Smit") in December 1996 (the
"Smit Joint Ventures").
(3) 1997 and 1996 include five vessels owned by Toisa Ltd. ("Toisa") which
participate in a pool with ten Company owned North Sea standby safety
vessels. Additionally, 1997 includes seven standby safety vessels in which
the Company shares net operating profits after certain adjustments with
Toisa and owners of the vessels (the "Saint Fleet Pool").
8
<PAGE>
Vessel operating expenses are primarily a function of fleet size and
utilization levels. The most significant vessel operating expense items are
wages paid to marine personnel, maintenance and repairs, and marine insurance.
In addition to variable vessel operating expenses, the offshore marine segment
also incurs fixed charges related to the depreciation of property and equipment.
Depreciation is a significant operating cost, and the amount related to vessels
is the most significant component.
A portion of the Company's revenues and expenses are paid in foreign
currencies. For financial statement reporting purposes, these amounts are
translated into U.S. dollars at the weighted average exchange rates during the
relevant period. The foregoing applies primarily to the Company's North Sea
operations and to a lesser extent its West African and Mexican offshore marine
operations. Overall, the percentage of the Company's offshore marine operating
revenues derived from foreign operations whether in U.S. dollars or foreign
currencies approximated 41% and 30% in the six months ended June 30, 1997 and
1996, respectively.
The Company's foreign offshore marine operations are subject to various
risks inherent in conducting business in foreign nations. These risks include,
among others, political instability, potential vessel seizure, nationalization
of assets, currency restrictions and exchange rate fluctuations, import-export
quotas and other forms of public and governmental regulation, all of which are
beyond the control of the Company. Although, historically, the Company's
operations have not been affected materially by such conditions or events, it is
not possible to predict whether any such conditions or events might develop in
the future. The occurrence of any one or more of such conditions or events could
have a material adverse effect on the Company's financial condition and results
of operations.
Regulatory drydockings, which are a substantial component of marine
maintenance and repair costs, are expensed when incurred. Under applicable
maritime regulations, vessels must be drydocked twice in a five-year period for
inspection and routine maintenance and repair. The Company follows an asset
management strategy pursuant to which it defers required drydocking of selected
marine vessels and voluntarily removes these marine vessels from operation
during periods of weak market conditions and low rates per day worked. Should
the Company undertake a large number of drydockings in a particular fiscal
quarter or put through survey a disproportionate number of older vessels which
typically have higher drydocking costs, comparative results may be affected. In
the first six months of 1997, the Company completed the drydocking of 56 vessels
at an aggregate cost of $4.3 million versus 59 vessels drydocked at an aggregate
cost of $4.1 million in the comparable period of 1996.
Operating results are also affected by the Company's participation in
the following ventures: (i) a joint venture arrangement with Vector Offshore
Limited, a U.K. corporation which owns a 9% equity interest in the Company's
subsidiary that operates standby safety vessels in the North Sea, (ii) a 15
vessel pooling arrangement between the Company and Toisa that coordinates the
marketing for both the Company and Toisa in the North Sea standby safety market,
(iii) the TMM Joint Venture, (iv) the Saint Fleet Pool, and (v) the Smit Joint
Ventures which own and operate vessels in the Far East, Latin America, the
Middle East, the Mediterranean and offshore West Africa.
9
<PAGE>
ENVIRONMENTAL SERVICES
The Company's environmental services business, operated primarily
through a wholly owned subsidiary, National Response Corporation ("NRC"),
provides contractual oil spill response services to those who store, transport,
produce or handle petroleum and certain other non-petroleum oils as required by
the Oil Pollution Act of 1990 ("OPA 90"). NRC's clients include tank vessel
owner/operators, refiners and terminal operators, exploration and production
facility operators, and pipeline operators. NRC charges a retainer fee to its
customers for ensuring, by contract, the availability at predetermined rates to
NRC's response services. Retainer services include employing a staff to
supervise response to an oil spill emergency and maintaining specialized
equipment, including marine equipment, in a ready state for spill response as
contemplated by response plans filed by NRC's customers in accordance with OPA
90 and various state regulations. NRC also maintains relationships with numerous
environmental sub-contractors to assist with equipment maintenance and provide
trained personnel for deploying equipment in a spill response.
Pursuant to retainer agreements entered into with NRC, certain vessel
owners pay in advance to NRC a minimum annual retainer fee based upon the number
and size of vessels in each such owner's fleet and in some circumstances pay NRC
additional fees based upon the level of each vessel owner's voyage activity in
the U.S. The Company recognizes the greater of revenue earned by voyage activity
or the portion of the retainer earned in each accounting period. Certain other
vessel owners pay a fixed fee for NRC's retainer services and such fee is
recognized ratably throughout the year. Facility owners generally pay a
quarterly fee to NRC based on a formula that defines and measures petroleum
products transported to or processed at the facility. Some facility owners pay
an annual fixed fee and such fee is recognized ratably throughout the year.
NRC's retainer agreements with vessel owners generally range from one to three
years while retainer arrangements with facility owners are as long as seven
years.
Spill response revenue is dependent on the magnitude of any one spill
response and the number of spill responses within a given fiscal period.
Consequently, spill response revenue can vary greatly between comparable periods
and the revenue from any one period is not indicative of a trend or of
anticipated results in future periods. Costs of oil spill response activities
relate primarily to (i) payments to sub-contractors for labor, equipment, and
materials, (ii) direct charges to NRC for labor, equipment and materials, and
(iii) training and exercises related to spill response preparedness.
The principal components of NRC's operating costs are salaries and
related benefits for operating personnel, payments to sub-contractors, equipment
maintenance and depreciation, and insurance. These expenses are primarily a
function of regulatory requirements and the level of retainer business.
10
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth operating revenue and operating profit
by business segment for the periods indicated. The offshore marine business
segment's data is provided by geographic area of operation. The environmental
business segment's principal operations are in the United States.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ----------------------------
1997 1996 1997 1996
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Operating Revenue --
Marine:
United States...................................... $ 47,479 31,612 $ 92,181 $ 61,746
North Sea.......................................... 16,664 3,274 30,888 6,836
West Africa........................................ 10,015 8,493 21,348 16,871
Other Foreign...................................... 5,835 1,115 10,531 2,283
------------- ------------- ------------- --------------
79,993 44,494 154,948 87,736
Environmental ....................................... 5,255 8,159 9,479 15,012
============= ============= ============= ==============
85,248 52,653 164,427 102,748
============= ============= ============= ==============
Operating Profit --
Marine:
United States...................................... 45,962 9,972 80,420 18,593
North Sea.......................................... 6,109 (960) 9,850 (1,678)
West Africa........................................ 4,221 2,497 8,602 3,938
Other Foreign...................................... 1,612 444 3,757 925
------------- ------------- ------------- --------------
57,904 11,953 102,629 21,778
Environmental ....................................... 615 976 830 2,348
------------- ------------- ------------- --------------
58,519 12,929 103,459 24,126
Other income (expense)................................. (2) (493) (3) (479)
General corporate administration....................... (1,181) (821) (2,291) (1,381)
Net interest expense................................... (352) (1,271) (1,080) (2,410)
Minority interest in loss of a subsidiary.............. 113 71 145 147
Equity in net earnings of 50% or less owned companies.. 1,648 355 2,159 441
Income tax expense..................................... (20,321) (3,854) (35,203) (7,205)
============= ============= ============= ==============
Income before extraordinary item....................... $ 38,424 $ 6,916 $ 67,186 $ 13,239
============= ============= ============= ==============
</TABLE>
The marine business segment's operating revenue increased $35.5 million
and $67.2 million in the three and six-month periods ended June 30, 1997,
respectively, compared to the three and six-month periods ended June 30, 1996
due primarily to a net increase in the number of owned vessels and a significant
improvement in rates per day worked for the Company's offshore vessels operating
in the U.S. Gulf of Mexico. Significant offshore vessel acquisitions include 24
vessels purchased from Smit during December 1996 that operate in the North Sea,
offshore West Africa, and in Other Foreign regions and 24 vessels purchased from
Galaxie Marine Service, Inc. and affiliated companies ("Galaxie") during January
1997 that operate in the U.S. Gulf of Mexico. Anchor handling towing supply,
towing, and supply vessels were acquired from Smit, and utility and crew vessels
were acquired from Galaxie. Strong demand in the U.S. Gulf of Mexico resulted in
rates per day worked increasing between comparable periods for all offshore
vessels owned by the Company. Additionally, rates per day worked for the
Company's vessels operating in the North Sea, offshore West Africa, and in Other
Foreign regions also increased between comparable periods.
The environmental business segment's operating revenue decreased $2.9
million and $5.5 million in the three and six-month periods ended June 30, 1997,
respectively, compared to the three and six-month periods ended June 30, 1996
due primarily to a decline in the severity of oil spills managed by the Company.
Retainer fees and other service revenues also declined between comparable
periods due primarily to a decline in voyage and other service activities.
11
<PAGE>
The marine business segment's operating profit increased $46.0 million
and $80.9 million in the three and six-month periods ended June 30, 1997,
respectively, compared to the three and six-month periods ended June 30, 1996.
The increases were due primarily to significant increases in gains from the sale
of equipment, mainly vessels, and factors affecting operating revenue as
outlined above. During the three months ended June 30, 1997, the Company
realized gains, aggregating $31.0 million, from the sale of 10 vessels: five
U.S. Gulf of Mexico supply/towing supply, two U.S. Gulf of Mexico utility, and
two West African and one U.S. Gulf of Mexico anchor handling towing supply.
During the six months ended June 30, 1997, the Company realized gains,
aggregating $46.9 million, from the sale of 22 vessels: 10 U.S. Gulf of Mexico
and one West African supply/towing supply, five U.S. Gulf of Mexico utility, two
West African and one U.S. Gulf of Mexico anchor handling towing supply, two U.S.
Gulf of Mexico crew, and one U.S. freight. These increases in operating profit
were partially offset by higher wage, repair, insurance, and bad debt reserve
costs. Wage costs rose for seaman working in the U.S. Gulf of Mexico region in
response to strong demand for personnel resulting from very active market
conditions. Vessel related insurance costs rose due to higher self funded claim
costs. Repair costs rose due primarily to an increase in the number of scheduled
engine overhauls and an increase in other engine maintenance resulting from
greater running time by the Company`s smaller vessels. The Company's bad debt
reserve for trade receivables rose due to potentially uncollectible accounts in
West Africa.
The environmental business segment's operating profit declined $0.4
million and $1.5 million in the three and six-month periods ended June 30, 1997,
respectively, compared to the three and six-month periods ended June 30, 1996
due primarily to the factors affecting operating revenue as outlined above.
These declines in operating profit were partially offset by decreases in both
operating and general and administrative expenses.
The Company's overall administrative and general expenses, relating
primarily to operating activities, increased $2.0 million and $3.0 million in
the three and six-month periods ended June 30, 1997, respectively, compared to
the three and six-month periods ended June 30, 1996, and related primarily to an
increase in managerial staff and other administrative costs necessary to support
vessels recently acquired from Smit and Galaxie and bad debt reserves as
mentioned in the discussion above of the marine business segment's operating
profit. Corporate expenses also rose between comparable periods due primarily to
increased employee compensation cost commensurate with the overall growth of the
Company's operations. Administrative and general expenses primarily include
costs associated with personnel, professional services, travel, communications,
facility rental and maintenance, general insurance, and franchise taxes.
The Company's overall depreciation and amortization expense, which
related primarily to operating activities, increased $2.9 million and $6.1
million in the three and six-month periods ended June 30, 1997, respectively,
compared to the three and six-month periods ended June 30, 1996. This increase
was due primarily to a net increase in the number of owned offshore marine
vessels that were acquired from Smit and Galaxie.
Other expense in the three and six-month periods ended June 30,
1996 included $0.5 million of costs to complete the McCall Acquisition.
Net interest expense decreased $0.9 million and $1.3 million in the
three and six-month periods ended June 30, 1997, respectively, compared to the
three and six-month periods ended June 30, 1996. Interest income rose between
comparable periods due primarily to greater invested cash balances that resulted
from improved operating results and the sale of the Company's 5-3/8% Convertible
12
<PAGE>
Subordinated Notes Due November 15, 2006. Interest expense also increased
between comparable periods due to an increase in the Company's outstanding
indebtedness but was partially offset by the capitalization in 1997 of certain
interest costs associated with the construction of vessels.
In the three and six-month periods ended June 30, 1997, equity in the
earnings of 50% or less owned companies, net of applicable income taxes,
resulted from the Company's investment in the TMM Joint Venture, Clean Pacific
Alliance L.L.C. ("CPA"), and certain Smit Joint Ventures. In the comparable
periods of 1996, equity earnings were realized from the Company's participation
in the TMM Joint Venture and CPA.
LIQUIDITY AND CAPITAL RESOURCES
The Company's ongoing liquidity requirements arise primarily from its
need to service debt, fund working capital requirements, acquire or improve
equipment, and make other investments. Management believes that cash flow from
operations will provide sufficient working capital to fund the Company's
operating needs. The Company may, from time to time, issue shares of common
stock, debt, or a combination thereof, or sell vessels to finance the
acquisition of equipment and businesses or improvements to existing equipment.
The Company's cash flow levels and operating revenues are determined
primarily by vessels' rates per day worked, overall vessel utilization, the size
of the Company's fleet, and the level of oil spill response activity. Factors
relating to the marine business segment are affected directly by the volatility
of oil and gas prices, the level of offshore drilling and exploration activity,
and other factors beyond the Company's control.
Net cash provided by operating activities increased $17.2 million in
the six-month period ended June 30, 1997, compared to the six-month period ended
June 30, 1996. The increase was due primarily to improved operating profits that
resulted from higher rates per day worked, primarily in the U.S. Gulf of Mexico,
and the net addition of vessels to the Company's fleet.
Net cash used in investing activities increased $13.3 million in the
six-month period ended June 30, 1997, compared to the six-month period ended
June 30, 1996. The increase was primarily related to funds used to acquire 30
vessels, construct crew, supply, and anchor handling towing supply vessels, and
advance a Smit Joint Venture for the acquisition of a vessel and restricted cash
balances held in escrow, pursuant to certain exchange and escrow agreements, to
be used toward the purchase of vessels. This increase was partially offset by
proceeds received from the sale of a greater number of vessels with higher
market values.
Net cash used in financing activities decreased $9.9 million in the
six-month period ended June 30, 1997, compared to the six-month period ended
June 30, 1996. The decrease was due primarily to a decline in principal
repayments under the DnB Facility and other outstanding indebtedness. This
decrease was offset by cash used to repurchase 106,000 shares of the Company's
common stock pursuant to its Board of Directors authorization that permitted the
repurchase, from time to time, of up to $35.0 million of the Company's common
stock and/or 5-3/8% Convertible Subordinated Notes Due November 15, 2006 and the
amounts may be increased up to $50.0 million under certain circumstances.
On June 30, 1997, the Company entered into an agreement for an
unsecured reducing revolving credit facility (the "Credit Facility") with Den
norske Bank ASA ("DnB"), as agent for itself and other lenders named therein
(the "Lenders"). This facility replaced the prior revolving credit facility with
DnB. On June 30, 1997, there was $7.0 million principal amount of borrowings
outstanding thereunder, the proceeds of which were used to pay all outstanding
13
<PAGE>
amounts under the prior revolving credit facility with DnB. Until termination of
the Credit Facility, a commitment fee is payable on a quarterly basis, at rates
ranging from .15 to .45 percent per annum on the average unfunded portion of the
Credit Facility. The commitment fee rate shall vary based upon the percentage
the Company's funded debt bears to earnings before interest, taxes,
depreciation, and amortization ("EBITDA"), as defined.
Under the terms of the Credit Facility, the Company may borrow up to
$100.0 million aggregate principal amount (the "Maximum Committed Amount") of
unsecured reducing revolving credit loans maturing on June 29, 2002. The Maximum
Committed Amount will automatically decrease semiannually by six and one-quarter
percent beginning June 30, 1998, with the balance payable at maturity.
Outstanding borrowings will bear interest at annual rates ranging from 70 to 160
basis points (the "Margin") above LIBOR. The Margin shall be determined
quarterly and vary based upon the percentage the Company's funded debt bears to
EBITDA, as defined.
The Credit Facility requires the Company, on a consolidated basis, to
maintain a minimum ratio of indebtedness to vessel value, as defined, a minimum
cash and cash equivalent level, a specified interest coverage ratio, specified
debt to capitalization ratios and a minimum net worth requirement. The Credit
Facility limits the amount of secured indebtedness which the Company and its
subsidiaries may incur, provides for a negative pledge with respect to the
Company's and its subsidiaries' assets, and restricts the payment of dividends.
In connection with certain of the Company's vessel sales during 1997,
the Company has directed the sale proceeds to be deposited into escrow accounts
pursuant to certain exchange and escrow agreements. Under the terms of those
agreements, for a period of six months, the funds held in escrow are restricted
to be used toward the purchase of replacement vessels. At June 30, 1997, the
Company's restricted cash balances totaled $32.5 million.
On December 19, 1996, in connection with the acquisition of all of the
offshore vessel assets, vessel spare parts, and certain related joint venture
interests owned by Smit, the Company agreed to the payment to Smit of up to
$47.2 million of additional consideration in cash and non-convertible notes
based upon the earnings performance during 1997 and 1998 by certain of those
assets. Based upon operations since the date of acquisition and estimated future
rates per day worked, management believes it is probable that additional
purchase consideration will be payable to Smit in 1999 and future years.
CAPITAL EXPENDITURES
The Company may make selective acquisitions of marine vessels or fleets
of marine vessels, drilling rigs, and oil spill response equipment and/or expand
the scope and nature of its environmental services. The Company also may upgrade
or enhance its marine vessels to remain competitive in the marketplace.
Management anticipates that such expenditures would be funded through a
combination of cash flow provided by operations, existing cash balances, and
may, from time to time, issue additional shares of common stock, debt, or sell
existing equipment.
At July 31, 1997, the Company has committed to build marine vessels
over the next two years for an aggregate capital expenditure of approximately
$133.3 million. Approximately $22.4 million has been funded and approximately
$6.0 million is committed to be paid by TMM, pursuant to a Memorandum of
Understanding, dated September 25, 1996, between TMM and the Company relating to
the construction of several marine vessels.
14
<PAGE>
On August 5, 1997, SEACOR Offshore Rigs Inc., a wholly owned subsidiary
of SEACOR, invested $8.85 million in cash in Chiles Offshore LLC for a 50%
membership interest in such entity and anticipates contributing an additional
$26.0 million to partially fund certain drilling rig construction projects to be
managed by Chiles Offshore LLC. See Note 9 to the Condensed Consolidated
Financial Statements included in this report.
Expenditures for environmental compliance to modify marine segment
vessels have not been a significant component of the Company's capital budget.
NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128 (SFAS 128), "Earnings Per Share," that simplifies the
computation of earnings per share. SFAS 128 is effective for financial
statements issued for periods ending after December 15, 1997 and requires
restatement for all prior period earnings per share data presented. Earnings per
share calculated in accordance with SFAS 128 would be unchanged for the periods
presented.
In June 1997, the Financial Accounting Standards Board issued Statement
No. 130 (SFAS 130), "Reporting Comprehensive Income" and Statement No. 131 (SFAS
131), "Disclosures About Segments of an Enterprise and Related Information."
SFAS 130 establishes standards for reporting comprehensive income (defined as
net income and all other non-owner changes in equity) in the financial
statements. SFAS 131 requires companies to disclose segment data based on how
management makes decisions about allocating resources to segments and measuring
their performance. SFAS 130 and 131 are effective for 1998, and adoption of
these standards is expected to result in additional disclosure but will not have
any effect on the Company's reported financial position or results of
operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
15
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The 1997 Annual Meeting of Stockholders of SEACOR SMIT Inc.
("SEACOR") was held on April 17, 1997 (the "Annual Meeting").
(b) Messrs. Charles Fabrikant, Granville E. Conway, Michael E.
Gellert, Stephen Stamas, Richard M. Fairbanks III, Pierre de
Demandolx, and Antoon Kienhuis were elected as directors to serve
until the 1998 Annual Meeting of Stockholders of SEACOR or until
their respective successors are earlier elected and qualified.
(c) At the Annual Meeting, SEACOR's stockholders ratified (i) the
appointment of Arthur Andersen LLP to serve as SEACOR's
independent auditors for the fiscal year ending December 31,
1997, (ii) an amendment to SEACOR's Restated Certificate of
Incorporation to increase the authorized capital stock of SEACOR
from 20,000,000 shares of common stock, par value $.01 per share
(the "Common Stock"), to 40,000,000 shares of Common Stock, and
(iii) an amendment to SEACOR's Restated Certificate of
Incorporation to change the corporate name from SEACOR Holdings,
Inc. to SEACOR SMIT Inc. Messrs. Charles Fabrikant, Granville E.
Conway, Michael E. Gellert, Stephen Stamas, Richard M. Fairbanks
III, Pierre de Demandolx, and Antoon Kienhuis were elected with
no director receiving less than 10,575,519 votes in favor and no
more than 14,508 abstentions with respect to any one director.
10,590,027 shares were voted in favor of the appointment of
Arthur Andersen LLP, with 4,662 shares voted against such
appointment and 10,545 abstentions. 10,590,027 shares were voted
in favor of adopting the increase in authorized capital stock of
SEACOR with 297,866 shares voted against such adoption and 12,307
abstentions. 10,590,027 shares were voted in favor of adopting
the corporate name change with 12,392 shares voted against such
adoption and 11,712 abstentions. There were no broker non-votes
for any of the directors, Arthur Andersen LLP, the increase in
authorized capital stock amendment, and the corporate name change
amendment.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits:
3.1(a) Restated Certificate of
Incorporation of SEACOR SMIT Inc.
3.1(b) Certificate of Amendment to the
Restated Certificate of
Incorporation of SEACOR SMIT Inc.
3.2 Amended and Restated By-Laws of
SEACOR SMIT Inc. (incorporated
herein by reference to Exhibit 4.2
to the Company's Registration
Statement on Form S-8 (No.
333-12637) filed with the
Securities and Exchange Commission
on September 25, 1996).
16
<PAGE>
10.1 Revolving Credit Facility Agreement
dated as of June 30, 1997 among
SEACOR SMIT Inc., Den norske Bank
ASA, as agent, and the other banks
and financial institutions named
therein.
10.2 Operating Agreement of Chiles
Offshore LLC dated as of August 5,
1997 between SEACOR Offshore Rigs
Inc. and COI, LLC.
11.1 Computation of Per Share Earnings
for the Three and Six Months Ended
June 30, 1997 and 1996.
27.1 Financial Data Schedule.
B. Reports on Form 8-K:
Current Report on Form 8-K/A dated December 19,
1996 and filed with the Securities and Exchange
Commission on March 4, 1997 (reporting under Items
2, 7 and 9 of the Current Report on Form 8-K and
including therein financial statements required by
Rule 3-05(b) and Article 11 of Regulation S-X) and
amending the Current Report on 8-K dated December
19, 1996 and filed with the Securities and
Exchange Commission on December 24, 1996.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEACOR SMIT Inc.
(Registrant)
DATE: AUGUST 14, 1997 By: /s/ Charles Fabrikant
-----------------------------------------
Charles Fabrikant, Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
DATE: AUGUST 14, 1997 By: /s/ Randall Blank
-----------------------------------------
Randall Blank, Executive Vice President,
Chief Financial Officer and Secretary
(Principal Financial Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
10.1 Revolving Credit Facility Agreement dated as of June 30, 1997
among SEACOR SMIT Inc., Den norske Bank ASA, as agent, and the
other banks and financial institutions named therein.
10.2 Operating Agreement of Chiles Offshore LLC dated as of August 5,
1997 between SEACOR Offshore Rigs Inc. and COI, LLC.
11.1 Computation of Per Share Earnings for the Three and Six Months
Ended June 30, 1997 and 1996.
27.1 Financial Data Schedule.
================================================================================
AGREEMENT FOR
A
U.S. $100,000,000
REVOLVING CREDIT FACILITY
TO BE MADE AVAILABLE TO
SEACOR SMIT INC.
BY
THE FINANCIAL INSTITUTIONS
IDENTIFIED ON SCHEDULE A
AND
DEN NORSKE BANK ASA, AS AGENT
================================================================================
June 30, 1997
<PAGE>
INDEX
PAGE
SECTION 1 DEFINITIONS .....................................................1
1.1 Defined Terms...........................................1
1.2 Construction............................................12
1.3 Accounting Terms .......................................12
1.4 Headings ...............................................12
SECTION 2 REPRESENTATIONS AND WARRANTIES.....................................13
2.1(a) Due Organization and Power..............................13
2.1(b) Authorization and Consents..............................13
2.1(c) Binding Obligations ....................................13
2.1(d) No Violation ...........................................13
2.1(e) Litigation .............................................13
2.1(f) No Default .............................................14
2.1(g) Vessel Ownership, Classification, and Insurance .......14
2.1(h) Citizenship ............................................14
2.1(i) Financial Statements ...................................14
2.1(j) Tax Returns and Payments ...............................15
2.1(k) Insurance ..............................................15
2.1(l) Solvency ..............................................15
2.1(m) Environmental Matters .................................15
2.1(n) Foreign Trade Control Regulations ......................16
SECTION 3 ADVANCES OF THE FACILITY/LETTERS OF CREDIT.........................17
3.1 Advances................................................17
3.2 Use of Proceeds.........................................17
3.3 Drawdown Notice ........................................17
3.4 Drawdown Notice a Warranty..............................18
3.5 Notation of Advance on Note.............................18
3.6 Foreign Currency Advances...............................18
3.7 Letters of Credit.......................................18
3.8 Letter of Credit Requests; Request for Issuance of
Letter of Credit.....................................19
3.9 Letter of Credit Payments Deemed Advances...............19
3.10 Letter of Credit Participation .........................20
<PAGE>
SECTION 4 CONDITIONS ....................................................... 22
4.1 Conditions Precedent to Drawdown of the Initial Advance
under the Credit Facility..........................22
4.2 Further Conditions Precedent............................24
4.3 Break Funding Costs ....................................25
4.4 Satisfaction after Drawdown ............................25
SECTION 5 REPAYMENT, PREPAYMENT AND REDUCTION................................25
5.1 Repayment...............................................25
5.2 Scheduled Reductions of the Committed Amount............25
5.3 Prepayment..............................................26
5.4 Permanent Reduction of the Committed Amount of the
Credit Facility.....................................26
5.5 Reduction of Commitment.................................26
SECTION 6 INTEREST AND RATE..................................................26
6.1 Applicable Rate.........................................26
6.2 The Margin..............................................27
6.3 LIBOR; Interest Periods ................................27
6.4 Interest Payments ......................................28
6.5 Interest due only on Banking Day .......................28
6.6 Calculation of Interest ................................28
SECTION 7 PAYMENTS ....................................................... 28
7.1 Place of Payments, No Set Off...........................28
7.2 Proof of no Withholding.................................28
7.3 Federal Income Tax Credits ............................ 29
SECTION 8 ACCOUNTS ....................................................... 29
8.1 The Operating Accounts..................................29
SECTION 9 EVENTS OF DEFAULT...................................................30
9.1(a) Principal Payments......................................30
9.1(b) Interest and Other Payments.............................30
9.1(c) Representations, etc. ..................................30
9.1(d) Impossibility, Illegality ..............................30
9.1(e) Citizenship ............................................30
9.1(f) Financial Covenants ....................................30
9.1(g) Other Covenants ........................................30
<PAGE>
9.1(h) Debt....................................................31
9.1(i) Bankruptcy .............................................31
9.1(j) Judgments .............................................31
9.1(k) Inability to Pay Debts .................................31
9.1(l) Vessels Value/Commitment ...............................31
9.1(m) Change of Control of the Borrower ......................32
9.2 Indemnification .......................................32
9.3 Application of Moneys ..................................33
SECTION 10 COVENANTS ........................................................33
10.1 .............................................33
10.1A(i) Performance of Agreements...................34
10.1A(ii) Compliance with Covenants ..................34
10.1A(iii) Notice of Default ..........................34
10.1A(iv) Obtain Consents ............................34
10.1A(v) Financial Statements .......................34
10.1A(vi) Qualification to Own U.S. Flag Vessels......35
10.1A(vii) Corporate Existence.........................35
10.1A(viii) Books, Records, etc ........................36
10.1A(ix) Inspection .................................36
10.1A(x) Taxes .....................................36
10.1A(xi) Compliance with Statutes, etc. .............36
10.1A(xii) Environmental Matters ......................36
10.1A(xiii) Evidence of Insurance ......................37
10.1A(xiv) Maintenance of Assets ......................37
10.1A(xv) Funded Debt/Total Capitalization ...........37
10.1A(xvi) Senior Debt/Total Capitalization ...........37
10.1A(xvii) Permitted Secured Senior Debt ..............37
10.1A(xviii) Cash, Cash Equivalents .....................38
10.1A(xix) Interest Coverage Ratio ....................38
10.1A(xx) Consolidated Net Worth .....................38
10.1A(xxi) ERISA Matters ..............................38
10.1A(xxii) Delivery of Share Certificates..............38
10.1B(i) Liens ......................................39
10.1B(ii) Sale of Assets..............................39
10.1B(iii) Dividends ..................................40
10.1B(iv) Changes in Business ........................40
10.1B(v) Consolidation, Merger ......................40
10.1B(vi) Use of Proceeds ............................40
10.1(B)(vii) Redemption/Repurchase of Securities ........40
10.1(B)(viii) Negative Pledge ............................40
10.2 Vessel Valuations ..........................41
10.3 Inspection and Survey Reports...............41
<PAGE>
SECTION 11 ASSIGNMENT AND PARTICIPATIONS.....................................41
SECTION 12 ILLEGALITY, INCREASED COST, NON-AVAILABILITY,
ETC. ............................................42
12.1 Illegality ............................................42
12.2 Increased Cost.........................................42
12.3 Non-availability of Funds..............................43
12.4 Determination of Losses................................44
12.5 Compensation for Losses................................44
SECTION 13 CURRENCY INDEMNITY .............................................. 44
13.1 Currency Conversion....................................44
13.2 Change in Exchange Rate................................44
13.3 Additional Debt Due....................................45
13.4 Rate of Exchange.......................................45
SECTION 14 FEES AND EXPENSES ................................................45
14.1 Commitment Fee.........................................45
14.2 Letter of Credit and Facing Fees and
Related Charges......................................46
14.3 Agency Fee ............................................46
14.4 Agent's Other Fees.....................................46
14.5 Costs, Charges and Expenses............................47
SECTION 15 APPLICABLE LAW, JURISDICTION AND WAIVER...........................47
15.1 Applicable Law.........................................47
15.2 Jurisdiction...........................................47
15.3 Waiver of Jury Trial...................................48
SECTION 16 THE AGENT .............................................48
16.1 Appointment of Agent...................................48
16.2 Distribution of Payments...............................48
16.3 Holder of Interest in Note.............................48
16.4 No Duty to Examine, Etc................................48
16.5 Agent as Lender........................................48
16.6(a) Obligations of Agent...................................49
16.6(b) No Duty to Investigate.................................49
16.7(a) Discretion of Agent....................................49
16.7(b) Instructions of Majority Lenders.......................49
16.8 Assumption re Event of Default.........................49
<PAGE>
16.9 No Liability of Agent or Lenders.......................49
16.10 Indemnification of Agent...............................50
16.11 Consultation with Counsel..............................50
16.12 Resignation............................................50
16.13 Representations of Lenders.............................50
16.14 Notification of Event of Default.......................51
16.15 No Agency until Syndication............................51
SECTION 17 NOTICES AND DEMANDS ............................................. 51
17.1 Notices in Writing.....................................51
17.2 Addresses for Notice...................................51
17.3 Notices Deemed Received................................52
SECTION 18 MISCELLANEOUS ....................................................52
18.1 Time of Essence........................................52
18.2 Unenforceable, etc., Provisions - Effect...............52
18.3 References.............................................52
18.4 Further Assurances.....................................52
18.5 Entire Agreements, Amendments..........................52
SCHEDULES
A THE LENDERS AND THEIR COMMITMENTS
B THE SUBSIDIARIES
C THE VESSELS
D COMPANY CHART
E EXISTING NEWBUILDINGS
F EXISTING LETTERS OF CREDIT
EXHIBITS
1 NOTE
2 FORM OF DRAWDOWN NOTICE
3 FORM OF LETTER OF CREDIT REQUEST
4 FORM OF COMPLIANCE CERTIFICATE
5 FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
<PAGE>
REVOLVING CREDIT FACILITY AGREEMENT
-----------------------------------
THIS REVOLVING CREDIT FACILITY AGREEMENT made this 30th day of
June, 1997, by and among (1) SEACOR SMIT INC., a corporation incorporated under
the laws of the State of Delaware with offices at 11200 Westheimer, Suite 850,
Houston, Texas (hereinafter called the "Borrower"), (2) the banks and financial
institutions whose names and addresses are set out in Schedule A hereto
(together with any assignee pursuant to Section 11, collectively, the "Lenders",
each a "Lender"); and (3) DEN NORSKE BANK ASA, a bank incorporated under the
laws of the Kingdom of Norway, acting through its New York branch, with offices
at 200 Park Avenue, New York, New York, as arranger and administrative agent
(hereinafter called the "Agent")
WITNESSETH THAT:
1 DEFINITIONS
1.1 Defined Terms. In this Agreement the words and expressions
specified below shall, except where the context otherwise requires, have the
meanings attributed to them below:
"Acceptable Accounting
Firm" means Arthur Anderson & Co., L.L.P. or any
other firm of independent certified public or
chartered accountants of international
reputation selected by the Borrower and
acceptable to the Agent;
"Advance" means any Dollar Advance or Foreign Currency
Advance;
"Agent's Exchange Rate" means the exchange rate
offered by the Agent of Dollars for a
particular Foreign Currency or vice versa in
accordance with its normal practices on the
relevant date, in either case, including any
costs associated with the relevant exchange
contract;
"Agreement" means this revolving credit facility
agreement as the same may be amended,
restated, modified or supplemented from time
to time;
"Applicable Rate" means any rate of interest on any Advance
from time to time applicable pursuant to
Section 6.1;
<PAGE>
"Assignment and
Assumption Agreement(s) shall mean the Assignment and Assumption
Agreement(s) executed pursuant to Section 11
substantially in the form of Exhibit 5;
"Banking Day(s)" means day(s) on which banks are open
for the transaction of business of the nature
required by this Agreement in the place or
places from time to time specified;
"Base Rate" means the higher of (i) the Agent's Prime
Rate and (ii) one-half percent (1/2%) above
the Federal Funds Effective Rate;
"Basis Point" or the
symbol "bp" means one one hundredth of one percent
(0.01%).
<PAGE>
"Cash Equivalents" means (i) securities issued or directly and
fully guaranteed or insured by the United
States of America or any agency or
instrumentality thereof (provided that the
full faith and credit of the United States of
America is pledged in support thereof) having
maturities of not more than ninety (90) days
from the date of acquisition, (ii) time
deposits and certificates of deposit of any
Lender or any commercial bank of recognized
standing having capital and surplus in excess
of Five Hundred Million Dollars
($500,000,000), (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 any
Lender or any bank meeting the qualifications
specified in (ii) above, and (iv) commercial
paper issued by any Lender or the parent
corporation of any commercial bank of
recognized standing organized under the laws
of the United States of America or any state
thereof having capital and surplus in excess
of Five Hundred Million Dollars
($500,000,000), and commercial paper rated at
least A-1 or the equivalent thereof by S&P or
at least P-1 or the equivalent thereof by
Moody's, and in each case maturing within
ninety (90) days after the date of
acquisition;
"Change of Control" means either (i) any "person" (as such term
is defined in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended)
is or becomes the beneficial owner (as
defined in Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, as amended),
directly or indirectly, of more than fifty
percent (50%) of the total voting power of
the voting stock of any company or (ii) the
Board of Directors of any company ceases to
consist of a majority of the existing
directors or directors elected by the
existing directors of such company;
"Code" means the Internal Revenue Code of 1986, as
amended, and any successor statute and the
regulations promulgated thereunder;
"Committed Amount" means One Hundred Million Dollars
($100,000,000), as reduced from time to time
pursuant to Sections 5.2 and 5.4, being the
maximum aggregate principal amount in Dollars
of the Advances and Letters of Credit which
may be outstanding at any time under the
Credit Facility;
"Commitment" shall mean in relation to a Lender, the
portion of the Credit Facility set out
opposite its name in Schedule A hereto or, as
the case may be, in any relevant Assignment
and Assumption Agreement, as the same may be
reduced from time to time as provided by
Section 5.5;
"Compliance Certificate" means a certificate of the chief financial
officer of the Borrower in the form set out
in Exhibit 4 or in such other form as the
Agent may reasonably require;
<PAGE>
"Consolidated Net Worth" for any period, shall mean, for any company,
the sum of such company's common and
preferred stock (excluding any capital stock
subject to mandatory redemption) and
additional paid-in-capital, plus retained
earnings (minus accumulated deficit) and
currency translation adjustments, all as
shown on the consolidated balance sheet of
such company and its subsidiaries as
determined in accordance with GAAP;
"Credit Facility" means the sums advanced or to be advanced by
the Lenders to the Borrower and the Letters
of Credit to be issued by the Letter of
Credit Issuer for the account of the
Borrower, all pursuant to, and subject to the
terms of, this Agreement;
"Credit Facility Balance" means the sum of (i) the amount of the Dollar
Advances, (ii) the amount of the then Dollar
Equivalent of the Foreign Currency Advances
and (iii) the amount of the Letter of Credit
Outstandings at any relevant time, all as
reduced by payments and increased by Advances
and Letters of Credit pursuant to the terms
of this Agreement;
"Credit Period" means the period from the Drawdown Date of
the initial Advance made hereunder to the
date upon which the Advances and all other
amounts due to the Lenders and the Agent
pursuant to this Agreement and the Note are
repaid or prepaid in full;
"CRN Group" means CRN Holdings, Inc., a corporation
organized under the laws of the State of
Delaware, and any of its direct and indirect
subsidiaries now or hereafter acquired;
"Default Rate" shall have the meaning ascribed thereto in
Section 6.1;
"Dollars" and the means the legal currency, at any
<PAGE>
sign "$" relevant time hereunder, of the United States
of America and, in relation to all payments
hereunder, in same day funds settled through
the New York Clearing House Interbank
Payments System (or such other Dollar funds
as may be determined by the Agent to be
customary for the settlement in New York City
of banking transactions of the type herein
involved);
"Dollar Advance" means any amount advanced in Dollars to the
Borrower on any Drawdown Date;
"Dollar Equivalent" means any amount of a Foreign Currency
converted to Dollars at the Agent's Exchange
Rate;
"Drawdown Dates" means the dates, each being a Banking
Day falling prior to the Termination Date,
upon which the Borrower has requested that an
Advance be made available to the Borrower or
an Advance is deemed to have been made due to
a drawing under any Letter of Credit;
"Drawdown Notice" shall have the meaning ascribed thereto in
Section 3.3;
"Dutch Guilders" and the
symbol "Dfl" means the legal currency, at any relevant
time hereunder, of The Netherlands;
"EBITDA" means on a consolidated basis, the aggregate,
to be measured on a trailing twelve (12)
month basis, of (i) operating income (before
deductions for interest, taxes, depreciation
and amortization), (ii) interest income and
(iii) "Equity in Net Earnings of Fifty
Percent (50%) or Less Owned Companies" (as
such term is used in the Borrower's published
financial reports);
"Environmental Affiliate" means any person or entity the liability of
which for Environmental Claims the Borrower
may have assumed by contract or operation of
law;
"Environmental Claim" shall have the meaning ascribed thereto in
Section 2.1(n);
<PAGE>
"ERISA" means the Employment Retirement Income
Security Act of 1974, as amended;
"ERISA Affiliate" means a trade or business (whether
or not incorporated) which is under common
control with the Borrower within the meaning
of Sections 414(b),(c),(m) or (o) of the
Code;
"Events of Default" means any of the events set out in Section
9.1;
"Existing Letters of
Credit" shall have the meaning ascribed thereto in
Section 3.7;
"Facing Fee" shall have the meaning ascribed thereto in
Section 14.2;
"Federal Funds
Effective Rate" means, for any period, a fluctuating interest
rate equal for each day during such period to
the weighted average of the rates on
overnight Federal Funds transactions with
members of the Federal Reserve System
arranged by Federal Funds brokers, as
published for such day (or, if such day is
not a Banking Day, for the next preceding
Banking Day) by the Federal Reserve Bank of
New York, or, if such rate is not so
published for any day which is a Banking Day,
the average of the quotations for such day on
such transactions received by the Agent from
three (3) Federal Funds brokers of recognized
standing selected by the Agent; "Foreign
Currency" means any of Pounds Sterling, Dutch
Guilders or French Francs;
"Foreign Currency
Advance" means an Advance denominated in a Foreign
Currency;
"French Francs" and the
symbol "FF" means the legal currency, at any relevant
time hereunder, of France;
<PAGE>
"Funded Debt" means, on a consolidated basis, the sum of
(i) indebtedness for borrowed money, all
obligations evidenced by bonds, debentures,
notes or similar instruments, and purchase
money obligations which, in accordance with
GAAP, would be shown on the consolidated
balance sheet as a liability, (ii) all
obligations arising under letters of credit,
(iii) all obligations as lessee under leases
which have been, in accordance with GAAP,
recorded as capitalized lease obligations and
(iv) guaranties of non-consolidated entity
obligations less (v) indebtedness which is
consolidated in the Borrower's published
financial statements in accordance with GAAP
but which represents a minority interest
holders' share of such indebtedness unless
such minority holders' share has been
guaranteed by the Borrower or a Subsidiary;
"GAAP" shall have the meaning ascribed thereto in
Section 1.3;
"Interest Coverage Ratio" means, on a consolidated basis, (a) EBITDA
divided by (b) an amount equal to interest
payments projected for the following twelve
(12) months (the foregoing calculation shall
assume that (i) all committed revolving
credit facilities are fully drawn and (ii)
interest during the following twelve (12)
months shall accrue at the rates prevailing
at the time of calculation) less interest on
indebtedness which is consolidated in the
Borrower's published financial statements in
accordance with GAAP but which represents a
minority interest holders' share of such
indebtedness;
"Interest Notice" means a notice to the Agent specifying the
duration of the relevant Interest Period;
"Interest Period(s)" means period(s) of one (1), three (3) or six
(6) months selected by the Borrower or such
longer period(s) as the Lenders may agree;
<PAGE>
"L/C Supportable means such obligations of the
Obligations" Borrower as are not inconsistent with the
issuance policies of the Letter of Credit
Issuer;
"Letter of Credit" shall have the meaning ascribed thereto in
Section 3.7;
"Letter of Credit Fee" shall have the meaning ascribed thereto in
Section 14.2;
"Letter of Credit Issuer" means Den norske Bank ASA;
"Letter of Credit
Outstandings" means, at any time, the aggregate Stated
Amount of all outstanding Letters of Credit,
less any drawings previously made thereunder;
"Letter of Credit
Participant" shall have the meaning ascribed thereto in
Section 3.10;
"Letter of Credit
Participant
Percentage" means, in relation to a Lender, the
percentage of the Credit Facility set out
opposite its name in Schedule A hereto;
"Letter of Credit
Request" shall have the meaning ascribed thereto in
Section 3.8;
<PAGE>
"LIBOR"
means the rate of interest for deposits, in
Dollars or the relevant Foreign Currency, as
the case may be, of an amount equivalent to
the relevant Advance (or portion thereof),
for periods equivalent to the applicable
Interest Period, which appear at or about
11:00 A.M. (London Time) on the day falling
two (2) Banking Days prior to the first day
of the relevant Interest Period as displayed
on Telerate page 3750 (British Bankers'
Association Interest Settlement Rates), in
the case of Dollars or Pounds Sterling, or
Telerate page 3740 (British Bankers'
Association Interest Settlement Rates), in
the case of Dutch Guilders or French Francs
(or such other page as may replace such page
3750 or such page 3740, as the case may be,
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, however, that, if on any
date of determination of the Applicable Rate,
no rate is so displayed for amounts
equivalent to the relevant Advance (or
portion thereof) and for periods equivalent
to the applicable Interest Period, LIBOR
shall be equal to the arithmetic mean
(rounded upward if necessary to four decimal
places) of the rates respectively quoted to
the Agent by each of the Reference Banks as
the offered rate for deposits of Dollars or
the relevant Foreign Currency, as the case
may be, in an amount approximately equal to
the amount in relation to which LIBOR is to
be determined for a period equivalent to such
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" shall mean Lenders whose aggregate
Commitments exceed two-thirds of the total
Commitments;
"Margin" shall have the meaning ascribed thereto in
Section 6.1;
<PAGE>
"Material Adverse Change" shall mean the occurrence of an event or
condition which (a) materially impairs the
ability of (1) the Borrower to meet any of
its obligations with regard to the Credit
Facility and the financing arrangements
established in connection therewith or (2)
the Borrower and the Subsidiaries to meet any
of their respective other obligations that
are material to the Borrower and the
Subsidiaries considered as a whole or (b)
have a material adverse effect on the
business, assets, operations, property or
financial condition of the Borrower and the
Subsidiaries considered as a whole;
"Moody's" shall mean Moody's Investors Service, Inc., a
credit rating agency;
"Note" means the promissory note to be executed by
the Borrower to the order of the Agent to
evidence the Advances of the Credit Facility
substantially in the form of Exhibit 1 or in
such other form as the Agent may agree;
"Operating Accounts" shall have the meaning ascribed thereto in
Section 8.1;
"Permitted Liens" means any of the liens permitted under
Section 10.1B(i);
"Plan" means any employee benefit plan covered by
Title IV of ERISA;
"Pounds Sterling" and the
sign "pound" means the legal currency, at any relevant
time hereunder, of England;
"Prime Rate" means the rate which the Agent announces from
time to time as its prime lending rate, the
Prime Rate to change when and as such prime
lending rate changes;
"Reduction Dates" means the day falling twelve (12) months
after the date hereof and the dates which
fall respectively at six (6) month intervals
thereafter and ending on the Termination Date
or, if any such date 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 relevant
Reduction Date shall be the immediately
preceding Banking Day;
<PAGE>
"Reference Banks" means the banks chosen from time to time by
the British Bankers' Association for the
purpose of establishing Interest Settlement
Rates;
"S&P" shall mean Standard & Poor's Rating Services,
a credit rating agency;
"Senior Debt" means, for the Borrower, on a consolidated
basis, the aggregate of (i) the Committed
Amount, (ii) any secured indebtedness and
(iii) Funded Debt ranking pari passu with the
Credit Facility;
"Stated Amount" means with respect to each Letter of Credit
the maximum amount available to be drawn
thereunder (regardless of whether any
conditions for drawing could then be met);
"Subsidiaries" means the corporations or other entities
listed on Schedule B of which the Borrower
owns legally or beneficially greater than
fifty percent (50%) of the issued and
outstanding stock or other interest in such
entity and has more than fifty percent (50%)
of the total voting power of the voting stock
or other interest in such corporation or
other entity, together with any other
corporations or other entities now or
hereafter in existence of which the Borrower
owns legally or beneficially greater than
fifty percent (50%) of the issued and
outstanding stock or other interest in such
entity and has more than fifty percent (50%)
of the total voting power of the voting stock
or other interest in such corporation or
other entity;
<PAGE>
"Taxes" means any present or future income or other
taxes, levies, duties, charges, fees,
deductions or withholdings of any nature now
or hereafter imposed, levied, collected,
withheld or assessed by any taxing authority
whatsoever, except for taxes on or measured
by the overall net income of the Lenders
imposed by their respective jurisdiction of
incorporation or domicile of the lending
office making the Advances or any
governmental subdivision or taxing authority
of any thereof or by any other taxing
authority having jurisdiction over any Lender
or the Agent (unless such jurisdiction is
asserted solely by reason of the activities
of the Borrower or any Subsidiary);
"Termination Date" means the day falling five (5) years after
the date hereof 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
Termination Date shall be the immediately
preceding Banking Day;
"Total Capitalization" for any company, means, on a consolidated
basis, the aggregate of Funded Debt and
Consolidated Net Worth; and
"Vessels" means (i) each of the vessels listed on
Schedule C, so long as such vessel remains
more than fifty percent (50%) owned, directly
or indirectly, by a Subsidiary, (ii) the
existing newbuildings described in Schedule E
and (iii) and any other vessels now or
hereafter more than fifty percent (50%)
owned, directly or indirectly, by a
Subsidiary.
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 financial data submitted
pursuant hereto shall be derived from financial statements prepared in
accordance with, GAAP.
1.4 Headings. In this Agreement, section headings are inserted for
convenience of reference only and shall not be taken into account in the
interpretation hereof.
<PAGE>
2 REPRESENTATIONS AND WARRANTIES
2.1 In order to induce the Agent and the Lenders to enter into this
Agreement and to make the Advances and to issue and/or participate in Letters of
Credit as provided for herein, 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 Note and the making of the
Advances and the issuance of Letters of Credit) that:
(a) Due Organization and Power. the Borrower and each of the
Subsidiaries are duly formed and are validly existing in good standing under the
laws of their respective jurisdictions of incorporation, have duly qualified and
are authorized to do business as a foreign corporation in each jurisdiction
wherein the nature of the business transacted thereby makes such qualification
necessary, have full power to carry on their respective businesses as now being
conducted and, in the case of the Borrower, to enter into and perform the
Borrower's obligations under each of this Agreement and the Note and have
complied with all statutory, regulatory and other requirements relative to such
businesses and such agreements the noncompliance with which could reasonably be
expected to give rise to a Material Adverse Change;
(b) Authorization and Consents. all necessary corporate action
has been taken to authorize, and all necessary consents and authorizations have
been obtained and remain in full force and effect to permit, the Borrower to
enter into and perform its obligations under each of this Agreement and the Note
and to permit the Borrower to borrow, service and repay the Advances and, as of
the date of this Agreement, no further consents or authorizations are necessary
for the service and repayment of the Advances or any part of any thereof;
(c) Binding Obligations. each of this Agreement and the Note
constitutes legal, valid and binding obligations of the Borrower, enforceable
against the Borrower in accordance with its terms, except to the extent that
such enforcement may be limited by equitable principles, principles of public
policy or applicable bankruptcy, insolvency, reorganization, moratorium or other
laws affecting generally the enforcement of creditors' rights;
(d) No Violation. the execution and delivery of, and the
performance of the provisions of, this Agreement and the Note do not, and will
not during the Credit Period, contravene any applicable law or regulation
existing at the date hereof or any contractual restriction binding on the
Borrower or its certificate of incorporation or by-laws;
<PAGE>
(e) Litigation. except as otherwise disclosed in the 1996
annual report of the Borrower or the 10Q report of the Borrower for the period
ending March 31, 1997, no action, suit or proceeding is pending or overtly
threatened against the Borrower or any of the Subsidiaries before any court,
board of arbitration or administrative agency which could result in any Material
Adverse Change;
(f) No Default. except as otherwise disclosed in writing to
the Agent on or prior to the date hereof, neither the Borrower nor any of the
Subsidiaries are in default under any agreement by which any thereof is bound,
nor are any thereof in default in respect of any financial commitment or
obligation, where such default could result in any Material Adverse Change;
(g) Vessel Ownership, Classification, and Insurance. as of
the date hereof:
(i) each of the Vessels is owned as listed on
Schedule C, free and clear of all liens of record except as
otherwise set forth on Schedule C and duly registered in the
name of its owner under the flag as listed on Schedule C;
(ii) except as otherwise set forth on Schedule C, each
of the Vessels is classed in the highest classification and
rating for vessels of the same age and type with the American
Bureau of Shipping, Lloyd's Register of Shipping, Det norske
Veritas, Bureau Veritas, Germanischer Lloyd or other
classification society acceptable to the Agent without any
material outstanding recommendations; and
(iii) each of the Vessels is insured in accordance with
standard industry practice, including, without limitation,
coverage for hull and machinery, war risk and protection &
indemnity (evidence of which shall include, without
limitation, cover notes, certificates of entry or such other
evidence as shall be reasonably satisfactory to the Agent);
(h) Citizenship. each of the Subsidiaries which owns a Vessel
registered under the laws and flag of the United States of America is eligible
to document a United States flag vessel within the meaning of 46 App. U.S.C.
'12102(a) and, if any such Vessel is eligible to operate in the coastwise trade,
within the meaning of Section 2 of the United States Shipping Act, 1916, as
amended (46 App. U.S.C. ' 802), the Subsidiary owning or operating same is
qualified to own and operate vessels in the coastwise trade;
<PAGE>
(i) Financial Statements. except as otherwise disclosed in
writing to the Lenders on or prior to the date hereof, all financial statements,
information and other data furnished by the Borrower to the Lenders 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. Since such date or dates there has been no Material
Adverse Change and neither the Borrower nor any of the Subsidiaries have any
contingent obligations, liabilities for taxes or other outstanding financial
obligations which on a consolidated basis are material in the aggregate, except
as disclosed in such statements, information and data;
(j) Tax Returns and Payments. since March 31, 1997, the
Borrower and each of the Subsidiaries have filed all tax returns required to be
filed thereby and have paid all taxes payable thereby which have become due,
other than those not yet delinquent or the non-payment of which would not give
rise to a Material Adverse Change and except for those taxes being contested in
good faith and by appropriate proceedings or other acts and for which adequate
reserves have been set aside on the books thereof;
(k) Insurance. each of the Borrower and the Subsidiaries have
insured their respective properties, assets and businesses against such risks
and in such amounts as are required by law and as are customary for comparable
companies engaged in similar businesses;
(l) Solvency. on the date of the making of the initial Advance
and both immediately before and immediately after giving effect to all the
transactions contemplated by this Agreement and the other documents referred to
herein to occur on the date of the making of the initial Advance and as of the
date hereof, (i) the sum of the Borrower's property (on a consolidated basis),
at a fair valuation, does and will exceed its liabilities (on a consolidated
basis), including contingent liabilities, (ii) the present fair salable value of
the Borrower's assets (on a consolidated basis) is not and shall not be less
than the amount that will be required to pay the Borrower's probable liability
on its then existing debts (on a consolidated basis), including contingent
liability, as they mature, (iii) the Borrower (on a consolidated basis) does not
and will not have unreasonably small capital with which to continue its
business, and (iv) the Borrower (on a consolidated basis) has not incurred, does
not intend to incur and does not believe it will incur debts beyond its ability
to pay such debts as they mature;
<PAGE>
(m) Environmental Matters. except as heretofore disclosed in
writing to the Lenders (i) the Borrower and each of the Subsidiaries are now and
will continue to be, to the extent required, in compliance with all applicable
United States federal and state, local, foreign and international laws,
regulations, conventions and agreements relating to pollution prevention or
protection of human health or the environment (including, without limitation,
ambient air, surface water, ground water, navigable waters, waters of the
contiguous zone, ocean waters and international waters), including, without
limitation, laws, regulations, conventions and agreements relating to (1)
emissions, discharges, releases or threatened releases of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous materials, oil, hazardous
substances, petroleum and petroleum products and by-products ("Materials of
Environmental Concern"), or (2) the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Materials of
Environmental Concern ("Environmental Laws") (except, as to all of the above,
where the failure to do so would not be reasonably likely to result in a
Material Adverse Change); (ii) the Borrower and each of the Subsidiaries now
have and will continue to have, to the extent required, all permits, licenses,
approvals, rulings, variances, exemptions, clearances, consents or other
authorizations required under applicable Environmental Laws ("Environmental
Approvals") and are now and will continue to be, to the extent required, in
compliance with all Environmental Approvals required to operate their respective
businesses as then being conducted (except where the failure to comply with,
obtain or renew such permits, licenses, rulings, variances, exemptions,
clearances, consents or other authorizations would not be reasonably likely to
result in a Material Adverse Change); and (iii) neither the Borrower nor any of
the Subsidiaries have 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 which would reasonably be
likely to result in a Material Adverse Change, or a requirement to incur, any
investigatory costs, cleanup costs, response and/or remedial costs (whether
incurred by a governmental entity or otherwise), natural resources, property
and/or personal injury damages, 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 the Borrower
or any of the Subsidiaries, 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 Borrower or any of the Subsidiaries in
respect thereof have been paid in full or which are fully covered by insurance
(including permitted deductibles)), if such costs, damages, fees, expenses,
fines and/or penalties on a consolidated basis are material in the aggregate;
and
<PAGE>
(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 Sanctions Regulations of the
United States of America (Title 31, Code of Federal Regulations, Chapter V, Part
550, as amended), any of the provisions of the Iranian 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 Iraqi Sanctions
Regulations (Title 31, Code of Federal Regulations, Chapter V, Part 575, as
amended), any of the provisions of the Federal Republic of Yugoslavia (Serbia
and Montenegro) Sanctions 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).
3 ADVANCES OF THE FACILITY/LETTERS OF CREDIT
3.1 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 the Drawdown Dates make its
portion of each Advance (pro rata in proportion to its Commitment) in Dollars or
a Foreign Currency, as requested by the Borrower, available through the Agent to
the Borrower in an aggregate amount not to exceed at any one time outstanding
the then available Committed Amount, provided, however, that no further Advances
shall be made after the Banking Day immediately preceding the Termination Date.
Each such Dollar Advance shall be in an amount (in an integral multiple of One
Million Dollars ($1,000,000)) equal to or exceeding One Million Dollars
($1,000,000). Each Foreign Currency Advance shall be in an amount: (a) with
respect to Advances denominated in Dutch Guilders (in an integral multiple of
One Million Five Hundred Thousand Dutch Guilders (Dfl1,500,000)) equal to or
exceeding One Million Five Hundred Thousand Dutch Guilders (Dfl1,500,000); (b)
with respect to Advances denominated in French Francs, (in an integral multiple
of Five Million French Francs (FF5,000,000)) equal to or exceeding Five Million
French Francs (FF5,000,000); and (c) with respect to Advances denominated in
Pounds Sterling, (in an integral multiple of Five Hundred Thousand Pounds
Sterling (,500,000)) equal to or exceeding Five Hundred Thousand Pounds Sterling
(,500,000). Each Advance may only be denominated in a single currency. Each
Advance shall be repaid in full, as more fully set forth hereinafter, not later
than the Termination Date. Not more than fifteen (15) Advances may be made in
each consecutive twelve (12) month period. Within the limits of this Section 3.1
and upon the conditions herein provided, the Borrower may from time to time
borrow pursuant to this Section 3.1, repay Advances pursuant to Section 5 and
reborrow pursuant to this Section 3.1.
3.2 Use of Proceeds. The proceeds of the Advances shall be utilized for
general corporate purposes.
<PAGE>
3.3 Drawdown Notice. The Borrower shall not less than three (3) Banking Days
before each Drawdown Date (other than a Drawdown Date occurring by reason of a
drawing under any Letter of Credit) serve a notice (a "Drawdown Notice") on the
Agent (which shall promptly furnish a copy to each Lender), substantially in the
form set out in Exhibit 2, which notice shall (a) be in writing addressed to the
Agent, (b) be effective on receipt by the Lender, provided it is received before
11 a.m. New York time (otherwise it shall be deemed to have been received on the
next Banking Day), (c) specify the currency, amount and purpose of the Advance
to be drawn, (d) specify the Banking Day on which the Advance is to be drawn and
the initial Interest Period, (e) specify the disbursement instructions and (f)
be irrevocable.
3.4 Drawdown Notice a Warranty. Each Drawdown Notice shall be deemed to
constitute a warranty by the Borrower (a) that the representations and
warranties stated in Section 2 (updated mutatis mutandis) are true and correct
on the date of such Drawdown Notice and will be true and correct on the Drawdown
Date as if made on such date, (b) that after giving effect to the borrowing made
pursuant to such Drawdown Notice, the Credit Facility Balance shall not exceed
the Committed Amount then available hereunder pursuant to Section 3.1 and (c)
that no Event of Default nor any event which, with the giving of notice or lapse
of time, or both, would constitute an Event of Default has occurred and is
continuing.
3.5 Notation of Advance on Note. Each 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 Note, which notation, absent manifest error, shall be prima
facie evidence of the amount of the relevant Advance.
3.6 Foreign Currency Advances. The Dollar Equivalent (calculated at the
applicable Agent's Exchange Rate from time to time prevailing) of the aggregate
principal amount of Foreign Currency Advances at any time outstanding under the
Credit Facility shall not exceed thirty percent (30%) of the then available
Committed Amount. To the extent provisions of this Agreement require the
calculation of amounts advanced or available under the Credit Facility in
Dollars, any such amounts (if denominated in a Foreign Currency) which are
subject to such calculation shall, for purposes of such calculations, be
notionally converted to Dollars at the relevant Agent's Exchange Rate then
prevailing. The calculation of such currency conversion shall be certified by
the Agent, which certification, absent any manifest error, shall be conclusive
and binding on the Borrower. If exchange rate fluctuations (a) cause the Credit
Facility Balance to exceed the Committed Amount at any time or (b) cause the
Foreign Currency Advances to exceed thirty percent (30%) of the then available
Committed Amount at any time, then the Borrower shall, within seven (7) days of
written demand of the Agent, repay Advances in an amount equal to the excess of
the Credit Facility Balance over the Committed Amount or repay Foreign Currency
Advances in an amount sufficient to reduce Foreign Currency Advances to not more
than thirty percent (30%) of the then available Committed Amount, as the case
may be.
<PAGE>
3.7 Letters of Credit. (a) Subject to and upon the terms and conditions
herein set forth, the Borrower may request that the Letter of Credit Issuer at
any time and from time to time prior to the Banking Day immediately preceding
the Termination Date issue, for the account of the Borrower and in support of
L/C Supportable Obligations, and subject to and upon the terms and conditions
herein set forth, the Letter of Credit Issuer agrees to issue from time to time,
irrevocable standby letters of credit denominated in Dollars (or in such other
currency as the Borrower and the Letter of Credit Issuer may agree) and in such
form as may be approved by the Letter of Credit Issuer (singly, a "Letter of
Credit" and collectively, the "Letters of Credit"). Schedule F contains a
description of all letters of credit issued for the account of the Borrower
prior to the date hereof and which will remain outstanding on the date hereof.
Each such letter of credit, including any extension thereof (each an "Existing
Letter of Credit"), shall constitute a "Letter of Credit", for all purposes of
this Agreement and shall be deemed issued for the purposes of Sections 3.10 and
14.2 on the date hereof.
(b) Notwithstanding the foregoing, (i) no Letter of Credit
shall be issued, the Stated Amount of which, (x) when added to the Letter of
Credit Outstandings at such time, would exceed the greater of Five Million
Dollars ($5,000,000) and five percent (5%) of the Committed Amount at such time
or (y) when added to the Letter of Credit Outstandings at such time plus the
aggregate principal amount of all Advances made by Lenders then outstanding
would exceed the Committed Amount at such time; and (ii) each Letter of Credit
shall have an expiry date occurring not later than the earlier of (x) the date
which occurs thirty (30) months after the date of issuance thereof and (y) the
Banking Day immediately preceding the Termination Date; provided that the
Borrower may request, and the Agent may consent, in its sole absolute
discretion, to extend the expiry dates of certain Letters of Credit beyond the
Termination Date.
3.8 Letter of Credit Requests; Request for Issuance of Letter of Credit.
(a) Whenever the Borrower wishes that a Letter of Credit be issued, the Borrower
shall give the Letter of Credit Issuer written notice (a "Letter of Credit
Request"), substantially in the form of Exhibit 3 prior to 11:00 a.m., New York
time, at least seven (7) Banking Days (or three (3) Banking Days if the issuance
of the Letter of Credit has been approved in advance by the Letter of Credit
Issuer) prior to the proposed date of issuance (which shall be a Banking Day),
which Letter of Credit Request shall include any documents that the Letter of
Credit Issuer may reasonably require in connection therewith. The Letter of
Credit Request shall after three (3) Banking Days (or one (1) Banking Day if the
issuance of the Letter of Credit has been approved in advance by the Letter of
Credit Issuer) be irrevocable. The Letter of Credit Issuer shall promptly notify
each Lender of each Letter of Credit Request.
(b) The Letter of Credit Issuer shall, on the date of each
issuance of a Letter of Credit by it, give each Lender and the Borrower written
notice of the issuance of such Letter of Credit.
<PAGE>
3.9 Letter of Credit Payments Deemed Advances. (a) The Borrower hereby agrees
that any payment or disbursement made by the Letter of Credit Issuer under any
Letter of Credit shall be deemed an Advance under this Agreement and shall bear
interest for each day from the date of such payment or disbursement at the Base
Rate as in effect on each day until the date falling three (3) Banking Days
after receipt by the Agent of an Interest Notice with respect to such Advance
and shall thereafter bear interest at the Applicable Rate. The Letter of Credit
Issuer shall give prompt notice to the Borrower and the Lenders of each payment
or disbursement under a Letter of Credit.
(b)(i) The Letter of Credit Issuer shall not concern itself with the
regularity or propriety of any demand made under any Letter of Credit beyond the
face thereof, provided that such demand strictly complies with the terms of such
Letter of Credit and (subject to the above proviso) it shall not be a defense to
a claim of the Letter of Credit Issuer that the Letter of Credit Issuer could
have resisted the payment in respect of which such claim is made.
(ii) The Borrower's obligation to repay any Advance deemed made under
this Section 3.9 (including, in each case, interest thereon) shall be absolute
and unconditional under any and all circumstances and irrespective of any
setoff, counterclaim or defense to payment which the Borrower may have or have
had against the Letter of Credit Issuer or any Lender, including, without
limitation, any defense based upon the failure of any drawing under a Letter of
Credit to conform to the terms of the Letter of Credit (other than the failure
of the Letter of Credit Issuer to determine that any documents required to be
delivered under such Letter of Credit have been delivered and that they comply
on their face with the requirements of such Letter of Credit) or any
non-application or misapplication by the beneficiary of the proceeds of such
drawing; provided, however, that the Borrower shall not be obligated to
reimburse the Letter of Credit Issuer for any wrongful payment made by the
Letter of Credit Issuer under a Letter of Credit as a result of acts or
omissions constituting willful misconduct or gross negligence on the part of the
Letter of Credit Issuer.
3.10 Letter of Credit Participation. (a) Immediately upon the issuance by the
Letter of Credit Issuer of any Letter of Credit, the Letter of Credit Issuer
shall be deemed to have sold and transferred to each Lender, and each Lender
(each a "Letter of Credit Participant") shall be deemed irrevocably and
unconditionally to have purchased and received from the Letter of Credit Issuer,
without recourse or warranty, an undivided interest and participation, to the
extent of such Lender's Commitment, in such Letter of Credit, each substitute
letter of credit, each drawing made thereunder and the obligation of the
Borrower under this Agreement with respect thereto (although the Letter of
Credit Fee shall be payable directly to the Agent for the account of the Letter
of Credit Participants as provided in Section 14.2) and any security therefor or
guaranty pertaining thereto.
<PAGE>
(b) In determining whether to pay under any Letter of Credit,
the Letter of Credit Issuer shall not have any obligation relative to the
respective Letter of Credit Participants other than to determine that any
documents required to be delivered under such Letter of Credit have been
delivered and that they comply on their face with the requirements of such
Letter of Credit. Any action taken or omitted to be taken by the Letter of
Credit Issuer under or in connection with any Letter of Credit, if taken or
omitted in the absence of gross negligence or willful misconduct, shall not
create for the Letter of Credit Issuer any resulting liability to the respective
Letter of Credit Participants.
(c) In the event that the Letter of Credit Issuer makes any
payment under any Letter of Credit, upon receipt of notice thereof as provided
in Section 3.9(a), each Letter of Credit Participant shall promptly and
unconditionally pay to the Letter of Credit Issuer, the amount of such Letter of
Credit Participant's Percentage of such payment in Dollars (or in the currency
of issuance if issued in a currency other than Dollars) and in same day funds;
provided, however, that no Letter of Credit Participant shall be obligated to
pay to the Letter of Credit Issuer its percentage of such payment for any
wrongful payment made by the Letter of Credit Issuer under a Letter of Credit as
a result of acts or omissions constituting willful misconduct or gross
negligence on the part of the Letter of Credit Issuer. If the Letter of Credit
Issuer so notifies any Letter of Credit Participant required to fund a Drawing
under a Letter of Credit prior to 11:00 a.m., New York time, on any Banking Day,
such Letter of Credit Participant shall make available to the Letter of Credit
Issuer such Letter of Credit Participant's Percentage of the amount of such
payment on such Banking Day in same day funds. If and to the extent such Letter
of Credit Participant shall not have so made its percentage of the amount of
such drawing available to the Letter of Credit Issuer, such Letter of Credit
Participant agrees to pay to the Letter of Credit Issuer, forthwith on demand
such amount, together with interest thereon, for each day from such date until
the date such amount is paid to the Letter of Credit Issuer at the overnight
Federal Funds Effective Rate. The failure of any Letter of Credit Participant to
make available to the Letter of Credit Issuer its percentage of any drawing
under any Letter of Credit shall not relieve any other Letter of Credit
Participant of its obligation hereunder to make available to the Letter of
Credit Issuer its percentage of any payment under any Letter of Credit on the
date required, as specified above, but no Letter of Credit Participant shall be
responsible for the failure of any other Letter of Credit Participant to make
available to the Letter of Credit Issuer such other Letter of Credit
Participant's Percentage of any such payment.
(d) The obligation of the respective Letter of Credit
Participants to make payments to the Letter of Credit Issuer with respect to
Letters of Credit shall be irrevocable and not subject to counterclaim, set-off
or other defense or any other qualification or exception whatsoever (provided
that no Letter of Credit Participant shall be required to make payments
resulting from the Letter of Credit Issuer's gross negligence or willful
misconduct) and shall be made in accordance with the terms and conditions of
this Agreement under all circumstances, including, without limitation, any of
the following circumstances:
(i) any lack of validity or enforceability of this
Agreement.
<PAGE>
(ii) the existence of any claim, set-off, defense or other
right which the Borrower may have at any time against
a beneficiary named in a Letter of Credit, any
transferee of any Letter of Credit (or any person for
whom any such transferee may be acting), the Agent,
any Lender or other person, whether in connection
with this Agreement, any Letter of Credit, the
transactions contemplated herein or any unrelated
transactions (including any underlying transaction
between the Borrower and the beneficiary named in any
such Letter of Credit);
(iii) any draft, certificate or other document presented
under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement
therein being untrue or inaccurate in any respect; or
(iv) the occurrence of any Event of Default.
4 CONDITIONS
4.1 Conditions Precedent to Drawdown of the Initial Advance under the Credit
Facility. The obligation of the Lenders to make the initial Advance available to
the Borrower under this Agreement shall be expressly subject to the following
conditions precedent:
(a) the Agent shall have received the following documents
in form and substance satisfactory to the Agent and its legal advisers:
(i) copies, certified as true and complete by an officer
of the Borrower of the resolutions of its board of
directors evidencing approval of this transaction and
authorizing an appropriate officer or officers or
attorney-in-fact or attorneys-in-fact to execute this
Agreement and the Note on its behalf;
(ii) copies, certified as true and complete by an officer
of the Borrower or other applicable party, of all
documents evidencing any other necessary actions
(including actions by such parties thereto other than
the Borrower as may be required by the Lenders),
approvals or consents with respect to this Agreement
and the Note and the transactions contemplated hereby
and thereby;
(iii) copies, certified as true and complete by an officer
of the Borrower of its certificate of incorporation
and by-laws;
<PAGE>
(iv) certificate of the Secretary or Assistant Secretary
of the Borrower certifying as to (x) the incumbency
of the signatories of the Borrower, (y) the present
directors of the Borrower and (z) the authorized,
issued and outstanding capital stock of each of the
Subsidiaries legally and beneficially owned by the
Borrower; and
(v) good standing certificate of the Borrower;
(b) the Borrower shall have duly executed and delivered:
(i) this Agreement,
(ii) the Note, and
(iii) the fee letter referred to in Section 14.4;
(c) the Operating Accounts referred to in Section 8.1
shall have been duly established with the Agent;
(d) the Agent shall have received an itemized written
valuation in form and substance satisfactory to the Agent, from an independent
shipbroker selected by the Borrower and acceptable to the Agent as to the then
current fair market value (charter free), in Dollars, of the Vessels and, such
valuation shall be dated no earlier than sixty (60) days prior to the initial
Drawdown Date;
(e) the Agent shall have received a certificate of the chief
financial officer of the Borrower confirming the representations and warranties
set forth in Section 2.1(l) and containing conclusions as to the solvency of the
Borrower (on a consolidated basis);
(f) the Lenders and the Agent shall have received payment in
full of all fees and expenses due to them on the date hereof including, without
limitation, all fees and expenses due under Section 14;
(g) the Agent shall be satisfied that neither the Borrower nor
any of the Subsidiaries is subject to any Environmental Claim which could give
rise to a Material Adverse Change;
(h) the Agent shall have received true and complete copies of
(i) the 10K report of the Borrower for the year ending December 31, 1996 filed
with the United States Securities and Exchange Commission and (ii) all 10Q and
8K reports filed by the Borrower with the United States Securities and Exchange
Commission since December 31, 1996;
<PAGE>
(i) no Material Adverse Change having occurred since April
9, 1997;
(j) the Agent having received such evidence as it may require
that the Borrower and each of the Subsidiaries have insured their respective
properties and other assets with underwriters and agents acceptable to the Agent
in the manner required under Section 2.1(k);
(k) all sums owing by Arthur Levy Enterprises, Inc., Graham
Offshore Inc. and Seacor Offshore Inc. to Den norske Bank ASA under that certain
Revolving Credit Facility Agreement, dated September 15, 1995, shall have been
repaid in full and the credit facility provided under such agreement shall have
been terminated;
(l) certificates and other evidences of ownership, if any,
representing all of the present issued and outstanding shares of, or other
interests in, the Subsidiaries owned, directly or indirectly, by the Borrower
shall have been delivered to the Agent;
(m) the Agent shall have received a certificate of an officer
of the Borrower certifying that the company chart attached as Schedule D to this
Agreement lists all of the ownership interests of the Borrower and the
Subsidiaries in any corporation, partnership or other entity; and
(n) the Agent shall have received opinions from Seward &
Kissel, counsel to the Lenders and the Agent, and Fort & Schlefer, counsel for
the Borrower, in such form as the Agent and counsel to the Lenders may agree, 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 State of New
York and the State of Delaware covering the representations and conditions which
are the subjects of Sections 2 and 4 or in such other form as the Agent may
agree.
4.2 Further Conditions Precedent. The obligation of the Lenders to make any
Advance (other than an Advance which occurs by reason of a drawing under any
Letter of Credit) available to the Borrower shall be expressly and separately
from the foregoing conditional upon, on the relevant Drawdown Date:
(a) the Agent having received a Drawdown Notice in accordance
with the terms of Section 3.3;
(b) the representations stated in Section 2 (updated mutatis
mutandis) 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 an Event of Default; and
<PAGE>
(d) the Agent being satisfied that no Event of Default will
arise following the drawdown of the Advance in question by reason of the
drawdown of the Advance and that no event or state of affairs exists which
constitutes, in the reasonable opinion of the Agent, a material risk that it
will be unlawful or impossible for the Borrower to make any payment or perform
any material obligation as required under the terms of this Agreement and the
Note.
4.3 Break Funding Costs. In the event that, on any date specified for the
making of an Advance in any Drawdown Notice, the Lenders shall not be obliged
under this Agreement to make such Advance available under this Agreement, the
Borrower shall indemnify and hold the Lenders or any of them, fully harmless
against any losses which they may sustain as a result of borrowing or agreeing
to borrow funds to meet the drawdown requirement in respect thereof and the
certificate of such Lender, absent manifest error, shall be conclusive and
binding on the Borrower as to the extent of any such losses.
4.4 Satisfaction after Drawdown. Without prejudice to any of the other terms
and conditions of this Agreement, in the event the Lenders, in their sole
discretion, make an Advance prior to the satisfaction of all or any of the
conditions referred to elsewhere 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).
5 REPAYMENT, PREPAYMENT AND REDUCTION.
5.1 Repayment. The Borrower shall repay all outstanding Advances (subject
to reductions and prepayments as hereinafter set forth) on the Termination Date
and shall also repay outstanding Advances, to the extent required to comply with
(a) the scheduled reductions required pursuant to Section 5.2 below on each
Reduction Date, (b) Section 3.6, (c) a reduction of the Credit Facility pursuant
to Section 5.4 or (d) as may be otherwise provided in this Agreement. Each
Advance (together with interest accrued thereon and any costs or other sums
associated therewith payable by the Borrower hereunder) shall be repaid in the
currency in which such Advance was drawn down or, in the case of such costs or
sums, the currency in which such cost or sum was incurred or booked by the Agent
and the Lenders.
<PAGE>
5.2 Scheduled Reductions of the Committed Amount. Subject to the provisions
of Section 5.4, (a) on each Reduction Date (other than that corresponding to the
Termination Date) the Committed Amount shall be reduced by Six Million Two
Hundred Fifty Thousand Dollars ($6,250,000) (or such lesser amount as may be
required pursuant to the last sentence of this Section 5.2) and (b) on the
Termination Date, the Committed Amount shall be reduced to zero. Upon the
effectiveness of each reduction of the Committed Amount whether pursuant to
Sections 5.4 or 12.1 or otherwise pursuant to this Agreement, the amount of each
scheduled reduction of the Committed Amount required pursuant to this Section
5.2 for each Reduction Date falling thereafter shall be adjusted pro rata to
reflect such reduction of the Committed Amount.
5.3 Prepayment. The Borrower may prepay, upon five (5) days' written notice,
any outstanding Advance or any portion thereof, without penalty, provided that
such prepayment is made on the last day of the Interest Period covering such
Advance. Each prepayment shall be in a minimum amount of: (a) if made in
Dollars, One Million Dollars ($1,000,000), (b) if made in Dutch Guilders, One
Million Five Hundred Thousand Dutch Guilders (Dfl1,500,000), (c) if made in
French Francs, Five Million French Francs (FF5,000,000) and (d) if made in
Pounds Sterling, Five Hundred Thousand Pounds Sterling (,500,000), or any
integral multiples thereof or the full amount of the Advance. On the date of
prepayment all accrued interest to the date of such prepayment shall be paid in
full with respect to Advances or portion thereof being prepaid, together with
any and all actual costs or expenses incurred by the Agent or any Lender in
connection with any breaking of funding or with the unwinding of any such
interest rate swap or other hedging arrangements entered into by the Lenders (in
each case, as certified by the relevant Lenders, which certification, absent any
manifest error, shall be conclusive and binding on the Borrower).
5.4 Permanent Reduction of the Committed Amount of the Credit Facility. (i)
The Borrower shall have the right, at any time and from time to time, to
request, without penalty, a permanent partial or whole reduction of the
Committed Amount, provided that (a) the Agent receives three (3) Banking Days'
prior written notice of such request and (b) if the then outstanding Credit
Facility Balance exceeds the Committed Amount as so reduced, such requested
reduction occurs on the last day of the applicable Interest Period(s) for
Advances (or portions thereof) outstanding under this Agreement at least equal
to the excess of the Credit Facility Balance over the reduced Committed Amount.
Each such partial permanent reduction shall be equal to or shall exceed One
Million Dollars ($1,000,000) and shall be an integral multiple of One Million
Dollars ($1,000,000).
5.5 Reduction of Commitment. Simultaneously with each reduction of the
Committed Amount (whether pursuant to Sections 5.2, 5.4 or otherwise), each
Lender's Commitment in respect of the Credit Facility shall be reduced pro rata
in proportion to their respective interests in the Credit Facility.
6 INTEREST AND RATE
<PAGE>
6.1 Applicable Rate. Except as otherwise provided in Section 3.9, each
Advance shall bear interest at a rate (the "Applicable Rate") equal to the
aggregate of (a) LIBOR for the applicable Interest Period, plus (b) the then
applicable margin (the "Margin") determined in accordance with Section 6.2. Upon
the occurrence of an Event of Default or an event or condition which, with the
giving of notice or passage of time or both, would constitute an Event of
Default, the Credit Facility Balance or any other amount payable hereunder or
under the Note shall bear interest thereafter at a rate per annum (the "Default
Rate") of two hundred basis points (200 bp) over the Applicable Rate then in
effect.
6.2 The Margin. The Margin will vary based upon the percentage that the
Borrower's consolidated Funded Debt (excluding any Funded Debt subordinated to
the indebtedness of the Borrower under the Credit Facility and in respect of
which no payments of principal are scheduled to be paid on or before the
Termination Date) bears to the consolidated EBITDA for the Borrower as follows:
Funded Debt/EBITDA Applicable Margin
less than or equal to 75% 70 bp
greater than 75% but 85 bp
less than or equal to 150%
greater than 150% but 110 bp
less than or equal to 225%
greater than 225% but 130 bp
less than or equal to 300%
greater than 300% 160 bp
The applicable Margin shall be determined by the Agent quarterly (based upon the
latest 10Q report and Compliance Certificate delivered by the Borrower to the
Agent from time to time pursuant to this Agreement). The newly determined Margin
shall be effective on the last day of the month following the month during which
such report and certificate were delivered to the Agent.
<PAGE>
6.3 LIBOR; Interest Periods. With respect to each Advance, the Borrower may
select Interest Periods of one (1), three (3) or six (6) months (or such other
periods as the Lenders may, in their sole discretion, agree), provided, however,
that at all times the Borrower must select an Interest Period for a portion of
the outstanding Advances so that sufficient deposits shall mature on each
Reduction Date to cover the principal amount of the Advances required to be
repaid on such Reduction Date, and provided further, that in no event may the
Borrower select an Interest Period of one (1) month more than six (6) times in
any calendar year. The Borrower shall give an Interest Notice to the Agent
(which shall promptly forward same to the Lenders) at least three (3) Banking
Days prior to the end of any then existing Interest Period, which Interest
Notice shall set forth the Interest Period selected. If at the end of any then
existing Interest Period, the Borrower fails to give an Interest Notice as
provided herein, the following Interest Period shall have a duration of three
(3) months. LIBOR and the Applicable Rate shall be determined by the Agent two
(2) Banking Days prior to the first day of the relevant Interest Period and
shall be promptly notified in writing to the Borrower. The Borrower's right to
select an Interest Period shall be further 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 the Agent is satisfied that no Event of Default or event which with
notice or the passage of time, or both, would constitute an Event of Default
shall have occurred. No Interest Period may extend beyond the Termination Date.
6.4 Interest Payments. Interest on each Advance or portion thereof, shall be
payable quarterly in arrears and on the last day of each Interest Period.
6.5 Interest due only on Banking Day. If interest would, under Section 6.4,
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.
6.6 Calculation of Interest. All interest shall accrue from day to day 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 on the due dates of such payments to the Agent at its
office located at 200 Park Avenue, New York, New York or to such other branch 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 Lenders or the Agent hereunder, then,
subject to Section 7.2, the Borrower shall pay such additional amounts in
Dollars as may be necessary in order that the net amounts received after
withholding or deduction shall equal the amounts which would have been received
if such withholding or deduction were not required and, in the event any
withholding or deduction is made, whether for Taxes or otherwise, the Borrower
shall promptly send to the Agent such documentary evidence with respect to such
withholding or deduction as may be required from time to time by the Agent, the
Lenders or any thereof.
<PAGE>
7.2 Proof of no Withholding. Any Lender and any transferee, assignee or
participation holder (a "Transferee") that is not incorporated under the laws of
the United States of America or a State thereof agrees that, on the initial
Drawdown Date and prior to the first date on which any payment is due to such
Lender hereunder, such Lender will deliver to the Borrower (i) two duly
completed copies of United States Internal Revenue Service Form 1001 or 4224, or
successor applicable form, as the case may be, certifying in each case that such
Lender or Transferee is entitled to receive payments under this Agreement and
the Note without deduction or withholding of any United States Federal income
taxes and (ii) a United States Internal Revenue Service Form W-8 or W-9, or
successor applicable form, as the case may be, to establish an exemption from
United States backup withholding tax. Each Lender or Transferee which delivers
to the Borrower a Form 1001 or 4224 and Form W-8 or W-9 pursuant to the
preceding sentence further undertakes to deliver to the Borrower two (2) further
copies of said Form 1001 or 4224 and Form W-8 or W-9, or successor applicable
forms, or other manner of certification, as the case may be, on or before the
date that any such form expires or becomes obsolete or after the occurrence of
any event requiring a change in the most recent form previously delivered by it
to the Borrower and such extensions or renewals thereof as may reasonably be
requested by the Borrower certifying in the case of a Form 1001 or 4224 that
such Lender or such Transferee is entitled to receive payments under this
Agreement and the Note without deduction or withholding of any United States
Federal income taxes, unless in any such case an event (including, without
limitation, any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent such Lender or such Transferee
from duly completing and delivering any such letter or form with respect to it,
and such Lender or such Transferee advises the Borrower that it is not capable
of (i) receiving payments without any deduction or withholding of United States
Federal income tax, and (ii) in the case of a Form W-8 or W-9, establishing an
exemption from United States backup withholding tax.
7.3 Federal Income Tax Credits. In connection with the foregoing, each
Lender may consult with its legal advisers, all fees and expenses of which shall
be for the account of the Borrower. If a Lender obtains the benefit of a credit
against its liability for federal income taxes imposed by the United States of
America for all or part of the Taxes as to which the Borrower has paid
additional amounts as aforesaid then such Lender shall reimburse the Borrower
for the amount of the credit so obtained.
8 ACCOUNTS
<PAGE>
8.1 The Operating Accounts. Except as otherwise agreed by the Agent, the
Borrower and the Subsidiaries shall maintain with the Agent at the office of the
Agent located at 200 Park Avenue, New York, New York or at other branches of the
Agent the principal operating accounts of the Vessels of the Borrower and the
Subsidiaries if the Agent has full commercial banking capability as of the date
of this Agreement in the geographic areas in which the Borrower or any of the
Subsidiaries operate. The Lenders expressly acknowledge that such operating
accounts are not pledged or otherwise hypothecated to the Lenders in connection
with the Credit Facility. The Lenders further acknowledge that any moneys
deposited in such accounts may be utilized for any business purpose whatsoever
consistent with the terms of this Agreement. Amounts accumulated in each
Operating Account shall bear interest for the account of the party maintaining
such account in accordance with the Agent's normal practice.
9 EVENTS OF DEFAULT
9.1 In the event that any of the following events shall occur and
be continuing:
(a) Principal Payments. any payment of principal due on the
Termination Date or any Reduction Date or otherwise due hereunder or under the
Note is not paid on the due date; or
(b) Interest and other Payments. any interest on any of the
Advances or any other amount becoming payable to the Agent or the Lenders under
this Agreement or under the Note 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, etc. any representation, warranty or
other statement made by the Borrower in this Agreement or in any other
instrument, document or other agreement delivered in connection herewith or
therewith proves to have been untrue or misleading in any material respect as at
the date as of which made; or
(d) Impossibility, Illegality. it becomes impossible or
unlawful for the Borrower to fulfill any of the covenants and obligations
contained herein or in the Note or for the Agent or the Lenders to exercise any
of the rights vested in them hereunder or under the Note and such impossibility
or illegality in the reasonable opinion of the Majority Lenders will give rise
to a Material Adverse Change; or
(e) Citizenship. the Borrower or any of the Subsidiaries
owning Vessels registered under the laws and flag of the United States of
America defaults in the performance of Section 10.1.A(vi) and, provided such
default does not render any such Vessel liable to forfeiture, such default is
not cured within thirty (30) days of its occurrence; or
(f) Financial Covenants. the Borrower defaults in the
performance of Sections 10.1.A, (xv), (xvi), (xvii), (xviii), (xix) or (xx) and
such default is not cured within thirty (30) days; or
<PAGE>
(g) Other Covenants. the Borrower defaults in the performance
of any other term, covenant or agreement contained in this Agreement, in the
Note or in any other instrument, document or other agreement delivered in
connection herewith or therewith, or there occurs any other event which
constitutes a default under this Agreement or under the Note, in each case other
than an Event of Default referred to elsewhere in this Section 9.1, and such
default in the reasonable opinion of the Majority Lenders will give rise to a
Material Adverse Change and such default continues unremedied for a period of
forty-five (45) days; or
(h) Debt. the Borrower or any of the Subsidiaries shall
default in the payment when due (subject to any applicable grace period),
whether by acceleration or otherwise, of (i) any Funded Debt or (ii)
indebtedness to trade creditors exceeding, in the aggregate, One Million Dollars
($1,000,000) and in connection with such default or in connection with any
non-payment default in respect of such Funded Debt, any party becomes entitled
to enforce the security for any such Funded Debt or other indebtedness and such
party shall take steps to enforce the same, unless such default or enforcement
is being contested in good faith and by appropriate proceedings or other acts
and the Borrower and/or such Subsidiary or Subsidiaries, as the case may be,
shall set aside on its books adequate reserves with respect thereto; or
(i) Bankruptcy. the Borrower or any of the Subsidiaries
commences any proceedings relating to any substantial portion of its property
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 to the appointment of any
receiver, trustee, liquidator or sequestrator of, or for, itself or any
substantial portion of its property; or
(j) Judgments. any judgment or order is made the effect
whereof would be to render ineffective or invalid this Agreement, the Note or
either thereof; or
(k) Inability to Pay Debts. the Borrower or any of the
Subsidiaries is unable to pay or admits its inability to pay its debts as they
fall due or if a moratorium shall be declared in respect of any Funded Debt of
the Borrower or any of the Subsidiaries; or
(l) Vessels Value/Commitment. the aggregate value of the
Vessels (as determined from time to time in accordance with Section 10.2) (it
being understood that for purposes of this Section 9.1(l), the value of a Vessel
owned by a Subsidiary in which the Borrower has less than a one hundred percent
(100%) direct and/or indirect ownership interest shall be prorated for such
ownership interest) shall be less than two hundred percent (200%) of the
Committed Amount; or
<PAGE>
(m)Change of Control of the Borrower. the Borrower shall have
suffered a Change of Control,
then the Lenders' obligation to make the Credit Facility available shall cease
and the Agent, on behalf of the Lenders, may (with the consent of the Majority
Lenders) and shall (upon the Majority Lenders' instruction) by notice to the
Borrower, (i) declare the entire balance of the then outstanding Advances,
accrued interest and any other sums payable by the Borrower hereunder and under
the Note due and payable whereupon the same shall forthwith be due and payable
without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived (provided that upon the happening of an event specified
in subsections (i) or (k) of this Section 9.1, the Note shall be immediately due
and payable without declaration or other notice to the Borrower), (ii) terminate
any Letter of Credit which may be terminated in accordance with its terms and
(iii) direct the Borrower to pay (and the Borrower hereby agrees upon receipt of
such notice, or upon the occurrence of an Event of Default specified in
subsection (i) or (k) of this Section 9.1, it will pay) to the Agent at the
office set forth in Section 7.1 such additional amounts, to be held as security
in respect of Letters of Credit then outstanding (if any), equal to the
aggregate of the then Letter of Credit Outstandings, such amounts to be repaid
to the Borrower to the extent not utilized to cover Letter of Credit drawings.
In such event, the Agent and the Lenders may proceed to protect and enforce
their rights by action at law, suit in equity or in admiralty or other
appropriate proceeding, whether for specific performance of any covenant
contained in this Agreement or in the Note or in aid of the exercise of any
power granted herein or therein, or the Agent and the Lenders may proceed to
enforce the payment of the Note when due or to enforce any other legal or
equitable right of the Lenders, or proceed to take any action authorized or
permitted by applicable laws for the collection of all sums due, or so declared
due, on the Note, including, without limitation, the right to appropriate and
hold or apply (directly, by way of set-off or otherwise) to the payment of the
obligations of the Borrower hereunder and/or under the Note (whether or not then
due) all moneys and other amounts of the Borrower , then or thereafter in
possession of the Lenders, the balance of any deposit account (demand or time,
matured or unmatured) of the Borrower then or thereafter with the Lenders and
every other claim of the Borrower then or thereafter against the Lenders.
<PAGE>
9.2 Indemnification. The Borrower agrees to, and shall, indemnify and hold
the Agent and the Lenders harmless against any loss or reasonable costs or
expenses (including legal fees and expenses) which the Agent or any Lender
sustains or incurs as a consequence of any default in payment of the principal
amount of any Advance or interest accrued thereon or any other amount payable
hereunder or under the Note 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 Credit Facility or any part thereof and
any costs incurred by the Agent or any Lender in connection with the unwinding
of any interest rate swap or other hedging arrangements. The Borrower also
agrees to reimburse and indemnify the Letter of Credit Issuer for and against
any and all losses, costs or expenses of whatever nature which may be incurred
by the Letter of Credit Issuer in performing its respective duties in any way
relating to or arising out of its issuance of Letters of Credit; provided that
the Borrower shall not be liable for the portion of such losses, costs or
expenses resulting from the Letter of Credit Issuer's gross negligence or
willful misconduct. To the extent the Letter of Credit Issuer is not so
indemnified by the Borrower, the Letter of Credit Participants will reimburse
and indemnify the Letter of Credit Issuer in proportion to its Letter of Credit
Participant Percentage. The Agent or any such Lender's certification of such
loss, costs and expenses absent any manifest error, shall be conclusive and
binding on the Borrower.
9.3 Application of Moneys. All moneys received by the Agent or any Lender
under or pursuant to this Agreement or the Note after the happening of any Event
of Default shall be applied by the Agent in the following manner:
(i) first, in or towards the payment or reimbursement of
any expenses or liabilities incurred by the Agent and
the Lenders in connection with the ascertainment,
protection or enforcement of the Agent's and the
Lenders' rights and remedies hereunder and under the
Note,
(ii) secondly, in or towards payment of any interest owing
in respect of the Advances,
(iii) thirdly, in or towards repayment of the Advances,
(iv) fourthly, as security in respect of Letters of Credit
then outstanding, in the aggregate amount of the then
Letter of Credit Outstandings,
(v) fifthly, in or towards payment of all other sums
which may be owing to the Agent and the Lenders under
this Agreement or under the Note, and
(vi) sixthly, the surplus (if any), as well as any moneys
held as security for Letters of Credit to the extent
not utilized to cover Letters of Credit, shall be
paid to the Borrower or to whomsoever else may be
entitled thereto.
10 COVENANTS
10.1 The Borrower hereby covenants and undertakes with the Agent and the
Lenders that, from the date hereof and so long as any principal, interest or
other moneys are owing in respect of the Credit Facility or otherwise owing
under this Agreement or under the Note:
<PAGE>
A. The Borrower will:
(i) Performance of Agreements. duly perform and observe
the terms of this Agreement and the Note;
(ii) Compliance with Covenants. comply with each of its
covenants set forth in this Agreement;
(iii) Notice of Default. promptly inform the Agent of the
occurrence of (a) any Event of Default or of any
event which with the giving of notice or lapse of
time, or both, would constitute an Event of Default,
(b) any litigation or governmental proceeding pending
or overtly threatened against it or against any of
the Subsidiaries which could reasonably be expected
to give rise to a Material Adverse Change and (c) any
other event or condition of which it becomes aware
which is reasonably likely to give rise to a Material
Adverse Change;
(iv) Obtain Consents. without prejudice to Section 2.1 and
this Section 10.1, obtain every consent and do all
other acts and things which may from time to time be
necessary or advisable for the continued due
performance of all its obligations under this
Agreement and under the Note;
(v) Financial Statements. 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 (or
equivalent) 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
Accounting Firm), which shall be prepared by the
Borrower and certified by the chief financial officer
of the Borrower, together with a Compliance
Certificate from such chief financial officer;
(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 (or equivalent) 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 from such chief financial officer;
<PAGE>
(c) within ten (10) days of filing, notice
of the filing of all 8K reports (or equivalent) filed
by the Borrower with the United States Securities and
Exchange Commission and deliver to the Agent,
promptly on its request therefor, copies of such
filings;
(d) promptly upon the mailing thereof to the
shareholders of the Borrower generally, copies of all
financial statements, reports and proxy statements so
mailed;
(e) within ten (10) days of filing, notice
of the filing of all registration statements (other
than the exhibits thereto and any registration
statements on Form S-8 or its equivalent) which the
Borrower shall have filed with the United States
Securities and Exchange Commission and deliver to the
Agent, promptly on its request therefor, copies of
such filings; and
(f) such other statement or statements,
lists of property and accounts, budgets, forecasts,
reports and financial information (including a
listing of all outstanding indebtedness of the
Borrower and the Subsidiaries for borrowed monies)
with respect to the business, operations and
management of the Borrower and the Subsidiaries and
the employment of the assets owned or operated
directly or indirectly by the Borrower or any of the
Subsidiaries as the Agent may from time to time
reasonably request in writing and any material
reports received by any thereof from their
independent certified accountants;
(vi) Qualification to Own U.S. Flag Vessels. throughout
the Credit Period, if the Borrower or a Subsidiary
owns a United States flag vessel (a) the Borrower
shall remain eligible, and shall cause such
Subsidiary to continue to be eligible, to document
such United States flag vessel within the meaning of
46 App. U.S.C. '12102(a) and (b) if such United
States flag vessel is operated in the coastwise
trade, remain qualified, and cause such Subsidiary to
continue to be qualified, to own and operate vessels
in the coastwise trade, within the meaning of Section
2 of the Shipping Act, 1916, as amended;
(vii) Corporate Existence. do or cause to be done all
things necessary to preserve and keep in full force
and effect its corporate existence, as well as the
corporate existence of its Subsidiaries, and all
licenses, franchises, permits and assets necessary to
the conduct of its business and the business of its
Subsidiaries;
<PAGE>
(viii) Books, Records, etc. keep, and cause each of the
Subsidiaries to keep, proper books of record and
account into which full and correct entries shall be
made, in accordance with GAAP throughout the Credit
Period;
(ix) Inspection. allow any representative or
representatives designated by the Agent, subject to
applicable laws and regulations, to visit and inspect
any of its or any of the Subsidiaries' properties,
and, on request, to examine its or any of the
Subsidiaries' books of account, records, reports and
other papers (and to make copies thereof and to take
extracts therefrom) and to discuss the affairs,
finances and accounts of any thereof with its
officers and executive employees all at such
reasonable times and as often as the Agent reasonably
requests;
(x) Taxes. pay and discharge, and cause each of the
Subsidiaries 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 thereof;
provided, however, that neither it nor any such
Subsidiary shall be required to pay and discharge any
such tax, assessment, charge or levy which are being
contested in good faith and by appropriate
proceedings or other acts and so long as it or such
Subsidiary shall set aside on its books adequate
reserves with respect thereto;
(xi) Compliance with Statutes, etc. do, or cause to be
done, all things necessary to comply with all
material laws, and the rules and regulations
thereunder, applicable to itself or to any of the
Subsidiaries including, without limitation, those
laws, rules and regulations relating to employee
benefit plans and environmental matters;
<PAGE>
(xii) Environmental Matters. promptly upon the occurrence
of any of the following conditions, provide to the
Agent a certificate of a chief executive officer
thereof, specifying in detail the nature of such
condition and its proposed response or the response
of its Environmental Affiliate: (a) its receipt or
the receipt by any Subsidiary or any of their
Environmental Affiliates of any 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 give rise to a Material
Adverse Change, (b) knowledge by it, any Subsidiary
or any of their Environmental Affiliates that there
exists any Environmental Claim pending or threatened
against any such person, which could reasonably be
expected to give rise to a Material Adverse Change,
or (c) any release, emission, discharge or disposal
of any material that could form the basis of any
Environmental Claim against it, any Subsidiary or any
of their Environmental Affiliates if such
Environmental Claim could reasonably be expected to
give rise to a Material Adverse Change. 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;
(xiii) Evidence of Insurance. shall, and shall procure that
each of the Subsidiaries shall, maintain the
insurances on its properties as provided under
Section 2.1(g)(iii) and 2.1(k), with underwriters,
brokers and protection and indemnity clubs acceptable
to the Agent, and the Borrower shall provide the
Agent, annually, with copies of insurance policies
and cover notes (together with such other
documentation as the Agent may reasonably require)
evidencing the same;
(xiv) Maintenance of Assets. maintain and keep, and cause
the Subsidiaries to maintain and keep, all properties
used or useful in the conduct of their business in
good condition, repair and working order and supplied
with all necessary equipment and will make, or cause
to be made, all necessary repairs, renewals and
replacements thereof so that the business carried on
in connection therewith and every portion thereof may
be properly and advantageously conducted at all
times;
(xv) Funded Debt/Total Capitalization. procure that, on a
consolidated basis, the Funded Debt of the Borrower
shall not exceed fifty percent (50%) of its Total
Capitalization;
(xvi) Senior Debt/Total Capitalization. procure that, on a
consolidated basis, the Senior Debt of the Borrower
shall not exceed thirty-five percent (35%) of its
Total Capitalization;
<PAGE>
(xvii) Permitted Secured Senior Debt. procure that, on a
consolidated basis, not more than the greater of (a)
One Hundred Five Million Dollars ($105,000,000) of
the Senior Debt of the Borrower and (b) seventeen and
one-half percent (17-1/2%) of its Total
Capitalization may be secured indebtedness (as used
herein, such secured Senior Debt shall include,
without limitation, all capitalized leases);
(xviii) Cash, Cash Equivalents. at all times maintain, on a
consolidated basis, readily available cash or Cash
Equivalents in an aggregate amount at least equal to
the greater of (a) Thirty Million Dollars
($30,000,000) and (b) an amount equal to twelve and
one-half percent (12-1/2%) of the Funded Debt, on a
consolidated basis, of the Borrower;
(xix) Interest Coverage Ratio. maintain, on a consolidated
basis, an Interest Coverage Ratio of 3.0 to 1.0,
measured quarterly;
(xx) Consolidated Net Worth. at all times maintain a
Consolidated Net Worth equal to (a), during calendar
year 1997, Two Hundred and Fifty Million Dollars
($250,000,000) and (b), during each calendar year
thereafter, the aggregate of (x) Two Hundred Fifty
Million Dollars ($250,000,000) and (y) an amount
equal to fifty percent (50%) of the Borrower's
consolidated annual net income, if any, for the
preceding calendar year or each of the preceding
calendar years, as the case may be, commencing with
calendar year 1997, as reported from time to time, in
the Borrower's published financial reports;
(xxi) ERISA Matters. forthwith upon learning of the
occurrence of any material liability of the Borrower,
any of the Subsidiaries or any ERISA Affiliate
pursuant to ERISA in connection with the termination
of any Plan or withdrawal or partial withdrawal from
any multiemployer plan (as defined in ERISA) or of a
failure to certify the minimum funding standard of
Section 412 of the Code or Part 3 of Title I of ERISA
by any Plan for which the Borrower, any of the
Subsidiaries or any ERISA Affiliate is plan
administrator (as defined in ERISA), furnish or cause
to be furnished to the Lender written notice thereof;
and
(xxii) Delivery of Share Certificates. promptly deliver to
the Agent all share certificates or other evidences
of ownership, if any, issued to the Borrower or to
any Subsidiary evidencing an ownership interest in
any Subsidiary.
B. The Borrower will not, without the prior written
consent of the Lenders:
<PAGE>
(i) Liens. create, assume or permit to exist, or permit
any of the Subsidiaries (excluding the CRN Group) to
create, assume or permit to exist, any lien, charge
or encumbrance whatsoever upon any of the properties
or other assets of any thereof, except:
(a) liens for taxes not yet payable for which
adequate reserves have been maintained;
(b) 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 it or
any of the Subsidiaries is the principal, as to all
of the foregoing, only to the extent arising and
continuing in the ordinary course of business;
(c) liens, charges and other encumbrances over such
property or other assets (other than Vessels) of the
Borrower or any of the Subsidiaries, unless otherwise
prohibited by Section 10.1B(viii);
(d) with respect to Vessels, liens for crew's wages
remaining unpaid in accordance with reasonable
commercial practices or for collision or salvage,
liens in favor of suppliers of necessaries or other
similar liens arising in the ordinary course of the
vessel-owning company's business so long as the
suppliers thereof have not evidenced an intention to
enforce any such lien or liens for loss, damage or
expense, which are fully covered by insurance or, in
respect of which, a bond or other security has been
posted by the company owning such Vessel with the
appropriate court or other tribunal to prevent the
arrest or secure the release of any vessel from
arrest on account of such claim or lien; and
(e) liens securing Senior Debt as set forth on
Schedule C and as otherwise permitted by the terms
of this Agreement;
(ii) Sale of Assets. (a) Cease, or threaten to cease, its
operations or (b) viewed on a consolidated basis with
its Subsidiaries, sell or otherwise dispose of, or
threaten to sell or otherwise dispose of, all or
substantially all of the assets thereof, or all or
substantially all of such assets are seized or
otherwise appropriated except for requisition for
hire;
<PAGE>
(iii) Dividends. declare or make 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 unless the Borrower and the
Subsidiaries are in full compliance with the
covenants contained in this Agreement and no Event of
Default has occurred and is continuing or will occur
after giving effect to any declaration or
distributions to shareholders;
(iv) Changes in Business. change or permit any of the
Subsidiaries to change, the nature of its business or
commence any other business not reasonably related to
the maritime services, environmental services or
related energy businesses;
(v) Consolidation, Merger. consolidate with, or merge
into, any corporation (it being understood that the
Borrower can merge with any corporation so long as
the Borrower is the surviving entity, any Subsidiary
can merge or consolidate with any other Subsidiary
and any Subsidiary can merge into the Borrower);
(vi) Use of Proceeds. use the proceeds of the Credit
Facility in violation of Regulation G, T, U or X of
the Board of Governors of the Federal Reserve System,
as in effect from time to time;
(vii) Redemption/Repurchase of Securities. redeem or
repurchase any of its outstanding convertible
subordinated bonds or outstanding shares, unless
after giving effect to any such redemption or
repurchase it is in compliance with its covenants
hereunder and no Event of Default shall have occurred
and be continuing and notification of any such
redemption or repurchase shall be included in the
next quarterly Compliance Certificate delivered to
the Agent; and
<PAGE>
(viii) Negative Pledge. sell, encumber or otherwise
transfer, or permit any Subsidiary to sell, encumber
or otherwise transfer, any of the Vessels or any of
the right, title or interest of any thereof therein,
assign, pledge or otherwise encumber any earnings of,
insurances covering or requisition compensation in
respect of, any of the Vessels or sell, assign,
pledge or otherwise transfer or encumber any of the
shares of stock of any of the Subsidiaries directly
or indirectly legally or beneficially owned by the
Borrower unless within ten (10) Banking Days after
such sale, assignment, pledge, transfer or other
encumbrance, it gives notice thereof to the Agent and
after giving effect to any such sale, assignment,
pledge, transfer or other encumbrance the Borrower is
in compliance with its covenants hereunder as
evidenced by a Compliance Certificate delivered to
the Agent with such notice and no Event of Default
shall have occurred and be continuing.
10.2 Vessel Valuations. Upon the reasonable request of the Agent, the Borrower
shall obtain, at the Borrower's cost, valuations of the Vessels, charter free,
in Dollars from an independent shipbroker satisfactory to the Agent (it being
understood that the initial valuation for any Vessel acquired in an arm's length
transaction with a third party shall be the purchase price of such Vessel). In
the event the Borrower shall fail or refuse to obtain the valuations requested
pursuant to this Section 10.2 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 an independent shipbroker selected by the Agent, which
valuations shall be deemed the equivalent of valuations duly obtained by the
Borrower pursuant to this Section 10.2, but the Agent's actions in doing so
shall not excuse any default of the Borrower under this Section 10.2.
10.3 Inspection and Survey Reports. Upon the reasonable request of the Agent,
the Borrower shall provide the Agent with copies of all internally generated
inspection or survey reports on the Vessels and shall, if the Agent so
reasonably requests, cause the Vessels to be surveyed on an annual basis by a
surveyor appointed by the Agent. All costs arising in connection with any such
survey or surveys (including, but not limited to, the fees of the relevant
surveyor or firm of surveyors appointed by the Agent to make such survey or
surveys) shall be borne by the Borrower.
11 ASSIGNMENT AND PARTICIPATIONS
<PAGE>
This Agreement shall be binding upon, and inure to the
benefit of, the Borrower, the Agent, the Lenders 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 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. Any
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 Credit
Facility to any subsidiary or holding company of such Lender, to any subsidiary
company of any thereof or, with the consent of the Borrower and the Agent (in
each case not to be unreasonably withheld) to any other bank or financial
institution whatsoever and such Lender shall forthwith give notice of any such
assignment or participation to the Agent and the Borrower, provided, however,
that (a) except as provided by Section 16, in such event Den norske Bank ASA
shall remain the agent, (b) any such assignment or participation shall be in a
minimum amount of Ten Million Dollars ($10,000,000), (c) any such assignment to
a Lender is to be made pursuant to an Assignment and Assumption Agreement
substantially in the form of Exhibit 5 hereto, (d) Den norske Bank ASA's
Commitment shall be not less than twenty-five percent (25%) of the Committed
Amount and (e) except as provided in Section 14.3 and for such reasonable legal
fees and expenses incurred in connection with the documentation of such an
assignment (but not participation), no such assignment or participation will
result in any additional costs to, or additional material requirements on, the
Borrower. The Borrower will take all reasonable actions requested by the Lenders
to effect such assignment, including, without limitation, the execution of a
written consent to such Assignment and Assumption Agreement.
12 ILLEGALITY, INCREASED COST, NON-AVAILABILITY, ETC.
12.1. Illegality. In the event that by reason of any change in any applicable
law, regulation or regulatory requirement or in the interpretation thereof a
Lender has a reasonable basis to conclude that it has become unlawful for such
Lender to maintain or give effect to its obligations as contemplated by this
Agreement, the Lender shall inform the Borrower and the Agent to that effect,
whereafter the liability of such Lender to make its Commitment available shall
forthwith cease and the Borrower shall be required either to prepay to such
Lender any portion of the then outstanding Advances owing to such Lender
immediately or, if such Lender so agrees, to prepay such portion of the
outstanding Advances to such Lender on the last day of the then current Interest
Period or Periods, in accordance with and subject to the provisions of Section
12.5 and to pay to the Agent sufficient amounts of cash to fund any possible
drawings under Letters of Credit then in existence, such amounts to be repaid to
the Borrower to the extent not utilized to cover Letter of Credit drawings. In
any such event, but without prejudice to the aforesaid obligations of the
Borrower to prepay the outstanding Advances or part thereof and fund any
possible drawings under Letters of Credit then in existence, the Borrower and
such Lender shall negotiate in good faith with a view to agreeing on terms for
making the Commitment available from another jurisdiction or otherwise
restructuring the Commitment on a basis which is not unlawful.
12.2 Increased Cost. 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 a Lender to any Taxes with respect to its
income from the Credit Facility or any part
thereof, or
<PAGE>
(ii) change the basis of taxation to a 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
incorporation of such Lender or the domicile of the
Lender's office through which the Lender's Commitment
is made or any governmental subdivision or other
taxing authority having jurisdiction over such Lender
(unless such jurisdiction is asserted solely by
reason of the activities of the Borrower or any of
the Subsidiaries) or such other jurisdiction where
the 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, any Lender, or
(iv) impose on any Lender any other condition affecting
the Commitment or any portion of any Advance
thereunder, and the result of the foregoing is either
to increase the cost to such Lender of making
available or maintaining its Commitment or to reduce
the amount of any payment received by such Lender
then and in any such case if such increase or reduction in the opinion of such
Lender materially affects the interests of such Lender under or in connection
with this Agreement:
(a) such Lender shall notify the Borrower
and the Agent of the happening of such event,
(b) the Borrower agrees forthwith upon
demand to pay to such Lender such amount as such
Lender certifies to be necessary to compensate such
Lender for such additional cost or such reduction,
and
(c) any such demand as is referred to in
sub-section (b) of this Section 12.2 may be made by
such Lender at any time before or after any repayment
of the Advances.
<PAGE>
12.3 Non-availability of Funds. If the Agent shall determine that, by reason
of circumstances affecting the London Interbank Eurodollar Market generally,
adequate and reasonable means do not or will not exist for ascertaining the
Applicable Rate for any Interest Period, the Agent shall give notice of such
determination to the Borrower. The Borrower and the Lenders shall then negotiate
in good faith in order to agree upon a mutually agreeable basis for funding the
Advance or Advances in question, and/or for determining the interest rate and/or
Interest Period(s) to be substituted for those which would otherwise have
applied under this Agreement. If the Borrower and the Lenders are unable to
agree upon such a substituted funding base, interest rate and/or Interest
Period(s) within thirty (30) days of the giving of such notice, the Borrower
shall repay the Credit Facility, or the relevant portion thereof, as the case
may be, to the Lenders immediately; provided, however, that if the Borrower
fails to make such repayment, the Lenders shall determine a funding basis, set
an interest rate and/or set an Interest Period(s), as the case may be, all to
take effect from the expiration of the relevant Interest Period(s) in effect at
the date of said determination notice, which rate shall be equal to the
aggregate of the Margin and the cost to the Lenders of funding the relevant
Advance or Advances.
12.4 Determination of Losses. A certificate or determination notice of the
Lenders or the Agent as to any of the matters referred to in this Section 12,
absent manifest error, shall be conclusive and binding on the Borrower.
12.5 Compensation for Losses. Where the Advances are to be prepaid by the
Borrower pursuant to Section 12.1 the Borrower agrees simultaneously with such
prepayment to pay to the relevant Lender all accrued interest to the date of
actual payment and all other sums payable by the Borrower to such Lender
pursuant to this Agreement, together with such amounts as may be certified by
such Lender to be necessary to compensate such Lender for any actual loss,
premium or penalties incurred or to be incurred by it on account of funds
borrowed to make, fund or maintain its Commitment for the remainder (if any) of
the then current Interest Period or Periods, if any, but otherwise without
penalty or premium.
13 CURRENCY INDEMNITY
13.1 Currency Conversion. If for the purpose of obtaining or enforcing a
judgment in any court in any country it becomes necessary to convert into any
other currency (the "judgment currency") an amount due in Dollars or a
particular Foreign Currency, as the case may be, under this Agreement or under
the Note, then the conversion shall be made, in the discretion of the Agent, at
the rate of exchange prevailing either on the date of default or on the day
before the day on which the judgment is given or the order for enforcement is
made, as the case may be (the "conversion date"), provided that the Agent shall
not be entitled to recover under this section any amount in the judgment
currency which exceeds at the conversion date the amount in Dollars or the
relevant Foreign Currency, as the case may be, due under this Agreement and/or
under the Note.
13.2 Change in Exchange Rate. If there is a change in the rate of exchange
prevailing between the conversion date and the date of actual payment of the
amount due, the Borrower shall pay such additional amounts (if any, but in any
event not a lesser amount) as may be necessary to ensure that the amount paid in
the judgment currency when converted at the rate of exchange prevailing on the
date of payment will produce the amount then due under this Agreement and/or
under the Note in Dollars or the relevant Foreign Currency; any excess over the
amount due received or collected by the Lenders shall be remitted to the
Borrower.
<PAGE>
13.3 Additional Debt Due. Any amount due from the Borrower under Section 13.2
shall be due as a separate debt and shall not be affected by judgment being
obtained for any other sums due under or in respect of this Agreement and/or
under or in respect of the Note.
13.4 Rate of Exchange. The term "rate of exchange" in this Section 13 means
the rate at which the Agent in accordance with its normal practices is able on
the relevant date to purchase Dollars or the relevant Foreign Currency with the
judgment currency and includes any premium and costs of exchange payable in
connection with such purchase.
14 FEES AND EXPENSES
14.1 Commitment Fee. (a) The Borrower shall pay to the Agent, for distribution
to the Lenders, a commitment fee in Dollars, payable quarterly in arrears,
computed at the relevant rates per annum applicable pursuant to this Section
14.1 (the "Commitment Fee Rate(s)") on the average unfunded portion of the
Committed Amount (valued in Dollars) during such quarter. The commitment fee
shall accrue from the date hereof and shall terminate on the Termination Date.
(b) To the extent that the average unfunded portion of the
Committed Amount equals or exceeds fifty percent (50%) of the average Committed
Amount available during such quarter, the Commitment Fee for such excess shall
be determined using Commitment Fee Rate "A" set forth below and the Commitment
Fee for the balance of the average unfunded portion shall be determined using
Commitment Fee Rate "B" set forth below. To the extent that the average unfunded
portion of the Committed Amount is less than fifty percent (50%) of the average
Committed Amount available during such quarter, the Commitment Fee for such
portion of the unfunded Committed Amount shall be determined using Commitment
Fee Rate "B" set forth below.
(c) The Commitment Fee Rates will vary based upon the
percentage that Funded Debt (excluding any Funded Debt subordinated to the
indebtedness of the Borrower in connection with the Credit Facilities and in
respect of which no payments of principal are scheduled to be paid on or before
the Termination Date) of the Borrower bears to EBITDA for the Borrower as
follows:
<PAGE>
Commitment Commitment
Funded Debt/EBITDA Fee Rate A Fee Rate B
less than or equal to 75% 25bp 15bp
greater than 75% but less than 30bp 20bp
or equal to 150%
greater than 150% but less than 35bp 25bp
or equal to 225%
greater than 225% but less than 40bp 30bp
or equal to 300%
greater than 300% 45bp 35bp
The applicable Commitment Fee Rate(s) shall be determined by the Agent quarterly
(based upon the latest 10Q report and Compliance Certificate delivered by the
Borrower to the Agent from time to time pursuant to this Agreement). The newly
determined Commitment Fee Rate(s) shall be effective on the on the last day of
the month following the month during which such report was delivered to the
Agent.
14.2 Letter of Credit and Facing Fees and Related Charges. In addition, the
Borrower shall pay to the Agent, for distribution to the Lenders, a fee in
Dollars in respect of each Letter of Credit (the "Letter of Credit Fee")
computed at a rate per annum equal to eighty percent (80%) of the Margin in
effect from time to time on the daily Stated Amount of such Letter of Credit as
reduced by any drawings thereunder. If the Credit Facility is syndicated, the
Borrower further agrees to pay to the Letter of Credit Issuer, commencing at
such time, a fee in Dollars in respect of each Letter of Credit (the "Facing
Fee") computed at a rate per annum equal to one-tenth of one percent (1/10%) on
the daily Stated Amount of such Letter of Credit as reduced by any drawings
thereunder. Accrued Letter of Credit and Facing Fees shall be due and payable
quarterly in arrears on the first day of each October, January, April and July
of each year the Credit Facility remains outstanding and on the Termination
Date. The Borrower also agrees to pay to the Letter of Credit Issuer all
customary issuing and handling fees of the Letter of Credit Issuer in connection
with its issuance of Letters of Credit.
14.3 Agency Fee. The Borrower shall also pay to the Agent an annual Agency Fee
of Five Thousand ($5,000) for each additional Lender (up to three (3)) which
acquires a participation or syndicated interest in the Credit Facility from Den
norske Bank ASA, payable annually in advance, commencing upon the date on which
each such additional lender acquires such participation or syndicated interest
in the Credit Facility.
14.4 Agent's Other Fees. The Borrower shall pay to the Agent, for its own
account, such fees as shall have been agreed in accordance with the letter
agreement of an even date herewith between the Borrower and the Agent.
<PAGE>
14.5 Costs, Charges and Expenses. The Borrower agrees to pay the Agent and the
Lenders upon demand (whether or not the Credit Facility or any part thereof is
made available hereunder) all reasonable costs, charges and expenses (including
legal fees and expenses, as well as travel expenses of the Agent and the
Lenders) incurred by the Agent and the Lenders in connection with the
negotiation, preparation, execution and enforcement or attempted enforcement of
this Agreement, the Note or otherwise in connection with the Credit Facility, as
well as in connection with any supplements, amendments, assignments, waivers or
consents relating thereto.
15 APPLICABLE LAW, JURISDICTION AND WAIVER
15.1 Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
15.2 Jurisdiction. The Borrower hereby irrevocably submits to the jurisdiction
of the courts of the State of New York and of the United States District Court
for the Southern District of New York in any action or proceeding brought
against it by the Agent or the Lenders under this Agreement or under any
document delivered hereunder and the Borrower hereby irrevocably appoints SEACOR
Management Services Inc. with an office at 1370 Avenue of the Americas, New
York, New York, its attorney-in-fact and agent for service of summons or other
legal process thereon, which service may be made by serving a copy of any
summons or other legal process in any such action or proceeding on such agent
and such agent is hereby authorized and directed to accept by and on behalf of
the Borrower service of summons and other legal process of any such action or
proceeding against the Borrower. 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 a Borrower to any
Lender or the Agent) 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
of the foregoing agent or of the substitution of another agent therefor. In the
event that the foregoing agent or any other agent appointed by the Borrower
shall not be conveniently available for such service or if the Borrower fails to
maintain an agent as provided herein, the Borrower hereby irrevocably appoints
the person who then is the Secretary of State of the State of New York as such
attorney-in-fact and agent. The Borrower will advise the foregoing agent of the
appointment made hereby, but failure to so advise shall not affect the
appointment made hereby. Notwithstanding anything herein to the contrary, the
Agent or the Lenders may bring any legal action or proceeding in any other
appropriate jurisdiction.
<PAGE>
15.3 WAIVER OF JURY TRIAL. IT IS MUTUALLY AGREED BY AND AMONG THE BORROWER,
THE AGENT AND THE LENDERS THAT EACH OF THEM HEREBY WAIVES TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST ANY OTHER
PARTY HERETO ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED
WITH THIS AGREEMENT OR THE NOTE.
16 THE AGENT
16.1 Appointment of Agent. Each of the Lenders hereby irrevocably appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement and under the Note 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 this Agreement and under the Note or in
connection therewith, except for its or their own gross negligence or willful
misconduct.
16.2 Distribution of Payments. Whenever any payment is received by the Agent
from the Borrower for the account of the Lenders, or any of them, whether of
principal or interest on the Note, commissions, commitment fees under Section
14.1, or otherwise, it will thereafter cause like funds relating to such payment
to be promptly distributed ratably to the Lenders according to their respective
Commitments, in each case to be applied according to the terms of this
Agreement.
16.3 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 unless and until the Agent has
received a copy of an Assignment and Assumption Agreement evidencing the
transfer of all or any part of such Lender's interest in the Credit Facility.
16.4 No Duty to Examine, Etc. The Agent shall not be under a duty to examine
or pass upon the validity, effectiveness or genuineness of this Agreement, the
Note or any instrument, document or communication furnished pursuant to this
Agreement or the Note or in connection with any thereof and the Agent shall be
entitled to assume that the same are valid, effective and genuine, have been
signed or sent by the proper parties and are what they purport to be.
16.5 Agent as Lender. With respect to that portion of the 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 Borrower as if it were not
the Agent.
<PAGE>
16.6 (a) Obligations of Agent. The obligations of the Agent under this Agreement
and under the Note 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 this Agreement and
the Note by the Borrower.
16.7 (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, this Agreement
and the Note , 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 this Agreement and
under the Note in accordance with the instructions of the Majority Lenders (or,
where expressly required hereby, all the Lenders), and any action taken or
failure to act pursuant to such instructions shall be binding on all of the
Lenders.
16.8 Assumption re Event of Default. Except as otherwise provided in Section
16.14, 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, unless the Agent has been
notified by the Borrower of such fact or has been notified by a Lender that such
Lender considers that an Event of Default or such an event (specifying in detail
the nature thereof) has occurred and is continuing. In the event that the Agent
shall have been notified by any party 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 this
Agreement or the Note as the Majority Lenders shall request in writing.
16.9 No Liability of Agent or Lenders. Neither the Agent nor any of the
Lenders shall be under any liability or responsibility whatsoever:
(a) to the Borrower or any other person or entity as a consequence of
any failure or delay in performance by, or any breach by, any other Lender or
any other person of any of its or their obligations under this Agreement or
under the Note;
<PAGE>
(b) to any Lender or Lenders as a consequence of any failure or delay
in performance by, or any breach by the Borrower of any of its obligations under
this Agreement or under the Note; or
(c) to any Lender or Lenders for any statements, representations or
warranties contained in this Agreement or in the Note or in any document or
instrument delivered in connection with the transaction hereby contemplated; or
for the validity, effectiveness, enforceability or sufficiency of this Agreement
and the Note or any document or instrument delivered in connection with the
transactions hereby contemplated.
16.10 Indemnification of Agent. The Lenders agree to indemnify the Agent (to
the extent not reimbursed by the Borrower), 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 reasonable
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 this Agreement and
the Note, any action taken or omitted by the Agent hereunder or thereunder or
the preparation, administration, amendment or enforcement of, or waiver of any
provision of, this Agreement and the Note, 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.
16.11 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.
16.12 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 (unless an
Event of Default has occurred and is continuing) be subject to the prior written
consent of the Borrower, such consent not to be unreasonably withheld. After any
retiring Agent's resignation as Agent hereunder, the provisions of this Section
16 shall continue in effect for its benefit with respect to any actions taken or
omitted by it while acting as Agent.
16.13 Representations of Lenders. Each Lender represents and warrants to each
other Lender and the Agent that:
<PAGE>
(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
Borrower, 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 remains outstanding, it
will continue to make its own independent evaluation of the financial condition
and affairs of the Borrower.
16.14 Notification of Event of Default. The Agent hereby undertakes promptly to
notify the Lenders, and each of the Lenders hereby undertakes promptly to notify
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 such Lender has
actual knowledge.
16.15 No Agency until Syndication. Unless and until the Credit Facility is
syndicated, all references in this Agreement to the term "Agent" shall be deemed
to be references to Den Norske Bank ASA, as a Lender and not as administrative
agent.
17 NOTICES AND DEMANDS
17.1 Notices in Writing. Every notice or demand under this Agreement shall
be in writing and may be given or made by telecopy.
17.2 Addresses for Notice. Every notice or demand shall be sent, if to the
Borrower or the Agent, at the address set forth below and, if to the Lenders at
their address and telecopy numbers set forth in Schedule A or at such other
address or telecopy numbers as such party may hereafter specify for the purpose
by notice to each other party hereto.
Any notices addressed to the Borrower shall be sent as follows:
c/o SEACOR Management Services Inc.
1370 Avenue of the Americas, 25th floor
New York, New York 10019
Telecopy.: 582-8522
Any notices addressed to the Agent shall be sent as follows:
200 Park Avenue
New York, New York 10166-0396
Telecopy No.: 681-3900
Any notice sent by telecopy shall be confirmed by letter dispatched as soon as
practicable thereafter.
<PAGE>
17.3 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 telecopy 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.
18 MISCELLANEOUS
18.1 Time of Essence. Time is of the essence of this Agreement but no failure
or delay on the part of the Agent or the Lenders to exercise any power or right
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise by the Agent or the Lenders of any power or right hereunder
preclude any other or further exercise thereof or the exercise of any other
power or right. The remedies provided herein are cumulative and are not
exclusive of any remedies provided by law.
18.2 Unenforceable, etc., Provisions - Effect. In case any one or more of the
provisions contained in this Agreement or in the Note would, if given effect,
(i) cause such of the Borrower or any of the Subsidiaries, as the case may be,
which owns United States flag vessels to cease to be a citizen of the United
States within the meaning of Section 2 of the United States Shipping Act 1916,
as amended, or cause a transfer of any of the Vessels registered under the laws
and flag of the United States of America in violation of Section 9 of said Act
or (ii) be otherwise invalid, illegal or unenforceable in any respect under any
law applicable in any relevant jurisdiction, said provision shall not be
enforceable against the Borrower or any of the Subsidiaries, as the case may be,
but the validity, legality and enforceability of the remaining provisions herein
or therein contained shall not in any way be affected or impaired thereby.
18.3 References. References herein to Sections and Schedules are to be
construed as references to sections of, and schedules to, this Agreement.
18.4 Further Assurances. The Borrower agrees that if this Agreement or the
Note shall 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 this Agreement and the Note.
<PAGE>
18.5 Entire Agreement, Amendments. This Agreement, the Note and the letter
agreement referred to in Section 14.3 constitute the entire agreement of the
parties hereto, including all parties added hereto pursuant to an Assignment and
Assumption Agreement. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute one and the same instrument. Any
provision of this Agreement or the Note may be amended or waived if, but only
if, such amendment or waiver is in writing and is signed by the Borrower and the
Majority Lenders (and, if the rights or duties of the Agent are affected
thereby, by the Agent); provided that no amendment or waiver shall, unless
signed by all the Lenders, (i) increase or decrease the Commitment of any Lender
or subject any Lender to any additional obligation other than those set forth
herein, (ii) reduce the principal of or rate of interest on the Credit Facility
or any fees hereunder, (iii) postpone the date fixed for any payment of
principal of or interest on the Loan or any fees hereunder, (iv) amend
<PAGE>
Section 11, (v) waive any condition precedent to the availability of the Credit
Facility or any Advance thereunder, (vi) amend or modify this Section 18.5 or
(vii) change the definition of "Majority Lenders".
IN WITNESS whereof the parties hereto have caused this
Agreement to be duly executed by their duly authorized representative as of the
day and year first above written.
SEACOR SMIT INC.
By_______________________________
Randall Blank
Executive Vice President
By special authority for
DEN NORSKE BANK ASA, New York
Branch, as Agent and Lender
By_______________________________
Theodore S. Jadick, Jr.
Senior Vice President
and
By_______________________________
Dick H. Fagerstal
First Vice President
EXHIBIT 10.2
EXECUTION COPY
- ------------------------------------------------------------------------------
OPERATING AGREEMENT
OF
CHILES OFFSHORE LLC
DATED AS OF AUGUST 5, 1997
- ------------------------------------------------------------------------------
NYFS12...:\93\73293\0016\1915\AGR7247P.24F
<PAGE>
TABLE OF CONTENTS
Section Page
ARTICLE 1 DEFINITIONS................................................ 1
ARTICLE 2 FORMATION AND OFFICES...................................... 12
2.1 Formation.................................................. 12
2.2 Principal Office .......................................... 13
2.3 Registered Office and Registered Agent .................... 13
2.4 Purpose of Company ........................................ 13
2.5 Date of Dissolution........................................ 13
2.6 Qualification.............................................. 13
ARTICLE 3 CAPITALIZATION OF THE COMPANY.............................. 14
3.1 Admission of Members; Capital Contributions................ 14
3.2 Additional Capital Contributions .......................... 14
3.3 Loans; Repayment of Bridge Loans .......................... 15
3.4 Contributions by SEACOR of certain Promoted Interests;
Certain SEACOR Transactions................................ 16
3.5 Maintenance of Capital Accounts............................ 17
3.6 Capital Withdrawal Rights, Interest and Priority .......... 18
3.7 Preemptive Rights.......................................... 18
3.8 Group A Preferred Return; Group B Preferred Return ........ 19
3.9 Right of First Offer ...................................... 21
ARTICLE 4 DISTRIBUTIONS.............................................. 22
4.1 Distributions of Net Cash Flow ............................ 22
4.2 Persons Entitled to Distributions.......................... 22
4.3 Limitations on Distributions .............................. 22
ARTICLE 5 ALLOCATIONS................................................ 23
5.1 Profits.................................................... 23
5.2 Losses .................................................... 23
5.3 Special Allocations........................................ 23
5.4 Curative Allocations ...................................... 25
5.5 Loss Limitation............................................ 25
5.6 Tax Allocations: Code Section 704(c)...................... 26
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ARTICLE 6 MEMBERS' MEETINGS.......................................... 26
6.1 Meetings of Members; Place of Meetings .................... 26
6.2 Quorum; Voting Requirement ................................ 27
6.3 Proxies.................................................... 27
6.4 Action Without Meeting .................................... 27
6.5 Notice .................................................... 27
6.6 Waiver of Notice .......................................... 27
6.7 No Authority .............................................. 27
6.8 Certain Approvals.......................................... 28
ARTICLE 7 MANAGEMENT AND CONTROL .................................... 28
7.1 Management Committee ...................................... 28
7.2 Management Committee Meetings; Proxies .................... 29
7.3 Management Committee's Authority; Certain Limitations...... 29
7.4 Officers; Agents .......................................... 30
7.5 Resignation of a Management Committee Member .............. 30
7.6 Compensation .............................................. 30
ARTICLE 8 LIABILITY AND INDEMNIFICATION.............................. 31
8.1 Liability of Members ...................................... 31
8.2 Indemnification............................................ 31
8.3 Effect of Certain Amendments .............................. 32
ARTICLE 9 TRANSFERS OF MEMBERSHIP INTERESTS.......................... 33
9.1 General Restrictions ...................................... 33
9.2 Permitted Transfers........................................ 33
9.3 Substitute Members ........................................ 34
9.4 Effect of Admission as a Substitute Member ................ 34
9.5 Consent.................................................... 35
9.6 No Dissolution ............................................ 35
9.7 Additional Members; Certain Representations of Members .... 35
9.8 Right of First Offer ...................................... 35
9.9 Tag-Along Rights .......................................... 36
9.10 Drag-Along Rights.......................................... 38
9.11 Piggyback Registration .................................... 40
ARTICLE 10 DISSOLUTION AND TERMINATION................................ 41
10.1 Events Causing Dissolution ................................ 41
10.2 Notices to Secretary of State.............................. 42
10.3 Cash Distributions Upon Dissolution........................ 42
10.4 In-Kind.................................................... 43
10.5 No Action for Dissolution.................................. 43
ARTICLE 11 TAX MATTERS MEMBER ........................................ 43
11.1 Tax Matters Member ........................................ 43
11.2 Certain Authorizations .................................... 44
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11.3 Indemnity of Tax Matters Member............................ 45
11.4 Information Furnished...................................... 45
11.5 Notice of Proceedings, etc................................. 45
11.6 Notices to Tax Matters Member.............................. 45
11.7 Preparation of Tax Returns ................................ 45
11.8 Tax Elections.............................................. 46
11.9 Taxation as a Partnership.................................. 46
ARTICLE 12 ACCOUNTING AND BANK ACCOUNTS .............................. 46
12.1 Fiscal Year and Accounting Method.......................... 46
12.2 Books and Records.......................................... 46
12.3 Delivery to Members; Inspection............................ 47
12.4 Financial Statements ...................................... 47
12.5 Filings.................................................... 47
12.6 Non-Disclosure ............................................ 47
12.7 Bank Accounts.............................................. 48
ARTICLE 13 MISCELLANEOUS.............................................. 48
13.1 Title to Property.......................................... 48
13.2 Waiver of Default.......................................... 48
13.3 Amendment.................................................. 49
13.4 No Third Party Rights...................................... 49
13.5 Severability .............................................. 49
13.6 Nature of Interest in the Company.......................... 49
13.7 Binding Agreement.......................................... 49
13.8 Headings .................................................. 50
13.9 Word Meanings.............................................. 50
13.10 Counterparts .............................................. 50
13.11 Entire Agreement .......................................... 50
13.12 Partition.................................................. 50
13.13 Governing Law; Consent to Jurisdiction and Venue .......... 50
13.14 Discretion ................................................ 50
SCHEDULE 1................................................................. 54
SCHEDULE 3.1(b).............................................................55
SCHEDULE 7.5............................................................... 56
SCHEDULE 9.7............................................................... 57
Annex I.....................................................................58
Annex II....................................................................59
Annex III(a)................................................................60
Annex III(b)................................................................62
iii
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Annex IV....................................................................63
Annex V.....................................................................64
iv
<PAGE>
OPERATING AGREEMENT
OF
CHILES OFFSHORE LLC
THIS OPERATING AGREEMENT (this "AGREEMENT") of CHILES OFFSHORE LLC (the
"COMPANY"), is made and entered into as of the 5th day of August, 1997 by and
among the Persons executing this Agreement on the signature pages hereto as a
member (together with such other Persons that may hereafter become members as
provided herein, referred to collectively as the "MEMBERS" or, individually, as
a "MEMBER").
WHEREAS, the Members have caused Chiles Offshore LLC to be formed on as a
limited liability company under the Delaware Limited Liability Company Act by
causing a certificate of formation of the Company to be filed with the Delaware
Secretary of State and, as required thereunder, do hereby adopt this Agreement
as the limited liability company agreement of the Company pursuant to Section
18-201(d) of the Act effective as of the date hereof;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties agree as follows:
ARTICLE 1
DEFINITIONS
As used herein, the following terms shall have the following meanings,
unless the context otherwise requires:
"ACT" means the Delaware Limited Liability Company Act, 6 Del. L. ss.
18-101, et seq., as amended from time to time.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to a Member, the
deficit balance, if any, in such Member's Capital Account as of the end of the
relevant Taxable Year, after giving effect to the following adjustments:
(a) Credit to such Capital Account any amounts which such Member
is obligated to restore pursuant to any provision of this Agreement or is
deemed to be obligated to restore pursuant to the penultimate sentences of
Regulation Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
<PAGE>
(b) Debit to such Capital Account the items described in
Regulation Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704- 1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Regulation Section 1.704-1(b)(2)(ii)(d) and shall
be interpreted consistently therewith.
"AFFILIATE" of a specified Person means any Person (a) who directly or
indirectly controls, is controlled by, or is under common control with, such
Person or (b) who has any relationship with such Person by blood, marriage or
adoption, not more remote than first cousin.
"AGREEMENT" means this Operating Agreement, which shall constitute the
limited liability company agreement of the Company for purposes of the Act, as
amended from time to time.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" means an assignment and assumption
agreement to be entered into by COI and the Company contemporaneously herewith,
in the form of Annex I attached hereto, pursuant to which COI assigns all of its
properties and assets identified on Schedule 3.1(b) attached hereto to the
Company and the Company assumes certain related liabilities of COI identified on
Schedule 3.1(b) attached hereto, including liabilities arising under the Lease
and the Construction Contracts.
"BASE RATE" means, at the applicable time, the Prime Rate as announced by
The Chase Manhattan Bank, N.A. in New York, New York.
"BASSOE" means Bassoe Rig Partners Ltd., a Bermuda corporation.
"BRIDGE LOAN" means that loan in the principal amount of $3,150,000 made
by SEACOR SMIT to and evidenced by that certain Promissory Note dated July 18,
1997 issued by Chiles Offshore Inc. to SEACOR SMIT in the principal amount of
$3,150,000, the proceeds of which were used to repay certain indebtedness which
had been incurred to make certain payments due under the Construction Contracts
and the repayment of which is secured by first priority liens on the assets and
properties, and a pledge of the outstanding capital stock, of Chiles Offshore
Inc. pursuant to the Bridge Loan Security Documents.
"BRIDGE LOAN SECURITY DOCUMENTS" means that (i) certain Security Agreement
dated as of July 18, 1997 by Chiles Offshore Inc. in favor of SEACOR SMIT, and
the Financing Statement (UCC-1) filed with the Secretary of State, State of
Texas in
2
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connection therewith, and (ii) those certain Pledge Agreements dated as of July
18, 1997 by each of Bassoe, Donald B. Gregg, Richard M. Fairbanks III and
Shannon Fairbanks and Chiles.
"BROKERAGE AGREEMENT" means that certain letter agreement to be entered
into by the Company and Bassoe contemporaneously herewith, in the form of Annex
II attached hereto, providing, among other things, for Bassoe to receive a
brokerage fee in connection with the Construction Contracts upon the delivery of
each of CJ1 and CJ2.
"BUSINESS" shall have the meaning set forth in Section 3.9(a).
"BUSINESS DAY" means any day (other than a day which is a Saturday, Sunday
or legal holiday in the state of New York) on which banks are open for business
in New York City.
"CJ1" means the Le Tourneau Enhanced 116-C jack-up drilling rig which as
of the date hereof is under construction pursuant to the Construction Contracts
and, upon completion, will be owned by CJP1.
"CJ1 3.8(A) EVENT" shall have the meaning set forth in Section 3.8(a).
"CJ1 3.8(B) EVENT" shall have the meaning set forth in Section 3.8(b).
"CJ2" means the Le Tourneau Super 116 jack-up drilling rig which may be
constructed pursuant to the Construction Contracts and, if so constructed, would
be owned by CJP2.
"CJ2 3.8(A) EVENT" shall have the meaning set forth in Section 3.8(a).
"CJ2 3.8(B) EVENT" shall have the meaning set forth in Section 3.8(b).
"CJP1" means a Delaware limited partnership to be formed to own and
operate CJ1 as provided in the Letter Agreement and whose managing general
partner will be the Company.
"CJP2" means a Delaware limited partnership to be formed to own and
operate CJ2 as provided in the Letter Agreement and whose managing general
partner will be the Company.
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"CAPITAL ACCOUNT" means, with respect to any Member, a separate account
established by the Company and maintained for each Member in accordance with
Section 3.5 hereof.
"CAPITAL CONTRIBUTION" means, with respect to any Member, the amount of
money and the initial Gross Asset Value of any Property (other than money)
contributed to the Company with respect to the interests purchased by such
Member pursuant to the terms of this Agreement, in return for which the Member
contributing such capital shall receive a Membership Interest.
"CERTIFICATE" means the Certificate of Formation of the Company filed with
the Secretary of State of Delaware, as amended or restated from time to time.
"CHILES" shall mean William E. Chiles.
"CHILES OFFSHORE INC." means Chiles Offshore Inc., a Delaware corporation
that was merged into COI effective July 31, 1997.
"CODE" means the United States Internal Revenue Code of 1986, as amended.
"COI" means COI, LLC, a Delaware limited liability company and the
successor by merger to Chiles Offshore Inc., a Delaware corporation merged with
and into COI effective July 31, 1997.
"COMPANY" means Chiles Offshore LLC.
"COMPANY AFFILIATE" shall have the meaning set forth in Section 8.2.
"COMPANY MINIMUM GAIN" shall have the meaning set forth for "partnership
minimum gain" in Regulation Section 1.704-2(b)(2) and shall be determined in
accordance with the provisions of Regulation Section 1.704-2(d).
"CONSTRUCTION CONTRACTS" means, collectively, that certain (i) Platform
Construction Agreement dated April 30, 1997 between Chiles Offshore Inc. and
Amfels, Inc., a Texas corporation ("AMFELS"), (ii) Ancillary Agreement dated
April 30, 1997 between Chiles Offshore Inc. and Amfels, and (iii)
Confidentiality Agreement dated April 30, 1997 between Chiles Offshore Inc. and
Amfels and (iv) such other agreements as may be entered into between the Company
or its successors or assigns and Amfels from time to time relating to the
construction of CJ2.
"DEPRECIATION" means, for each Taxable Year or other period, an amount
equal to the depreciation, amortization or other cost recovery deduction
allowable with respect
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to an asset for such Taxable Year, except that if the Gross Asset Value of an
asset differs from its adjusted basis for federal income tax purposes at the
beginning of such Taxable Year, Depreciation shall be an amount which bears the
same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization or other cost recovery deduction for such Taxable
Year bears to such beginning adjusted tax basis; provided, however, that if the
adjusted basis for federal income tax purposes of an asset at the beginning of
such Taxable Year is zero, Depreciation shall be determined with reference to
such beginning Gross Asset Value using any reasonable method selected by the
Management Committee.
"DISPOSITION" shall have the meaning set forth in Section 3.9(a).
"DISPOSITION NOTICE" shall have the meaning set forth in Section 3.9(a).
"DRAG-ALONG NOTICE" shall have the meaning set forth in Section 9.10(a).
"DRAG-ALONG RIGHT" shall have the meaning set forth in Section 9.10(a).
"EMPLOYMENT AGREEMENT" means an employment agreement to be entered into
between the Company and Chiles pursuant to which Chiles will be employed to
serve as President and Chief Executive Officer of the Company for a term of
three years upon the other terms and conditions set forth in the Letter
Agreement.
"GROSS ASSET VALUE" means with respect to any asset, the asset's adjusted
basis for federal income tax purposes, except as follows and as otherwise
provided in clause (ii) of Section 3.2(b):
(a) The initial Gross Asset Value of any asset contributed by a
Member to the Company shall be the gross fair market value of such asset,
as reasonably determined by the Management Committee; provided, however,
that the initial Gross Asset Values of the assets contributed to the
Company pursuant to Section 3.1 hereof shall be as set forth in such
section or the schedule referred to therein;
(b) The Gross Asset Values of all Company assets shall be
adjusted to equal their respective gross fair market values (taking Code
Section 7701(g) into account), as reasonably determined by the Management
Committee as of the following times: (i) the acquisition of an additional
interest in the Company by any new or existing Member in exchange for more
than a de minimis Capital Contribution; (ii) the distribution by the
Company to a Member of more than a de minimis amount of Company property
as consideration for an interest in the Company; and (iii) the liquidation
of the
5
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Company within the meaning of Regulation Section 1.704-1(b)(2)(ii)(g);
provided, however, that an adjustment described in clauses (i) and (ii) of
this paragraph shall be made only if the Management Committee reasonably
determines that such adjustment is necessary to reflect the relative
economic interests of the Members in the Company;
(c) The Gross Asset Value of any item of Company assets
distributed to any Member shall be adjusted to equal the gross fair market
value (taking Code Section 7701(g) into account) of such asset on the date
of distribution as reasonably determined by the Management Committee; and
(d) The Gross Asset Values of Company assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such
assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into account in determining
Capital Accounts pursuant to Regulation Section 1.704-1(b)(2)(iv)(m) and
subparagraph (f) of the definition of "Profits" and "Losses" or Section
5.3(g) hereof; provided, however, that Gross Asset Values shall not be
adjusted pursuant to this subparagraph (d) to the extent that an
adjustment pursuant to subparagraph (b) is required in connection with a
transaction that would otherwise result in an adjustment pursuant to this
subparagraph (d).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
subparagraph (b) or (d), such Gross Asset Value shall thereafter be adjusted by
the Depreciation taken into account with respect to such asset, for purposes of
computing Profits and Losses.
"GROUP A MEMBERS" means SEACOR and its permitted successors or assigns.
"GROUP B MEMBERS" means COI and its permitted successors or assigns.
"GROUP A PREFERRED RETURN" shall have the meaning set forth in Section
3.8(a).
"GROUP B PREFERRED RETURN" shall have the meaning set forth in Section
3.8(b).
"INITIAL TAG-ALONG NOTICE" shall have the meaning set forth in Section
9.9(a).
"LEASE" means the office lease between Chiles Offshore Inc. and 2000 West
Loop Ltd. expiring on March 31, 1998 for approximately 850 square feet at the
premises located at 2000 West Loop South, Suite 2130, Houston, Texas 77027.
6
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"LETTER AGREEMENT" means that certain Letter Agreement dated the date
hereof among the Company, SEACOR, SEACOR SMIT and Chiles setting forth, among
other things, certain understandings relating to the formation after the date
hereof of CJP1 and CJP2 and the terms and conditions of the Employment
Agreement.
"LOSSES" has the meaning set forth in the definition of "Profits" and
"Losses".
"MAJORITY IN INTEREST" means, with respect to any specified group or class
of Members, Members owning more than fifty percent (50%) of the total Percentage
Interests held by all such specified group or class of Members.
"MANAGEMENT COMMITTEE" means the management committee of the Company
established pursuant to Section 7.1.
"MANAGERS" means, collectively, the Persons designated and serving in
accordance with Article 7 as members of the Management Committee.
"MEMBER" or "MEMBERS" shall have the meaning set forth in the preamble
hereof.
"MEMBER NONRECOURSE DEBT" has the meaning set forth for "partner
nonrecourse debt" in Regulation Section 1.704-2(b)(4).
"MEMBER NONRECOURSE DEBT MINIMUM GAIN" means an amount, with respect to
each Member Nonrecourse Debt, equal to the Company Minimum Gain that would
result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulation Section 1.704-2(i)(3).
"MEMBER NONRECOURSE DEDUCTIONS" has the meaning set forth for "partner
nonrecourse deductions" in Regulation Sections 1.704-2(i)(1) and 1.704-2(i)(2).
"MEMBERSHIP INTEREST" means a Member's limited liability company interest
in the Company which refers to all of a Member's rights and interests in the
Company in such Member's capacity as a Member, all as provided in this Agreement
and the Act.
"NET CASH FLOW" shall mean the gross cash proceeds from the Company's
operations and any distributions received from CJP1 or CJP2 (excluding the
proceeds of Company borrowings and capital contributions) and from all sales and
other dispositions of the Company's Property and any amount released by the
Management Committee from Reserves, less the portion of gross proceeds (other
than the proceeds of the Company's borrowings and capital contributions) used to
pay or establish
7
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Reserves for all the Company's expenses, debt payments (including principal,
interest and required redemption payments), capital improvements, replacements
and contingencies, all as reasonably determined by the Management Committee. Net
Cash Flow shall not be reduced by Depreciation or similar allowances (but shall
be reduced by the Group A Preferred Return and the Group B Preferred Return, if
any, as accrued pursuant to Section 3.8 unless Section 3.8(d) shall be
applicable) and shall include the net cash proceeds of all principal and
interest payments actually received by the Company with respect to any
promissory note or other deferred payment obligation held by the Company in
connection with sales and other dispositions of the Company's Property.
"NONRECOURSE DEDUCTIONS" has the meaning set forth in Regulation Section
1.704- 2(b)(1).
"NONRECOURSE LIABILITY" has the meaning set forth in Regulation Section
1.704- 2(b)(3).
"NOTICE" means a writing, containing the information required by this
Agreement to be communicated to a party, and shall be deemed to have been
received (a) when personally delivered or sent by telecopy, (b) one day
following delivery by overnight delivery courier, with all delivery charges
pre-paid, or (c) on the third Business Day following the date on which it was
sent by United States mail, postage prepaid, to such party at the address or fax
number, as the case may be, of such party as shown on the records of the
Company.
"NOTICE OF ACCEPTANCE" shall have the meaning set forth in Section 3.9(a).
"PERCENTAGE INTEREST" of a Member means the aggregate limited liability
company percentage interest set forth on Schedule 1 hereto, as the same may be
modified from time to time as provided herein.
"PERMITTED TRANSFEREE" shall have the meaning set forth in Section 9.2.
"PERSON" means any individual, partnership, limited liability company,
corporation, cooperative, trust, estate or other entity.
"PROFITS" and "LOSSES" means, for each Taxable Year, an amount equal to
the Company's taxable income or loss for a taxable year, determined in
accordance with Section 703(a) of the Code (for this purpose, all items of
income, gain, loss or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code shall be included in taxable income or loss), with
the following adjustments:
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(a) Any income of the Company that is exempt from federal income
tax and not otherwise taken into account in computing Profits or Losses
shall be added to such taxable income or loss;
(b) Any expenditures of the Company described in Section
705(a)(2)(B) of the Code or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Regulation Section 1.704-1(b)(2)(iv)(i), and not
otherwise taken into account in computing Profits or Losses, shall be
subtracted from such taxable income or loss;
(c) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to subparagraphs (b) or (c) of the definition of Gross
Asset Value, the amount of such adjustment shall be treated as an item of
gain (if the adjustment increases the Gross Asset Value of the asset) or
an item of loss (if the adjustment decreases the Gross Asset Value of the
asset) from the disposition of such asset and shall be taken into account
for purposes of computing Profits or Losses;
(d) Gain or loss resulting from any disposition of Property with
respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of the
Property disposed of, notwithstanding that the adjusted tax basis of such
Property differs from its Gross Asset Value;
(e) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or
loss, there shall be taken into account Depreciation for such Taxable
Year, computed in accordance with the definition of Depreciation;
(f) To the extent an adjustment to the adjusted tax basis of any
Company asset pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to Regulation Sections 1.704-(b)(2)(iv)(m)(4) to be
taken into account in determining Capital Accounts as a result of a
distribution other than in liquidation of a Member's interest in the
Company, the amount of such adjustment shall be treated as an item of gain
(if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis) from the disposition of such asset and
shall be taken into account for purposes of computing Profits or Losses;
and
(g) Notwithstanding any other provision of this definition, any
items which are specially allocated pursuant to Section 5.3 or Section 5.4
hereof shall not be taken into account in computing Profits or Losses.
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The amounts of the items of Company income, gain, loss or deduction
available to be specially allocated pursuant to Sections 5.3 and 5.4 hereof
shall be determined by applying rules analogous to those set forth in
subparagraphs (a) through (f) above.
"PROMOTED INTEREST" shall have the meaning set forth in Section 3.4(d).
"PROPERTY" means all assets, real or intangible, that the Company may own
or otherwise have an interest in from time to time.
"PURCHASING GROUP B MEMBERS" shall have the meaning set forth in Section
3.9(a).
"REGULATIONS" means the regulations, including temporary regulations,
promulgated by the United States Department of Treasury with respect to the
Code, as such regulations are amended from time to time, or corresponding
provisions of future regulations.
"REGULATORY ALLOCATIONS" shall have the meaning set forth in Section 5.4.
"RESERVES" means the cash reserves established by the Management Committee
to provide for working capital, future investments, debt service and such other
purposes as may be deemed reasonably necessary or advisable by the Management
Committee.
"SEACOR" means SEACOR Offshore Rigs Inc., a Delaware corporation, and its
permitted successors or assigns.
"SEACOR GROUP" shall have the meaning set forth in Section 3.4(a).
"SEACOR SMIT" means SEACOR SMIT Inc., a Delaware corporation and, as of
the date hereof, the parent of SEACOR.
"SEC" means the Securities and Exchange Commission.
"SECRETARY" shall mean the Secretary of the Treasury or his/her delegate
or the Internal Revenue Service.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SECTION 9.8 OFFEREE" shall have the meaning set forth in Section 9.8(a).
"SECTION 9.8 PROPOSED PURCHASER" shall have the meaning set forth in
Section 9.8(a).
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"SECTION 9.8 SELLING MEMBER" shall have the meaning set forth in Section
9.8(a).
"SECTION 9.9 PARTICIPATING TAGGED MEMBERS" shall have the meaning set
forth in Section 9.9(a).
"SECTION 9.9 PROPOSED PURCHASER" shall have the meaning set forth in
Section 9.9(a).
"SECTION 9.9 TAG-ALONG MEMBERSHIP INTEREST" shall have the meaning set
forth in Section 9.9(a).
"SECTION 9.9 TAGGED MEMBERS" shall have the meaning set forth in Section
9.9(a).
"SECTION 9.10 DRAG ALONG MEMBERSHIP INTERESTS" shall have the meaning set
forth in Section 9.10(a).
"SECTION 9.10 DRAGGED MEMBERS" shall have the meaning set forth in Section
9.10(a).
"SECTION 9.10 PROPOSED PURCHASER" shall have the meaning set forth in
Section 9.10(a).
"SECTION 9.10 SELLING MEMBER" shall have the meaning set forth in Section
9.10(a).
"TAG-ALONG RIGHT" shall have the meaning set forth in Section 9.9(a).
"TAG-ALONG NOTICE" shall have the meaning set forth in Section 9.9(a).
"TAXABLE YEAR" shall mean the taxable year of the Company in accordance
with the provisions of Section 706 of the Code.
"TAX DISTRIBUTION" means an amount equal to (i) the taxable income of the
Company allocated to the Group B Members for a Taxable Year multiplied by the
sum of (x) the highest federal income tax rate applicable to individuals for
such Taxable Year and (y) 6%, divided by (ii) the lowest aggregate Percentage
Interests held by the Group B Members during such Taxable Year. Cash
Distributions in respect of the Tax Distribution shall be made quarterly as
provided in Section 4.1 hereof, based on a reasonable estimate of the amount of
Tax Distribution for such Taxable Year. The amount of Tax Distribution shall be
computed by the Company's regular independent public accounting firm.
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"TAX MATTERS MEMBER" shall have the meaning set forth in Article 11.
"TRANSFER" or "TRANSFERRED" means (a) when used as a verb, to give, sell,
exchange, assign, transfer, pledge, hypothecate, bequeath, devise or otherwise
dispose of or encumber, and (b) when used as a noun, the nouns corresponding to
such verbs, in either case voluntarily or involuntarily, by operation of law or
otherwise. When referring to a Membership Interest, "TRANSFER" shall mean the
Transfer of such Membership Interest whether of record, beneficially, by
participation or otherwise.
ARTICLE 2
FORMATION AND OFFICES
2.1 FORMATION. Pursuant to the Act, the Members have formed a Delaware
limited liability company effective upon the filing of the Certificate of the
Company with the Secretary of State of Delaware. To the extent that the rights
or obligations of any Member are different by reason of any provision of this
Agreement than they would be in the absence of such provision, to the extent
permitted by the Act, this Agreement shall control.
2.2 PRINCIPAL OFFICE. The principal office of the Company shall be located at
2000 West Loop South, Suite 2130, Houston, Texas 77027 or at such other place(s)
as the Management Committee may determine from time to time.
2.3 REGISTERED OFFICE AND REGISTERED AGENT. The location of the registered
office and the name of the registered agent of the Company in the State of
Delaware shall be as stated in the Certificate, as determined from time to time
by the Management Committee.
2.4 PURPOSE OF COMPANY. The Company's purposes, and the nature of the
business to be conducted and promoted by the Company are, (a) to acquire
partnership interests in each of CJP1 and CJP2 in exchange for the contribution
of the Construction Contracts, the progress payments and deposits made in
accordance therewith of $5,400,000 in the aggregate and the obligation to make
additional cash contributions of $9,450,000 in the aggregate, (b) to manage and
supervise all aspects of the construction of CJ1 and CJ2 and, upon their
completion, manage all aspects of their operation for CJP1 or CJP2, as the case
may be, and receive therefor certain construction supervision fees and
management fees, (c) to act as managing general partner of each of CJP1 and
CJP2, (d) to engage in any other lawful act or activity for which limited
liability companies may be formed under the Act, and (e) to engage in any and
all activities necessary, advisable, convenient or incidental to the foregoing.
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2.5 DATE OF DISSOLUTION. The term of the Company shall continue until the
close of business on August 1, 2032 or until the earlier dissolution under
Article 10 hereof. The existence of the Company as a separate legal entity shall
continue until cancellation of the Certificate in the manner required by the
Act.
2.6 CERTIFICATE; QUALIFICATION. The execution, delivery and filing of the
Certificate by David E. Zeltner, in his capacity as an authorized person, within
the meaning of the Act, is hereby ratified, approved and confirmed in all
respects. The President and Chief Executive Officer, any Vice President, the
Secretary and any Assistant Secretary of the Company is hereby authorized to
qualify the Company to do business as a foreign limited liability company in
Texas and any other state or territory in the United States in which the Company
may wish to conduct business and each is hereby designated as an authorized
person, within the meaning of the Act, to execute, deliver and file any
amendments or restatements of the Certificate and any other certificates and any
amendments or restatements thereof necessary for the Company to so qualify to do
business in any such state or territory.
ARTICLE 3
CAPITALIZATION OF THE COMPANY
3.1 INITIAL CAPITAL CONTRIBUTIONS.
(a) On the date hereof, each Member shall make Capital Contributions to the
capital of the Company consisting of cash and/or property as specified and as
set forth opposite such Member's name on Schedule 1 hereto. The amount of such
Capital Contributions, or the Gross Asset Value of any property contributed, if
other than cash, and the Percentage Interest of each Member on the date hereof,
is likewise set forth on Schedule 1.
(b) COI hereby represents and warrants to each of the Company and the Group A
Members that, as of the date hereof and immediately prior to the Capital
Contribution of the Group B Member pursuant to Section 3.1(a), the sole assets
and liabilities of COI are as set forth on Schedule 3.1(b), and such assets are
owned free and clear of any lien or encumbrances of any nature whatsoever (other
than liens or encumbrances arising out of this Agreement, the Bridge Loans and
the Bridge Loan Documents, the Construction Contracts and the other agreements
referred to on Schedule 3.1(b), to the extent relating to the rights thereunder
of the parties thereto).
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3.2 ADDITIONAL CAPITAL CONTRIBUTIONS.
(a) Except as otherwise expressly provided in this Agreement, no Member shall
be required to make any additional Capital Contribution. No Member shall be
permitted to make any additional Capital Contribution without the approval of
the Management Committee.
(b) Subject to the rights of each Member to purchase its proportionate share
of additional Membership Interests issued by the Company in accordance with
Section 3.7, the Company may offer additional Membership Interests to:
(i) any person that is not an Affiliate of a Member with the
approval of the Management Committee; or
(ii) any person that is a Member or is an Affiliate of a Member with
the approval of (A) the Management Committee, (B) a Majority in Interest of the
Group A Members and (C) a Majority in Interest of the Group B Members, it being
expressly understood that such approval of the Members shall also include their
approval of any related valuations of Gross Asset Value by the Management
Committee and, if such Members approve the Transfer without approving said
valuation, Gross Asset Value shall be determined by a third Person familiar with
the valuation of such transactions selected jointly by a Majority in Interest of
the Group A Members and a Majority in Interest of the Group B Members not later
than ten (10) days after their approval of the Transfer or, if the Members fail
to so select a third Person, then such third Person will be selected in
accordance with the rules and procedures of the American Arbitration Association
in New York, New York.
If any additional Capital Contributions are made by Members but not
in proportion to their respective Percentage Interests, the Percentage Interest
of each Member shall be adjusted such that each Member's revised Percentage
Interest determined immediately following the additional Capital Contributions
shall be equal to a fraction (1) the numerator of which is the sum of (a) the
positive Capital Account balance of the Member determined immediately preceding
the date the additional Capital Contribution is made (such Capital Account to be
computed by adjusting the book value for Capital Account purposes of each
Company asset to equal its Gross Asset Value as of such date, as provided in
subparagraph (b) of the definition herein of "Gross Asset Value"), and (b) the
additional Capital Contribution, if any, made by such Member, and (2) the
denominator of which is the sum of the positive Capital Account balances and
additional Capital Contributions of all Members, including any new Members (in
each case calculated as provided in Section 3.2(b)(ii)(1)). The names, addresses
and Capital Contributions of the Members shall be reflected in the books and
records of the Company.
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3.3 LOANS; REPAYMENT OF BRIDGE LOANS.
(a) Each Member shall have the right, but not the obligation, to purchase
debt securities hereafter issued by the Company, CJP1 or CJP2; provided,
however, that, if any Member so purchases debt securities from the Company, CJP1
or CJP2, such purchase shall not increase the Capital Account balance of such
Member. No Member shall be obligated to loan funds to the Company. Loans by a
Member to the Company shall not be considered Capital Contributions. The amount
of any such purchases shall be a debt of the Company owed to such Member in
accordance with the terms and conditions upon which such purchases are made.
(b) A Member may (but shall not be obligated to) guarantee a loan made to the
Company. If a Member guarantees a loan made to the Company and is required to
make payment pursuant to such guarantee to the maker of the loan, then the
amounts so paid to the maker of the loan shall be treated as a loan by such
Member to the Company and not as an additional capital contribution.
(c) On the date hereof, the Company shall use a portion of the Members'
Capital Contributions to satisfy the Bridge Loans in full and the Company,
contemporaneously therewith, agrees to repay in full the Bridge Loans and take
all necessary steps to release any security granted pursuant to the Bridge Loan
Security Documents, including liens granted with respect to the Construction
Contracts.
(d) The Members acknowledge and agree that SEACOR is making a loan to the
Company as of the date hereof in the amount of $5,465,000 which will be
evidenced by a promissory note of the Company in such principal amount and
secured by a pledge of the assets of the Company pursuant to a Security
Agreement in the forms attached as Annexes IV and V. The Members agree that
SEACOR may enforce its right thereunder as if it were an unaffiliated third
Person without any violation of fiduciary or other duties to the Company or its
Members.
3.4 CONTRIBUTIONS BY SEACOR OF CERTAIN PROMOTED INTERESTS;
CERTAIN SEACOR TRANSACTIONS.
(a) In the event SEACOR or its parent, SEACOR SMIT, or any other consolidated
subsidiary of SEACOR SMIT (collectively, the "SEACOR GROUP"), shall engage in
any offshore drilling rig investment transaction pursuant to which it receives a
"Promoted Interest" (as defined below), then SEACOR shall be obligated to
contribute such Promoted Interest, or to cause the contribution of such Promoted
Interest, to the Company without the payment of any consideration by the Company
therefor, and the contribution of any such Promoted Interest hereunder to the
Company shall not be considered an additional capital contribution and shall not
in
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any way increase SEACOR's Capital Account; provided, however, that in the event
any member of the SEACOR Group was required to make an equity or other
investment to obtain such Promoted Interest, either (i) the Company shall make
such investment or acquire such investment from the applicable member of the
SEACOR Group at the cost incurred by SEACOR with respect thereto or (ii)
SEACOR's Capital Account shall be increased by an amount determined by the
Management Committee and approved by a Majority in Interest of the Group B
Members, which approval shall not be unreasonably withheld or delayed; provided,
further, in the event that the Group B Members do not approve an increase in
SEACOR's Capital Account as contemplated by clause (ii) of the foregoing
proviso, the Company shall not be precluded from engaging in the related
offshore rig investment transaction and the amount of any increase in SEACOR's
Capital Account shall be determined by a third Person familiar with the
valuation of such transactions selected jointly by SEACOR and a Majority in
Interest of the Group B Members not later than ten (10) days after the
consummation of said investment or, if SEACOR and such Group B Members fail to
so select a third Person, then such third Person will be selected in accordance
with the rules and procedures of the American Arbitration Association in New
York, New York.
(b) Notwithstanding anything herein to the contrary, members of the SEACOR
Group may freely (i) make equity or equivalent investments in offshore or other
oil rig investment transactions without any obligation to contribute any
interest therein to the Company (so long as any related Promoted Interest shall
be contributed to the Company pursuant to Section 3.4(a) and shall not at any
time accrue to any member of the SEACOR Group as a result thereof), and (ii)
acquire or combine with any other Person engaged in offshore drilling activities
so long as such Person has net assets in excess of $50,000,000 (whether or not
such Person has the benefit of any Promoted Interest).
(c) Notwithstanding anything herein to the contrary, in the event any member
of the SEACOR Group provides administrative, financial or investment- banking
type services to the Company, CJP1 or CJP2 with the respect to any rig
transactions or otherwise, such member of the SEACOR Group shall be entitled to
receive reasonable fees and reimbursement for expenses incurred in connection
with the provision of such services so long as such fees are not in excess of
fees charged by unrelated Persons for comparable services.
(d) For purposes of this Section 3.4, a "Promoted Interest" shall mean a
Person's right to receive any equity interest in, or percentage of the cash flow
or profits of, an enterprise in excess of the amount of equity or percentage
attributable to such Person's investment of cash or other property in such
enterprise (i.e., a
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disproportionate share of equity, cash flow or profits when such Person's
investment is compared to comparable investments of other investors in the
enterprise).
3.5 MAINTENANCE OF CAPITAL ACCOUNTS.
(a) The Company shall maintain for each Member, a separate Capital Account
with respect to the Membership Interest owned by such Member in accordance with
the following provisions:
(i) To each Member's Capital Account there shall be credited (A)
such Member's Capital Contributions, (B) such Member's distributive share of
Profits and any items in the nature of income or gain which are specially
allocated pursuant to Section 5.3 or Section 5.4 hereof, and (C) the amount
of any Company liabilities assumed by such Member or which are secured by any
Property distributed to such Member. The principal amount of a promissory
note which is not readily traded on an established securities market and
which is contributed to the Company by the maker of the note (or a Member
related to the maker of the note within the meaning of Regulation Section
1.704-1(b)(2)(ii)(c)) shall not be included in the Capital Account of any
Member until the Company makes a taxable disposition of the note or until
(and only to the extent) principal payments are made on the note, all in
accordance with Regulation Section 1.704-1(b)(2)(iv)(d)(2);
(ii) To each Member's Capital Account there shall be debited (A) the
amount of money and the Gross Asset Value of any Property distributed or
treated as an advance distribution to such Member pursuant to any provision
of this Agreement (including without limitation any distributions pursuant to
Section 4.1(a)), (B) such Member's distributive share of Losses and any items
in the nature of expenses or losses which are specially allocated pursuant to
Section 5.3 or Section 5.4 hereof, and (C) the amount of any liabilities of
such Member assumed by the Company or which are secured by any Property
contributed by such Member to the Company;
(iii) In the event Membership Interests are Transferred in
accordance with the terms of this Agreement, the transferee shall succeed to
the Capital Account of the transferor to the extent it relates to the
Transferred Membership Interests; and
(iv) In determining the amount of any liability for purposes of
Sections 3.5(a)(i) and 3.5(a)(ii) there shall be taken into account Code
Section 752(c) and any other applicable provisions of the Code and
Regulations.
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(b) The foregoing Section 3.5(a) and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulation Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Regulation. The Management Committee shall (i) make any
adjustments that are necessary or appropriate to maintain equality between the
Capital Accounts of the Members and the amount of capital reflected on the
Company's balance sheet, as computed for book purposes, in accordance with
Regulation Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Regulation Section 1.704-1(b).
3.6 CAPITAL WITHDRAWAL RIGHTS, INTEREST AND PRIORITY. Except as expressly
provided in this Agreement, no Member shall be entitled (a) to withdraw or
reduce such Member's Capital Contribution or to receive any distributions from
the Company, or (b) to receive or be credited with any interest on the balance
of such Member's Capital Contribution at any time.
3.7 PREEMPTIVE RIGHTS. If the Company elects to offer and sell Membership
Interests other than the Membership Interests set forth on Schedule 1, such
additional Membership Interests shall be in the form of Membership Interests
having such Percentage Interest, designations and such rights and provisions,
including, but not limited to, provisions relating to distributions and
allocations of Profits and Losses, as shall be reasonably determined by the
Management Committee to be in the best interest of the Company; provided,
however, that the Company may not offer and sell any Membership Interests having
preferences to the rights of Group A Members or the Group B Members with respect
to distributions, allocations or rights upon liquidation, without the prior
written consent of a Majority in Interest of the Group A Members, and a Majority
in Interest the Group B Members (it being understood that no such consent shall
be required for the offering or sale of Membership Interests that are entitled
to distributions, allocations and rights upon liquidation that are pari passu to
the rights of the Group A Members and the Group B Members). Prior to the
consummation of any sale of additional Membership Interests, the Company shall
offer the additional Membership Interests to the Members, on the terms and
conditions set forth below:
(a) The Company shall give Notice to each Member, setting forth the
price, terms and conditions of the proposed sale of the additional Membership
Interests, including the date of the proposed sale, which shall not be less
than thirty (30) days after the date of the Notice.
(b) Each Member shall have the option to acquire all or a portion of
such Member's pro rata portion (which shall be in proportion to the
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Percentage Interest of all the Members) at the time of the offering of the
additional Membership Interests proposed to be sold, on the same terms and
conditions as are set forth in the Notice. The option of Members to purchase
all or a portion of their pro rata portions of the additional Membership
Interests shall be exercised by delivery of a Notice to the Company of
exercise within twenty (20) days following receipt of the Company's Notice of
the price, terms and conditions of the sale of the additional Membership
Interests. If any Member fails or declines to purchase all or a portion of
such Member's pro rata portion of the additional Membership Interests, then
such Member's remaining portion of the additional Membership Interests shall
be offered to the Members who have exercised their options to purchase their
pro rata portions. This procedure shall continue until such time as all the
Membership Interests offered hereby have been purchased by such Members or
until no such Member desires to purchase any additional Membership Interests
hereunder. Each such Member shall have the right to offer to acquire such
additional Membership Interests by delivering to the Company such Member's
Notice of such offer within ten (10) days following receipt of the Company's
Notice that additional portions are available. If less than all the
Membership Interests to be sold by the Company are purchased by the Members,
the Company may within one hundred twenty (120) days from the initial Notice
sell such Membership Interests as shall not have been purchased by the
Members upon terms and conditions no less favorable to the Company than those
set forth in the Notice.
(c) The sale of additional Membership Interests to Members who
exercise their options to purchase additional Membership Interests shall
occur on the date set forth in the Company's Notice of the price, terms and
conditions of the sale.
3.8 GROUP A PREFERRED RETURN; GROUP B PREFERRED RETURN . (a) If any of the
following events occur: (i) delivery of CJ1 is not completed until a date that
is 120 days after the "Scheduled Delivery Date" (as such term is defined in the
Construction Contracts with respect to CJ1) and such delayed delivery date is
not due to force majeure (the "CJ1 3.8(A) EVENT"), or (ii) the construction and
delivery of CJ2 is not completed until a date that is 120 days after the
"Scheduled Delivery Date" (as defined in the Construction Contracts with respect
to CJ2) and such delivery date is not due to force majeure (the "CJ2 3.8(A)
EVENT"), then upon such occurrence, the Group A Members shall be entitled to a
Group A preferred return (the "GROUP A PREFERRED RETURN") equal to (1) the total
equity investment made by SEACOR and its successors or assigns in the Company
and in (a) CJP1, in the case of a CJ1 3.8(a) Event, or (b) CJP2, in the case of
a CJ2 3.8(a) Event, multiplied by (2) the product of (A) the Base Rate in effect
on the date CJ1 or CJ2, as the case may be, is actually
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delivered, plus 2%, multiplied by (B) (x) the number of days in excess of 120
days after the applicable "Scheduled Delivery Date," that CJ1 or CJ2, as the
case may be, is actually delivered, divided by (y) 365 days. Notwithstanding
anything to the contrary contained in the preceding sentence, if the Management
Committee duly approves and authorizes a "Change Order" (as defined in the
Construction Contracts as of the date hereof) that results in an adjustment to a
"Scheduled Delivery Date," the date used in determining whether a CJ1 3.8(a)
Event or CJ2 3.8(b) Event has occurred therein shall be adjusted accordingly.
(b) If any of the following events occur: (i) delivery of CJ1 is completed on
a date that is 120 days before the "Scheduled Delivery Date" (as such term is
defined in the Construction Contracts with respect to CJ1) (the "CJ1 3.8(B)
EVENT") or (ii) the construction and delivery of CJ2 is completed on a date that
is 120 days before the "Scheduled Delivery Date" (as defined in the Construction
Contracts with respect to CJ2) (the "CJ2 3.8(B) EVENT"), then upon such
occurrence, the Group B Members shall be entitled to a Group B preferred return
(the "GROUP B PREFERRED RETURN") equal to (1) the total equity investment made
by the Group B Members and their successors or assigns in the Company and (a)
CJP1, in the case of a CJ1 3.8(b) Event, or (b) CJP2, in the case of a CJ2
3.8(b) Event, multiplied by (2) the product of (A) the Base Rate in effect on
the date CJ1 or CJ2, as the case may be, is actually delivered, plus 2%,
multiplied by (B) (x) the number of days in advance of 120 days before the
applicable "Scheduled Delivery Date," that CJ1 or CJ2, as the case may be, is
actually delivered, divided by (y) 365 days. Notwithstanding anything to the
contrary contained in the preceding sentence, if the Management Committee duly
approves and authorizes a "Change Order" (as defined in the Construction
Contracts as of the date hereof) that results in an adjustment to a "Scheduled
Delivery Date," the date used in determining whether a CJ1 3.8(b) Event or CJ2
3.8(b) Event has occurred therein shall be adjusted accordingly.
(c) Anything to the contrary herein notwithstanding, the Group A Preferred
Return and the Group B Preferred Return shall be paid or distributed to the
Group A Members or the Group B Members, as applicable, on a priority basis prior
to the making of any other distribution or allocation hereunder to Members and
shall be treated for federal income tax purposes as a "guaranteed payment" under
Section 707(c) of the Code.
(d) In the event that the Construction Contracts are amended to provide that
both CJ1 and CJ2 shall be constructed on a priority basis as described under the
heading "Adjustment to the Order of Distributions in the Event of Early or Late
Delivery" in the outline of terms attached to the letter of intent between COI
and SEACOR SMIT dated July 18, 1997, this Section 3.8 shall be null and void and
of no further force or effect.
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3.9 RIGHT OF FIRST OFFER ON SALE OF THE BUSINESS.
(a) If (i) the Management Committee proposes to sell all or substantially all
of the business and operations of the Company (the "BUSINESS") to any Person by
means of merger, sale of assets or otherwise (a "DISPOSITION"), other than
pursuant to a sale of outstanding Membership Interests (as to which the
provisions of Article 9 shall be applicable) and (ii) a Majority in Interest of
the Group B Members shall not have consented in writing to such Disposition,
then the Management Committee shall provide Notice of the proposed Disposition
to the Group B Members setting forth in reasonable detail the price, terms and
conditions of the proposed Disposition (the "DISPOSITION NOTICE"). One or more
of the Group B Members (the "PURCHASING GROUP B MEMBERS") shall have the option,
exercisable by a Notice to the Company delivered within thirty (30) days after
the date of the Disposition Notice and signed by a Majority in Interest of the
Group B Members (the "NOTICE OF ACCEPTANCE"), to elect to acquire the Business
on the price, terms and conditions set forth in the Disposition Notice. The
Notice of Acceptance shall indicate the identity of the Purchasing Group B
Members, state their acceptance of the price, the terms and conditions of the
proposed Disposition and may provide that consummation of the proposed
Disposition is conditioned upon the Purchasing Group B Members obtaining
financing therefor; provided, however, that if such consummation is conditioned
upon obtaining financing therefor, Purchasing Group B Members shall provide, not
later than forty-five (45) days after the date of the Disposition Notice,
commitments from recognized financial institutions evidencing their commitment
to provide any financing required to consummate the proposed Disposition, which
commitments shall be in form and substance reasonable satisfactory to the
Company; and, provided further, that, if such Purchasing Group B Members fail to
provide any commitments required by the immediately preceding proviso, the
Purchasing Class B Members shall be deemed not to have exercised their option to
acquire the Business and the Company shall be free to effect the Disposition as
contemplated by this Section. If the Purchasing Class B Members fail or for any
reason (other than a default or breach by the Company) are unable to consummate
the proposed Disposition within sixty (60) days from the date of the Disposition
Notice in accordance with Section 3.9(b), the Company may effect a Disposition
to any Person upon terms and conditions no less favorable to the Company than
those set forth in the Disposition Notice during a period of 180 days after the
expiration of such 60-day period. Thereafter, any Disposition will again be
subject to the rights of the Group B Members under the provisions of this
Section 3.9(a).
(b) The sale of the Business to the Purchasing Group B Members pursuant to
this Section 3.9 shall occur at the office of the Company on a Business Day
specified by not less than five (5) Business Days' prior Notice from the
Purchasing Group B Members to the Company, which Business Day shall not be later
than sixty (60) days
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after the date of the Disposition Notice. At the closing, the Purchasing Group B
Members shall deliver the consideration payable pursuant to the Disposition
Notice in the form and amount specified therein against the simultaneous
delivery of instruments of assignment in form and substance reasonably
satisfactory to the Purchasing Group B Members, evidencing the sale of the
Business contemplated by the Disposition Notice.
ARTICLE 4
DISTRIBUTIONS
4.1 DISTRIBUTIONS OF NET CASH FLOW. Except as otherwise provided in
Section 3.8(c), distributions of Net Cash Flow to the Members shall be made as
follows:
(a) quarterly, to the Group A Members and Group B Members in
proportion to and to the extent of their relative Percentage Interests, an
amount not in excess of the Tax Distribution for the Taxable Year; provided,
however, that distributions under this Section 4.1(a) shall be treated as
advance distributions under Section 4.1(b), with the result that
distributions otherwise made under Section 4.1(b) to such Member shall be
reduced by the amount of advances made pursuant to this Section 4.1(a)); and
(b) upon the approval of and in the amount so approved by the
Management Committee acting in its sole discretion, to the Group A Members
and Group B Members in proportion to their relative Percentage Interests.
4.2 PERSONS ENTITLED TO DISTRIBUTIONS. All distributions of Net Cash Flow to
the Members under this Article 4 shall be made to the Persons shown on the
records of the Company to be entitled thereto as of the last day of the fiscal
period prior to the time for which such distribution is to be made, unless the
transferor and transferee of any Membership Interest otherwise agree in writing
to a different distribution and such distribution is consented to in writing by
the Management Committee.
4.3 LIMITATIONS ON DISTRIBUTIONS. Notwithstanding anything to the contrary
herein provided, no distribution hereunder shall be permitted to the extent
prohibited by Section 18-607 of the Act.
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ARTICLE 5
ALLOCATIONS
5.1 PROFITS. After giving effect to the special allocations set forth in
Sections 5.3 and 5.4 hereof and subject to Section 5.7 hereof, Profits for any
Taxable Year shall be allocated to the Group A Members and Group B Members in
proportion to their Percentage Interests.
5.2 LOSSES. After giving effect to the special allocations set forth in
Sections 5.3 and 5.4, subject to the limitation in Section 5.5 hereof and
subject to Section 5.7 hereof, Losses for any Taxable Year shall be allocated to
the Group A Members and Group B Members in proportion to their Percentage
Interests.
5.3 SPECIAL ALLOCATIONS. The following special allocations shall be made
in the following order:
(a) Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-2(f) of the Regulations, notwithstanding any other provision of this
Article 5, if there is a net decrease in Company Minimum Gain during any
Taxable Year, each Member shall be specially allocated items of Company
income and gain for such year (and, if necessary for subsequent years) in
proportion to, and to the extent of, an amount equal to each Member's share
of the net decrease in Company Minimum Gain during such taxable year as
determined in accordance with the provisions of Regulation Section
1.704-2(g). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Member
pursuant thereto. The items to be so allocated shall be determined in
accordance with Sections 1.704-2(f) (6) and 1.704-2(j) (2) of the
Regulations. This Section 5.3(a) is intended to comply with the minimum gain
chargeback requirement in Section 1.704-2(f) of the Regulations and shall be
interpreted consistently therewith.
(b) Member Minimum Gain Chargeback. Except as otherwise provided in
Section 1.704-2(i) (4) of the Regulations, notwithstanding any other
provision of this Section 5, if there is a net decrease in Member Nonrecourse
Debt Minimum Gain attributable to a Member Nonrecourse Debt during any
Taxable Year, each Member who has a share of the Member Nonrecourse Debt
Minimum Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Section 1.704-2(i) (5) of the Regulations, shall be specially
allocated items of Company income and gain for such Taxable Year (and, if
necessary, subsequent Taxable Years) in an amount equal to such Member's
share of the net decrease in Member
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Nonrecourse Debt, determined in accordance with Regulation Section 1.704-
2(i) (4). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Member
pursuant thereto. The items to be so allocated shall be determined in
accordance with Sections 1.704-2(i) (4) and 1.704-2(j) (2) of the
Regulations. This Section 5.3(b) is intended to comply with the minimum gain
chargeback requirement in Section 1.704-2(i) (4) of the Regulations and shall
be interpreted consistently therewith.
(c) Qualified Income Offset. In the event any Member unexpectedly
receives any adjustments, allocations, or distributions described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704- 1(b)(2)(ii)(d)(6)
of the Regulations, items of Company income and gain shall be specially
allocated to such Member in an amount and manner sufficient to eliminate, to
the extent required by the Regulations, the Adjusted Capital Account Deficit
of the Member as quickly as possible, provided that an allocation pursuant to
this Section 5.3(c) shall be made only if and to the extent that the Member
would have an Adjusted Capital Account Deficit after all other allocations
provided for in this Section 5 have been tentatively made.
(d) Gross Income Allocation. In the event any Member has a deficit
Capital Account at the end of any Taxable Year which is in excess of the sum
of (i) the amount such Member is obligated to restore pursuant to any
provision of this Agreement and (ii) the amount such Member is obligated to
restore pursuant to the penultimate sentences of Regulations Sections 1.704-
2(g)(1) and 1.704-2(i)(5), each such Member shall be specially allocated
items of Company income and gain in the amount of such excess as quickly as
possible; provided, however, that an allocation pursuant to this Section
5.3(d) shall be made only if and to the extent that such Member would have a
deficit Capital Account in excess of such sum after all other allocations
provided for in this Section 5 have been made other than those allocations
pursuant to Section 5.3(c) and this Section 5.3(d).
(e) Nonrecourse Deductions. Nonrecourse Deductions for any
Taxable Year shall be specially allocated to the Members in proportion to
their respective Percentage Interests.
(f) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions
for any Taxable Year shall be specially allocated to the Member who bears the
economic risk of loss with respect to the Member Nonrecourse Debt to which
such Member Nonrecourse Deductions are attributable in accordance with
Regulation Section 1.704-2(i) (1).
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(g) Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Company asset, pursuant to Code Section 734(b) or
Code Section 743(b) is required pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4) to be taken into account
in determining Capital Accounts as the result of a transfer of a Member's
Membership Interest or a distribution to a Member in complete liquidation of
such Member's Membership Interest, the amount of such adjustment to Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis) and such
gain or loss shall be specially allocated to the Members in accordance with
their interests in the Company in the event Regulation Section
1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom such distribution
was made in the event Regulation Section 1.704-1(b)(2)(iv)(m)(4) applies.
5.4 CURATIVE ALLOCATIONS. The allocations set forth in Sections 5.3(a),
5.3(b), 5.3(c), 5.3(d), 5.3(e), 5.3(f), 5.3(g) and 5.5 (the "REGULATORY
ALLOCATIONS") are intended to comply with certain requirements of the
Regulations. It is the intent of the Members that, to the extent possible, all
Regulatory Allocations shall be offset either with other Regulatory Allocations
or with special allocations of other items of Company income, gain, loss or
deduction pursuant to this Section 5.4. Therefore, notwithstanding any other
provision of this Section 5 (other than the Regulatory Allocations), following
any Regulatory Allocation, the Management Committee shall use its best efforts
to make such offsetting special allocations of Company income, gain, loss or
deduction in whatever reasonable manner it determines so that, after such
offsetting allocations are made, each Member's Capital Account balance is, to
the extent possible, equal to the Capital Account balance such Member would have
had if the Regulatory Allocations had not been made and all Company items were
allocated pursuant to Sections 5.1 and 5.2.
5.5 LOSS LIMITATION. Losses allocated pursuant to Section 5.2 hereof shall
not exceed the maximum amount of Losses that can be allocated without causing
any Member to have an Adjusted Capital Account Deficit at the end of any Taxable
Year. In the event some but not all the Members would have Adjusted Capital
Account Deficits as a consequence of an allocation of Losses pursuant to Section
5.2 hereof, the limitation set forth in this Section 5.5 shall be applied on a
Member by Member basis and Losses not allocable to any Member as a result of
such limitation shall be allocated to the other Members pro rata in accordance
with the positive balances in such Members' Capital Accounts so as to allocate
the maximum permissible Losses to each Member under Section 1.704-1(b)(2)(ii)(d)
of the Regulations.
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5.6 TAX ALLOCATIONS: CODE SECTION 704(C).
(a) In accordance with Code Section 704(c) and the Regulations thereunder,
income, gain, loss and deduction with respect to any Property contributed to the
capital of the Company shall, solely for tax purposes, be allocated among the
Members so as to take account of any variation between the adjusted basis of
such Property to the Company for federal income tax purposes and its initial
Gross Asset Value (computed in accordance with the definition of Gross Asset
Value).
(b) In the event the Gross Asset Value of any Company asset is adjusted
pursuant to subparagraph (b) of the definition of Gross Asset Value, subsequent
allocations of income, gain, loss and deduction with respect to such asset shall
take account of any variation between the adjusted basis of such asset for
federal income tax purposes and its Gross Asset Value in the same manner as
under Code Section 704(c) and the Regulations thereunder.
(c) Any elections or other decisions relating to such allocations shall be
made by the Management Committee in any manner that reasonably reflects the
purpose and intention of this Agreement; provided, that the Company, in the
discretion of SEACOR, may make, or not make, "curative" or "remedial"
allocations (within the meaning of the Regulations under Code Section 704(c))
including, but not limited to, "curative" allocations which offset the effect of
the "ceiling rule" for a prior Taxable Year (within the meaning of Regulation
Section 1.704-3(c)(3)(ii)) and "curative" allocations from disposition of
contributed property (within the meaning of Regulation Section
1.704-3(c)(3)(iii)(B)). Allocations pursuant to this Section 5.6 are solely for
purposes of federal, state, and local taxes and shall not affect, or in any way
be taken into account in computing, any Member's Capital Account or share of
Profits, Losses, other items, or distributions (other than Tax Distributions)
pursuant to any provision of this Agreement.
5.7 CHANGE IN PERCENTAGE INTERESTS. In the event that the Members' Percentage
Interests change during a Taxable Year, Profits and Losses shall be allocated
taking into account the Members' varying Percentage Interests for such Taxable
Year, determined on a daily, monthly or other basis as determined by the
Management Committee, using any permissible method under Code Section 706 and
the Regulations thereunder.
5.8 WITHHOLDING. Each Member hereby authorizes the Company to withhold and to
pay over any taxes payable by the Company or any of its Affiliates as a result
of such Member's participation in the Company; if and to the extent that the
Company shall be required to withhold any such taxes, such Member shall be
deemed for all purposes of this Agreement to have received a payment from the
Company as
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of the time such withholding is required to be paid, which payment shall be
deemed to be a distribution to such Member to the extent that the Member is then
entitled to receive a distribution. To the extent that the aggregate of such
payments in respect of a Member for any period exceeds the distributions to
which such Member is entitled for such period, the amount of such excess shall
be considered a demand loan from the Company to such Member, with interest at 8%
per annum, which interest shall be treated as an item of Company income, until
discharged by such Member by repayment, which may be made in the sole discretion
of the Management Committee out of distributions to which such Member would
otherwise be subsequently entitled. The withholdings referred to in this Section
5.7 shall be made at the maximum applicable statutory rate under the applicable
tax law unless the Management Committee shall have received an opinion of
counsel or other evidence, satisfactory to the Management Committee, to the
effect that a lower rate is applicable, or that no withholding is applicable.
ARTICLE 6
MEMBERS' MEETINGS
6.1 MEETINGS OF MEMBERS; PLACE OF MEETINGS. Regular meetings of the Members
may be held on an annual basis or more frequently as determined by a Majority in
Interest of the Members. All meetings of the Members shall be held in New York,
New York or Houston, Texas as designated from time to time by the Management
Committee and stated in the Notice of the meeting or in a duly executed waiver
of the Notice thereof. The Company shall reimburse each Member for reasonable
travel expenses incurred to attend such meeting provided that such expenses do
not exceed the reasonable cost of travel between New York, New York and Houston,
Texas. Special meetings of the Members may be held for any purpose or purposes,
unless otherwise prohibited by law, and may be called by the Management
Committee or by Members owning not less than thirty percent (30%) of the
Percentage Interests. Members may participate in a meeting of the Members by
means of conference telephone or other similar communication equipment whereby
all Members participating in the meeting can hear each other. Participation in a
meeting in this manner shall constitute presence in person at the meeting.
6.2 QUORUM; VOTING REQUIREMENT. The presence, in person or by proxy, of a
Majority in Interest of the Members shall constitute a quorum for the
transaction of business by the Members. The affirmative vote of a Majority in
Interest of the Members present, in person or by proxy, at any meeting shall
constitute a valid decision of the Members, except where a larger vote is
required by the Act or this Agreement.
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6.3 PROXIES. At any meeting of the Members, every Member having the right to
vote thereat shall be entitled to vote in person or by proxy appointed by an
instrument in writing signed by such Member and bearing a date not more than one
year prior to such meeting.
6.4 ACTION WITHOUT MEETING. Any action required or permitted to be taken at
any meeting of Members of the Company may be taken without a meeting, without
prior notice and without a vote if a consent in writing setting forth the action
so taken is signed by Members having not less than the minimum Percentage
Interests that would be necessary to authorize or take such action at a meeting
of the Members. Prompt Notice of the taking of any action taken pursuant to this
Section 6.4 by less than the unanimous written consent of the Members shall be
given to those Members who have not consented in writing.
6.5 NOTICE. Notice stating the place, day and hour of the meeting and the
purpose for which the meeting is called shall be delivered personally or sent by
mail or by telecopier not less than five (5) days nor more than sixty (60) days
before the date of the meeting by or at the direction of the Management
Committee or other persons calling the meeting, to each Member entitled to vote
at such meeting.
6.6 WAIVER OF NOTICE. When any Notice is required to be given to any Member
hereunder, a waiver thereof in writing signed by the Member, whether before, at
or after the time stated therein, shall be equivalent to the giving of such
Notice.
6.7 NO AUTHORITY. Unless expressly authorized herein or by action of the
Members or the Management Committee in accordance herewith and the Act, no
Member shall have any authority to act on behalf of the Company or bind the
Company in any manner whatsoever, including, without limitation, entering into
any agreement on behalf of the Company.
6.8 CERTAIN APPROVALS. The Company may enter into, and perform the Assignment
and Assumption Agreement, Construction Contracts, the Brokerage Agreement and
the Employment Agreement and all agreements instruments and other documents
relating thereto contemplated to be executed and delivered by the Company. The
President and Chief Executive Officer and any Vice President of the Company are
hereby authorized to enter into on behalf of the Company the agreements,
instruments and documents referred to in the preceding sentence.
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ARTICLE 7
MANAGEMENT AND CONTROL
7.1 MANAGEMENT COMMITTEE; MANAGERS.
(a) Except as otherwise provided hereunder, the business and affairs of the
Company shall be managed by a Management Committee comprised of seven Managers:
(i) four (4) Managers designated by a Majority in Interest of the Group A
Members, and (ii) three (3) Managers designated by a Majority in Interest of the
Group B Members. The Group A Members shall have the right to remove or replace
(following death or resignation) any or all of the Persons referred to in clause
(i) above and designate their successors, and the Group B Members shall have the
right to remove or replace (following death or resignation) any or all of the
Persons referred to in clause (ii) above and designate their successors, such
that the Group A Members shall at all times have the right to designate four
Managers and the Group B Members shall at all times have the right to designate
three Managers. The initial Managers designated by the Group A Members are: (i)
Charles Fabrikant, (ii) Randall Blank, (iii) Dick H. Fagerstal, and (iv) Edward
Washecka. The initial managers designated by the Group B Members are: (i)
Richard M. Fairbanks III, (ii) William E. Chiles, and (iii) Jonathan B.
Fairbanks.
(b) Except as otherwise expressly provided herein, the power and authority
granted to the Management Committee hereunder shall include all those necessary
or convenient for the furtherance of the purposes of the Company and shall
include the power to make all decisions with regard to the management,
operations, assets, financing and capitalization of the Company.
(c) Anything to the contrary herein notwithstanding, no Manager shall have
any authority to bind the Company or the Management Committee in his individual
capacity in any manner whatsoever, except for such authority as shall be
expressly delegated to a Manager in this Agreement or by the Management
Committee.
7.2 MANAGEMENT COMMITTEE MEETINGS; AUTHORITY; PROXIES.
(a) The Management Committee will establish a regular meeting schedule, and
will use its reasonable best efforts to meet at least once every quarter. Unless
otherwise agreed by a majority of the Managers, meetings of the Management
Committee shall be held in New York, New York or Houston, Texas. The Company
shall reimburse each Manager for reasonable travel expenses incurred to attend
such meeting; provided, that such expenses do not exceed the reasonable cost of
travel between New York, New York and Houston, Texas. Meetings may be conducted
in person, by telephone or in any other manner agreed to by the Management
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Committee. Any two (2) Managers may call a meeting of the Management Committee
upon delivery of written or telephonic Notice at least three (3) Business Days
prior to the date of such meeting, which Notice shall be accompanied by a
proposed agenda or statement of purpose and by copies of all documents,
agreements and information to be considered at such meeting; provided, however,
at any such meeting, the Managers may address any and all business matters which
may come before it, whether or not such items were provided for in the proposed
agenda.
(b) A quorum shall exist when a majority of the Managers are present in
person or by proxy. Each Manager is entitled to vote at any meeting of the
Management Committee. The vote of a majority of the Managers present in person
or by proxy at any meeting of the Management Committee where a quorum is present
shall be required for action by the Management Committee.
(c) At each meeting of the Management Committee, every Manager shall be
entitled to vote in person or by proxy appointed by instrument in writing,
subscribed by such Manager.
7.3 MANAGEMENT COMMITTEE'S AUTHORITY; CERTAIN LIMITATIONS. (a) Except as
expressly set forth herein, the Management Committee shall have the maximum
power and authority with respect to the business and operations of the Company
permitted by law, including, without limitation, the right to cause the Company
to merge or consolidate with, or sell all, or substantially all, of its asset to
any Person.
(b) Notwithstanding the grant of authority to the Management Committee
pursuant to Section 7.3(a) and except as otherwise contemplated in Sections
10.1(a), (b) and (c), the Management Committee shall not authorize the Company
to merge or consolidate with, or sell all, or substantially all, of its assets
to, a Member or an Affiliate of a Member without the prior written consent of a
Majority in Interest of the Group A Members and a Majority in Interest of the
Group B Members.
7.4 OFFICERS; AGENTS. The Management Committee shall have the power to
appoint any Person or Persons as agents (who may be referred to as officers) to
act for the Company with such titles, if any, as the Management Committee deems
appropriate and to delegate to such officers or agents such of the powers as are
granted to the Management Committee hereunder. Any decision or act of an officer
appointed under this Section 7.4 within the scope of the officer's designated or
delegated authority shall control and shall bind the Company. The officers or
agents so appointed may have such titles as the Management Committee shall deem
appropriate, which may include (but need not be limited to) President and Chief
Executive Officer, Executive Vice President, Vice President, Chief Operating
Officer,
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Chief Financial Officer, Treasurer or Controller. The initial officers of the
Company are set forth on Schedule 7.4. Unless the authority of the agent
designated as the officer in question is limited by the Management Committee,
any officer so appointed shall have the same authority to act for the Company as
a corresponding officer of a Delaware corporation would have to act for a
Delaware corporation in the absence of a specific delegation of authority. The
Management Committee, in its sole discretion, may by vote, resolution or
otherwise ratify any act previously taken by an officer or agent acting on
behalf of the Company.
7.5 RESIGNATION OF A MANAGEMENT COMMITTEE MEMBER. A Manager may resign from
such position at any time upon giving Notice to the Management Committee. Any
vacancy created by any such resignation of a Manager shall be filled by the
Persons or Person who designated such vacating Manager in accordance with the
provisions of Section 7.1(a).
7.6 COMPENSATION Except as otherwise provided herein, each Manager shall be
entitled to reimbursement from the Company for all reasonable direct
out-of-pocket expenses incurred on behalf of the Company. Commencing upon the
completion, delivery and successful operation of both CJ1 and CJ2, any Manager
that is not also employed by the Company shall be entitled to such compensation
for services rendered on behalf of the Company as may be approved to by the
Management Committee.
ARTICLE 8
LIABILITY AND INDEMNIFICATION
8.1 LIABILITY OF MEMBERS. A Member shall only be liable to make the payment
of its Capital Contribution. No Member, except as otherwise specifically
provided in the Act, shall be obligated to pay any distribution to or for the
account of the Company or any creditor of the Company.
8.2 INDEMNIFICATION.
(a) The Company shall indemnify and hold harmless each Manager and Member and
their respective Affiliates and all officers, directors, members, partners,
managers and employees thereof, and each officer of the Company and any Person
serving in any similar capacity for another Person affiliated with the Company
at the request of the Company (solely for purposes of this Section 8.2, each
such Person being referred to as, a "COMPANY AFFILIATE"), from and against any
and all losses, claims, demands, costs, damages, liabilities, expenses of any
nature (including reasonable attorneys' fees and disbursements), judgments,
fines, settlements and other
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amounts arising from any and all claims, demands, actions, suits or proceedings,
whether civil, criminal, administrative or investigative, in which a Company
Affiliate may be involved, or threatened to be involved, as a party or
otherwise, arising out of or incidental to the business of the Company,
including, without limitation, liabilities under the Federal and state
securities laws, regardless of whether a Company Affiliate continues to be a
Company Affiliate, at the time any such liability or expense is paid or
incurred, if (i) the Company Affiliate acted in good faith and in a manner it or
he reasonably believed to be in, or not opposed to, the interests of the Company
and, with respect to any criminal proceeding, had no reason to believe its or
his conduct was unlawful, and (ii) the Company Affiliate's conduct did not
constitute actual fraud, gross negligence or willful or wanton misconduct. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere, or its equivalent, shall not, in
and of itself, create a presumption or otherwise constitute evidence that the
Company Affiliate acted in a manner contrary to that specified in (i) or (ii)
above.
(b) Expenses (including reasonable legal fees and expenses) incurred in
defending any proceeding subject to subsection (a) of this Section 8.2 shall be
paid by the Company in advance of the final disposition of such proceeding upon
receipt of a written affirmation by the Company Affiliate of his or its good
faith belief that he or it has met the standard of conduct necessary for
indemnification under this Section 8.2 and a written undertaking (which need not
be secured) by or on behalf of the Company Affiliate to repay such amount if it
shall ultimately be determined, by a court of competent jurisdiction or
otherwise, that the Company Affiliate is not entitled to be indemnified by the
Company as authorized hereunder.
(c) The indemnification provided by this Section 8.2 shall be in addition to
any other rights to which each Company Affiliate may be entitled under any
agreement or vote of the Management Committee by the vote of Managers that are
disinterested and unaffiliated with such Company Affiliate, as a matter of law
or otherwise, both as to action in the Company Affiliate's capacity as a Company
Affiliate or as a Person serving at the request of the Company and shall
continue as to a Company Affiliate who has ceased to serve in such capacity and
shall inure to the benefit of the heirs, successors, assigns, administrators and
personal representatives of such Company Affiliate.
(d) The Company may purchase and maintain directors and officers insurance
or, similar coverage, for its Managers and its officers in such amounts and with
such deductibles or self-insured retentions as are customary for Persons engaged
in businesses similar in size and type to those engaged in by the Company. The
Company shall use reasonable commercial efforts to purchase and maintain such
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insurance in the event and to the extent such insurance is available on
commercially reasonable terms, as determined by the Management Committee in its
discretion.
(e) Any indemnification hereunder shall be satisfied only out of the assets
of the Company and the Members shall not be subject to personal liability by
reason of these indemnification provisions. To the extent the Company does not
have adequate cash available to satisfy its obligations under this Article 8,
the Company shall pay its obligations under this Article 8 out of Net Cash Flow
prior to making any distributions (other than distributions under Section 4.1(a)
hereof) to the Members.
(f) A Company Affiliate shall not be denied indemnification in whole or in
part under this Section 8.2 because the Company Affiliate had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement and all material facts
relating to such indemnitee's interest were adequately disclosed to the
Management Committee at the time the transaction was consummated.
(g) The provisions of this Section 8.2 are for the benefit of the Company
Affiliates and the heirs, successors, assigns, administrators and personal
representatives of the Company Affiliates and shall not be deemed to create any
rights for the benefit of any other Persons.
(h) Any repeal or amendment of any provisions of this Section 8.2 shall be
prospective only and shall not adversely affect any Company Affiliates's right
existing at the time of such repeal or amendment.
ARTICLE 9
TRANSFERS OF MEMBERSHIP INTERESTS
9.1 GENERAL RESTRICTIONS.
(a) No Member may Transfer all or any part of such Member's Membership
Interest, except as provided in this Agreement. Any purported Transfer or
purported purchase of a Membership Interest or a portion thereof in violation of
the terms of this Agreement shall be null and void and of no effect. A permitted
Transfer shall be effective as of the date specified in the instruments relating
thereto. Any transferee desiring to make a further Transfer shall become subject
to all the provisions of this Article 9 to the same extent and in the same
manner as any Member desiring to make any Transfer. No Member shall have the
right to withdraw as a Member of the Company.
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(b) In the event that the Membership Interests are registered under the
Securities Act, the Transfer restrictions set forth in this Article 9 shall
terminate.
(c) No Group B Member shall transfer any Membership Interests prior to the
completion of the construction and delivery of CJ1 and CJ2 except pursuant to
Sections 3.9, 9.2, 9.9 or 9.10. Following such construction and delivery, all
Group B Members shall also have the right to Transfer their Membership Interests
pursuant to Section 9.8.
9.2 PERMITTED TRANSFEREES.
(a) Notwithstanding the provisions of Sections 9.8 and 9.9, each Group A
Member shall have the right to Transfer (but not to substitute the transferee as
a substitute Member in such Member's place, except in accordance with Section
9.3), by a written instrument, all or any part of such Group A Member's
Membership Interest, to any member of the SEACOR Group (each a "PERMITTED
TRANSFEREE"); it being understood that any such Permitted Transferee shall be
deemed to be an additional or substitute Member as of the date of such Transfer
and each Member agrees to take such action and execute such documents as such
transferee may deem reasonably necessary and appropriate for such transferee to
become a substitute or additional Member. Notwithstanding the provisions of
Sections 9.8 and 9.9, each Member shall have the right to pledge such Member's
interest as collateral security for a loan to another Member or to a financial
institution generally in the business of making commercial loans; provided,
however, that no such pledge shall be made for the purpose of effecting a
disguised sale to the pledgee and; provided further, that any such pledgee shall
agree in a writing delivered to the Company to be bound by all the terms and
conditions of this Agreement, including,without limitation, the terms and
conditions set forth in Section 9.10.
(b) Unless and until admitted as a substitute Member pursuant to Section 9.3,
a transferee of a Member's Membership Interest in whole or in part shall be an
assignee with respect to such Transferred Membership Interest and shall not be
entitled to participate in the management of the business and affairs of the
Company or to become or to exercise the rights of a Member, including the right
to vote, the right to require any information or accounting of the Company's
business or the right to inspect the Company's books and records. Such
transferee shall only be entitled to receive, to the extent of the Membership
Interest transferred to such transferee, the share of distributions and profits,
including distributions representing the return of Capital Contributions, to
which the transferor would otherwise be entitled with respect to the Transferred
Interest. The transferror shall have the right to vote such Transferred Interest
until the transferee is admitted to the Company as a substituted Member with
respect to the Transferred Interest.
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9.3 SUBSTITUTE MEMBERS. No transferee of all or part of a Member's
Membership Interest shall become a substitute Member in place of the transferor
unless and until:
(a) the transferee has executed an instrument in form and substance
reasonably satisfactory to the Management Committee accepting and adopting
the terms and provisions of the Certificate and this Agreement; and
(b) the transferee has caused to be paid all reasonable expenses of
the Company in connection with the admission of the transferee as a
substitute Member.
Upon satisfaction of all the foregoing conditions with respect to a
particular transferee, the President and Chief Executive Officer shall cause the
books and records of the Company to reflect the admission of the transferee as a
substitute Member to the extent of the Transferred Interest held by the
transferee.
9.4 EFFECT OF ADMISSION AS A SUBSTITUTE MEMBER. A transferee who has become a
substitute Member has, to the extent of the transferred Membership Interest, all
the rights, powers and benefits of, and is subject to the restrictions and
liabilities of a Member under the Certificate, this Agreement and the Act. Upon
admission of a transferee as a substitute Member, the transferor of the
Membership Interest so held by the substitute Member shall cease to be a Member
of the Company to the extent of such transferred Membership Interest.
9.5 CONSENT. Each Member hereby agrees that upon satisfaction of the terms
and conditions of this Article 9 with respect to any proposed Transfer, the
Person proposed to be such transferee may be admitted as a Member.
9.6 NO DISSOLUTION. If a Member transfers all of its Membership Interest
pursuant to this Article 9 and the transferee of such Membership Interest is
admitted as a Member pursuant to Section 9.3, such Person shall be admitted to
the Company as a Member effective on the effective date of the Transfer or such
other date as may be specified when the Member is admitted. In such event, the
Company shall not dissolve if the business of the Company is continued without
dissolution in accordance with clause (c) of Section 10.1 hereof.
9.7 ADDITIONAL MEMBERS; CERTAIN REPRESENTATIONS OF MEMBERS.
(a) Subject to Section 3.7, after the formation of the Company, any Person
acceptable to the Management Committee may become an additional Member of the
Company for such consideration as the Management Committee shall determine,
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provided that such additional Member complies with all the requirements of a
transferee under Sections 9.3(a) and (b).
(b) Each of COI and SEACOR hereby represents to the Company that, as of the
date hereof, its outstanding membership interests or issued and outstanding
shares of capital stock, as the case may be, are as set forth on Schedule 9.7
and such membership interests or shares, as the case may be, are owned
beneficially and of record by the Persons identified on such Schedule.
(c) In order to prevent any indirect transfer of interests in the Company,
each of COI and SEACOR represents that it has caused each of its members or
stockholders, as the case may be, to agree to certain transfer restrictions with
respect to their membership interests or shares, as the case may be, by
executing an agreement in the form of Annex III(a), in the case of COI, or Annex
III(b), in the case of SEACOR.
9.8 RIGHT OF FIRST OFFER.
(a) Subject to Section 9.1(c), if at any time any Member (hereinafter for
purposes of this Section 9.8, the "SECTION 9.8 SELLING MEMBERS") proposes to
Transfer to any Person other than a Permitted Transferee (hereinafter for
purposes of this Section 9.8, the "SECTION 9.8 PROPOSED PURCHASER") its
Membership Interest (or any portion thereof), such Section 9.8 Selling Member
shall provide Notice of the proposed Transfer to the other Members (hereinafter
for purposes of Section 9.8, the "SECTION 9.8 OFFEREES") setting forth the
price, terms and conditions of the proposed sale of the Membership Interest.
Each of the Section 9.8 Offerees shall have the option to acquire such Member's
pro rata portion (which shall be in proportion to the Percentage Interests of
all Section 9.8 Offerees) at the time of such Notice on the terms and conditions
set forth in such Notice. The option of Section 9.8 Offerees to purchase their
pro rata portions of the Membership Interest shall be exercised by delivery of a
Notice to the Section 9.8 Selling Member and the Company of exercise within
twenty (20) days following receipt of the Section 9.8 Selling Member's Notice of
the price, terms and conditions of the sale. A Section 9.8 Offeree may exercise
such Member's option to purchase such Membership Interest only as to the entire
portion thereof that such Member is entitled to purchase. If any Section 9.8
Offeree fails or declines to purchase such Member's pro rata portion of such
Membership Interest, then such Member's portion of such Membership Interest
shall be offered to the Section 9.8 Offerees who have exercised their options to
purchase their pro rata portions. This procedure shall continue until such time
as the entire Membership Interest offered hereby has been purchased by such
Section 9.8 Offerees or until no such Member desires to purchase any additional
Membership Interest hereunder. Each Section 9.8 Offeree shall have the right to
offer to acquire such Membership
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Interest by delivering to the Section 9.8 Selling Member and the Company such
Member's Notice of acceptance within three (3) Business Days following receipt
of the Company's Notice that additional portions are available. If less than the
entire Membership Interest to be sold by the Section 9.8 Selling Member is
purchased by the Section 9.8 Offerees, the Section 9.8 Selling Member may sell
the entire Membership Interest to be sold within forty-five (45) days after the
expiration of the last option to expire under this Section 9.8(a), upon terms
and conditions no less favorable to the Section 9.8 Selling Member than were set
forth in the initial Notice.
(b) The sale of any Membership Interest to Section 9.8 Offerees who exercise
their options to purchase any Membership Interest shall occur thirty (30) days
after the expiration of the last option to expire under Section 9.8(a) above. At
the closing, each of the Section 9.8 Offerees shall deliver a certified or bank
cashier's check in the appropriate amount to the Section 9.8 Selling Member
against the simultaneous delivery of an assignment in form and substance
reasonably satisfactory to each Section 9.8 Offeree of the Member Interest (or
portion thereof) being transferred to such Section 9.8 Offeree, such assignment
shall be made free and clear of all liens, claims and encumbrances, except as
provided by this Agreement or as otherwise agreed to by such Section 9.8
Offeree.
9.9 TAG-ALONG RIGHTS. (a) In the event of any proposed Transfer by any Member
(hereinafter for purposes of this Section 9.9, the "SECTION 9.9 SELLING MEMBER")
of its Membership Interests (or any portion thereof) to any Person (such Person
being hereinafter referred to as the "SECTION 9.9 PROPOSED PURCHASER"), other
than to a Permitted Transferee or in a bona fide public distribution pursuant to
an effective Registration Statement under the Securities Act, each of the other
Members (hereinafter for purposes of this Section 9.9, the "SECTION 9.9 TAGGED
MEMBERS") shall have the irrevocable and exclusive right, but not the obligation
(the "TAG-ALONG RIGHT"), to require the Section 9.9 Proposed Purchaser to
purchase from each of them such Section 9.9 Tagged Member's pro rata portion
(i.e., such Tagged Member's Percentage Interest) of the Membership Interests
proposed to be sold by the Section 9.9 Selling Members to the Section 9.9
Proposed Purchaser (collectively, the "SECTION 9.9 TAG-ALONG MEMBERSHIP
INTEREST"). The Section 9.9 Selling Members shall give Notice (the "INITIAL
TAG-ALONG NOTICE") to the Section 9.9 Tagged Members contemporaneously, or as
part of the Notice as Section 9.8 Selling Members given pursuant to Section 9.8,
and the option of the Section 9.9 Tagged Members to exercise their Tag-Along
Rights shall expire on the later of (i) five (5) days after the last option of
Section 9.8 Offerees to expire pursuant to Section 9.8 (the "SECTION 9.8 OFFER
EXPIRATION DATE") and (ii) five (5) days after the Section 9.9 Tagged Members
receive Notice from the Section 9.9 Selling Members of the Section 9.8 Offer
Expiration Date, stating:
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(i) the name and address of the Section 9.9 Proposed Purchaser;
(ii) the proposed amount of consideration and terms and conditions
of payment offered by such Section 9.9 Proposed Purchaser (if the proposed
consideration is not cash, the Notice shall describe the terms of the
proposed consideration) and any other material terms and conditions of the
Section 9.9 Proposed Purchaser's offer;
(iii) the Membership Interest proposed to be transferred; and
(iv) that the Section 9.9 Proposed Purchaser has been informed of
the Tag-Along Right and has agreed to purchase Membership Interests in
accordance with the terms hereof.
The Tag-Along Right shall be exercised by any or all of the Section 9.9
Tagged Members by giving Notice to the Company ("TAG-ALONG NOTICE") with a copy
to each Section 9.9 Selling Member, within five (5) days following receipt of
the Initial Tag-Along Notice, indicating its election to exercise the Tag-Along
Right (hereinafter referred to for purposes of this Section 9.9, the "SECTION
9.9 PARTICIPATING TAGGED MEMBERS"). The Tag-Along Notice shall state the amount
of Membership Interests that such Section 9.9 Participating Tagged Member
proposes to include in such transfer to the Section 9.9 Proposed Purchaser.
Failure by any Section 9.9 Tagged Member to give such Tag-Along Notice within
such 5 day period shall be deemed an election by such Section 9.9 Tagged Member
not to sell its Membership Interests pursuant to the Tag-Along Notice. The
closing with respect to any sale to a Section 9.9 Proposed Purchaser pursuant to
this Section shall be held at the time and place specified in the Tag-Along
Notice but in any event within sixty (60) days of the date the Tag-Along Notice
is given. Consummation of the sale of Membership Interests by any Section 9.9
Selling Member to a Section 9.9 Proposed Purchaser shall be conditioned upon
consummation of the sale by each Section 9.9 Participating Tagged Member to such
Section 9.9 Proposed Purchaser of the Section 9.9 Tag-Along Membership Interest,
if any.
(b) In the event that the Section 9.9 Proposed Purchaser does not purchase
the Section 9.9 Tag-Along Membership Interest from the Section 9.9 Participating
Tagged Members on the same terms and conditions as purchased from the Section
9.9 Selling Member, then the Section 9.9 Selling Member making such Transfer
shall purchase on such terms and conditions such Section 9.9 Tag-Along
Membership Interest if the Transfer occurs.
(c) The Section 9.9 Selling Members who are parties to a sale to a Section
9.9 Proposed Purchaser shall arrange for payment directly by the Section 9.9
Proposed
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Purchaser to each Section 9.9 Participating Tagged Member, upon delivery of an
appropriate assignment in form and substance reasonably satisfactory to the
Section 9.9 Proposed Purchaser, which assignment shall be made free and clear of
all liens, claims and encumbrances except as provided by this Agreement or as
otherwise agreed to by such Section 9.9 Proposed Purchaser.
(d) If at the end of 60 days following the date on which a Tag-Along Notice
was given, the sale of Membership Interests by the Section 9.9 Selling Members
and the sale of the Section 9.9 Tag-Along Membership Interests have not been
completed in accordance with the terms of the Section 9.9 Proposed Purchaser's
offer, all the restrictions on sale, transfer or assignment contained in this
Agreement with respect to Membership Interests owned by the Members shall again
be in effect.
9.10 DRAG-ALONG RIGHTS.
(a) In the event of any proposed Transfer of Membership Interest by the Group
A Members (hereinafter for purposes of this Section 9.10, a "SECTION 9.10
SELLING MEMBERS") of all of their Membership Interest to a Person (such Person
being hereinafter referred to as the "SECTION 9.10 PROPOSED PURCHASER"), other
than to an Affiliate of any Group A Member, a Permitted Transferee or in a bona
fide public distribution pursuant to an effective Registration Statement under
the Securities Act, such Section 9.10 Selling Members shall have the right (the
"DRAG-ALONG RIGHT"), to require each other Member (hereinafter for purposes of
this Section 9.10, the "SECTION 9.10 DRAGGED MEMBERS") to Transfer to the
Section 9.10 Proposed Purchaser each such Section 9.10 Dragged Member's entire
Membership Interest (such Membership Interests as may be required to be so
Transferred being hereinafter referred to as the "SECTION 9.10 DRAG-ALONG
MEMBERSHIP INTERESTS"). The Section 9.10 Selling Members shall exercise their
Drag-Along Right by giving Notice (the "DRAG-ALONG NOTICE") to each Section 9.10
Dragged Member at least twenty (20) days prior to the date of the proposed
Transfer and at least three (3) Business Days after the expiration of the last
option to expire under Section 9.8(a) above, stating:
(i) the name and address of the Section 9.10 Proposed Purchaser;
(ii) the proposed amount of consideration and terms and conditions
of payment offered by such Section 9.10 Proposed Purchaser (if the proposed
consideration is not cash, the notice shall describe the terms of the
proposed consideration);
(iii) the Membership Interests proposed to be transferred; and
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(iv) that the Section 9.10 Proposed Purchaser has been informed of
the Drag-Along Right and has agreed to purchase Membership Interests in
accordance with the terms hereof.
The closing with respect to any sale to a Section 9.10 Proposed Purchaser
pursuant to this Section shall be held at the time and place specified in the
Drag- Along Notice but in any event within sixty (60) days of the date the
Drag-Along Notice is given. Consummation of the sale of Membership Interests by
any Member to a Section 9.10 Proposed Purchaser shall be conditioned upon
consummation of the sale by each Section 9.10 Selling Member to such Section
9.10 Proposed Purchaser of the Membership Interests proposed to be sold by the
Section 9.10 Selling Members.
(b) In the event that the Section 9.10 Proposed Purchaser does not purchase
the Section 9.10 Drag-Along Membership Interests from the Section 9.10 Dragged
Members on the same terms and conditions as purchased from the Section 9.10
Selling Members, then such Section 9.10 Dragged Members shall have the right to
require the Company to cause the Section 9.10 Selling Members making such
Transfer to purchase on such terms and conditions such Section 9.10 Drag-Along
Membership Interests if the Transfer occurs.
(c) The Section 9.10 Selling Members who are parties to a sale to a Section
9.10 Proposed Purchaser shall arrange for payment directly by the Section 9.10
Proposed Purchaser to each Section 9.10 Dragged Member, upon delivery of the an
appropriate assignment in form and substance reasonably satisfactory to the
Section 9.10 Proposed Purchaser, which assignment shall be made free and clear
of all liens, claims and encumbrances, except as provided by this Agreement or
as otherwise agreed to by such Section 9.10 Proposed Purchaser.
(d) If at the end of 60 days following the date on which a Drag-Along Notice
was given, the sale of Membership Interests by the Section 9.10 Selling Members
and the sale of the Section 9.10 Drag-Along Membership Interests have not been
completed in accordance with the terms of the Drag-Along Notice, all the
restrictions on sale, transfer or assignment contained in this Agreement with
respect to Membership Interests owned by the Section 9.10 Selling Members shall
again be in effect.
9.11 PIGGYBACK REGISTRATION.
(a) For the purposes of this Section 9.11, the following capitalized terms
shall have the following meanings:
(i) "COMMON STOCK" shall mean the common stock of the Company
issued upon conversion of the Company to a corporation;
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(ii) "OTHER SHARES" shall mean at any time those shares of Common
Stock or other securities of the Company which do not constitute Primary
Shares or Registrable Shares;
(iii) "PRIMARY SHARES" shall mean at any time authorized but unissued
shares of Common Stock or shares of Common Stock held by the Company in
its treasury;
(iv) "REGISTRABLE SHARES" shall mean the shares of Common Stock held
by the Members in the Company which constitute Restricted Shares and which
are not then eligible for sale to the public pursuant to Rule 144 (other
than Rule 144(k)) in a single transaction (and including Membership
Interests held by Members prior to the conversion of the Company to a
corporation).
(v) "RESTRICTED SHARES" shall mean any Membership Interests, shares
of Common Stock or other securities received in respect thereof held or
which may be acquired from the Company by the Members as of the applicable
date, and which theretofore have not been sold to the public pursuant to a
registration statement under the Securities Act or pursuant to Rule 144;
and
(vi) "RULE 144" shall mean Rule 144 promulgated under the Securities
Act or any successor rule thereto or any complementary rule thereto (such
as Rule 144A).
(b) If the Company at any time proposes for any reason to register Primary
Shares or Other Shares under the Securities Act (other than on Form S-4 or Form
S-5 promulgated under the Securities Act or any successor forms thereto), it
shall promptly give Notice to the Members of its intention so to register the
Primary Shares or Other Shares and, upon the written request, given within 30
days after delivery of any such Notice by the Company, of the Members to include
in such registration Registrable Shares (which request shall specify the number
of Registrable Shares proposed to be included in such registration), the Company
shall use its best efforts to cause all such Registrable Shares to be included
in such registration on the same terms and conditions as the securities
otherwise being sold in such registration; provided, however, that if the
managing underwriter advises the Company that the inclusion of all Registrable
Shares or Other Shares proposed to be included in such registration would
interfere with the successful marketing (including pricing) of Primary Shares
proposed to be registered by the Company, then the number of Primary Shares,
Registrable Shares and Other Shares proposed to be included in such registration
shall be included in the following order:
(i) first, the Primary Shares; and
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(ii) second, the Registrable Shares and Other Shares requested to be
included in such registration pro rata, based upon the respective numbers
of Restricted Shares owned at the time by each Member and the respective
numbers of Other Shares owned at the time by each holder of Other Shares.
(c) If at any time after giving written notice pursuant to this Section
9.11 of its intention to register any securities and prior to the effective date
of the registration statement filed in connection with such registration, the
Company shall determine for any reason either not to register or to delay
registration of such securities, the Company may, at its election, give Notice
of such determination to the Members and, thereupon, (i) in the case of a
determination not to register, shall be relieved of its obligation to register
any Registrable Securities in connection with such registration and (ii) in the
case of a determination to delay registering, shall be permitted to delay
registering any Registerable Securities, for the same period as the delay in
registering such other securities.
(d) If a registration under this Section 9.11 involves an underwritten
offering, the underwriter or underwriters and any additional investment bankers
and managers to be used in connection with such registration shall be selected
by the Company, and any Member desiring to have Registrable Shares included in
such registration, and any such Investor shall be required to sign an
underwriting agreement in customary form with such underwriter or underwriters.
ARTICLE 10
DISSOLUTION AND TERMINATION
10.1 EVENTS CAUSING DISSOLUTION. The Company shall be dissolved and its
affairs wound up upon the first to occur of the following events:
(a) The vote of a Majority in Interest of the Members to
dissolve;
(b) The sale, Transfer or other disposition of substantially all
of the assets of the Company and the receipt and distribution of all the
proceeds therefrom;
(c) The death, retirement, resignation, insanity, expulsion,
bankruptcy or dissolution of a Member, or any other event which terminates
the continued membership of a Member in the Company, unless there is at
least one remaining Member and the business of the Company is continued by
the consent of such remaining Member or not less than a Majority in
Interest of the remaining Members;
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(d) The entry of a decree of judicial dissolution pursuant to
Section 18-802 of the Act; or
(e) The expiration of the term of the Company as provided in Section
2.5.
10.2 NOTICES TO SECRETARY OF STATE. When all the remaining property and
assets of the Company have been distributed, the Certificate shall be cancelled
by filing a certificate of cancellation with the Secretary of State of Delaware.
10.3 CASH DISTRIBUTIONS UPON DISSOLUTION. Upon the dissolution of the
Company as a result of the occurrence of any of the events set forth in Section
10.1, the Management Committee shall proceed to wind up the affairs of and
liquidate the Company and any cash and proceeds therefrom shall be applied and
distributed in the following order of priority:
(a) First, to the payment (or the making of reasonable provision for
payment) of debts and liabilities of the Company in the order of priority
as provided by law (including any loans or advances that may have been
made by any of the Members to the Company) and the expenses of liquidation
including the establishment of any Reserves which the Management Committee
may reasonably deem necessary for any contingent, conditional or
unasserted claims or obligations of the Company. Such Reserves may be paid
over by the Company to an escrow agent to be held for disbursement in
payment of any of the aforementioned liabilities and, at the expiration of
such period as shall be reasonably deemed advisable by the Management
Committee, for distribution of the balance in the manner provided in this
Article 10;
(b) Finally, the remaining balance, if any, to the Members in
proportion to their respective positive Capital Accounts, after giving
effect to all contributions, distributions and allocations for all
periods, in accordance with the requirements of Regulation Section 1.704-
1(b)(2)(ii)(b)(2).
10.4 IN-KIND. Notwithstanding the foregoing but subject to Section 18-
804(a)(1) of the Act, in the event the Management Committee shall determine that
an immediate sale of part of or all the Property would cause undue loss to the
Members, or the Management Committee determines that it would be in the best
interest of the Members to distribute the Property to the Members in-kind (which
distributions do not, as to the in-kind portions, have to be in the same
proportions as they would be if cash were distributed, but all such in-kind
distributions shall be equalized, to the
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extent necessary, with cash), then the Management Committee may either defer
liquidation of, and withhold from distribution for a reasonable time, any of the
Property except that necessary to satisfy the Company's debts and obligations,
or distribute the Property to the Members in-kind.
10.5 NO ACTION FOR DISSOLUTION. The Members acknowledge that irreparable
damage would be done to the goodwill and reputation of the Company if any Member
should bring an action in court to dissolve the Company under circumstances
where dissolution is not required by Section 10.1. Accordingly, except where the
Manager has failed to liquidate the Company as required by Section 10.1 and
except as specifically provided in Section 18-802 and Section 18-803(a) of the
Act, each Member hereby to the fullest extent permitted by law waives and
renounces his right to initiate legal action to seek dissolution of the Company
or to seek the appointment of a receiver or trustee to wind up the affairs of
the Company, except in the cases of fraud, violation of law, bad faith, gross
negligence, willful misconduct or willful violation of this Agreement.
ARTICLE 11
TAX MATTERS MEMBER
11.1 TAX MATTERS MEMBER. SEACOR shall be the Tax Matters Member of
the Company as provided in the Regulations under Section 6231 of the Code and
analogous provisions of state law.
11.2 CERTAIN AUTHORIZATIONS. The Tax Matters Member shall represent the
Company, at the Company's expense, in connection with all examinations of the
Company's affairs by tax authorities including any resulting administrative or
judicial proceedings. Without limiting the generality of the foregoing, and
subject to the restrictions set forth herein, the Tax Matters Member is hereby
authorized, but not required:
(a) to enter into any settlement with the Secretary with respect to
any tax audit or judicial review, in which agreement the Tax Matters
Member may expressly state that such agreement shall bind the other
Members except that such settlement agreement shall not bind any Member
that has not approved such settlement agreement in writing;
(b) if a notice of a final administrative adjustment at the Company
level of any item required to be taken into account by a Member for tax
purposes is mailed to the Tax Matters Member, to seek
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judicial review of such final adjustment, including the filing of a
petition for readjustment with the Tax Court, the District Court of the
United States for the district in which the Company's principal place of
business is located, or elsewhere as allowed by law, or the United States
Claims Court;
(c) to intervene in any action brought by any other Member
for judicial review of a final adjustment;
(d) to file a request for an administrative adjustment with the
Secretary at any time and, if any part of such request is not allowed by
the Secretary, to file a petition for judicial review with respect to such
request;
(e) to enter into an agreement with the Internal Revenue Service to
extend the period for assessing any tax that is attributable to any item
required to be taken into account by a Member for tax purposes, or an item
affected by such item; and
(f) to take any other action on behalf of the Members (with respect
to the Company) or the Company in connection with any administrative or
judicial tax proceeding to the extent permitted by applicable law or the
Regulations.
Each Member shall have the right to participate in any such actions and
proceedings to the extent provided for under the Code and Regulations.
11.3 INDEMNITY OF TAX MATTERS MEMBER. To the maximum extent permitted by
applicable law and without limiting Article 8, the Company shall indemnify and
reimburse the Tax Matters Member for all expenses (including reasonable legal
and accounting fees) incurred as Tax Matters Member pursuant to this Article 13
in connection with any administrative or judicial proceeding with respect to the
tax liability of the Members as long as the Tax Matters Member has determined in
good faith that the Tax Matters Member's course of conduct was in, or not
opposed to, the best interest of the Company. The taking of any action and the
incurring of any expense by the Tax Matters Member in connection with any such
proceeding, except to the extent provided herein or required by law, is a matter
in the sole discretion of the Tax Matters Member.
11.4 INFORMATION FURNISHED. To the extent and in the manner provided by
applicable law and Regulations, the Tax Matters Member shall furnish the name,
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address, profits and loss interest, and taxpayer identification number of each
Member to the Internal Revenue Service.
11.5 NOTICE OF PROCEEDINGS, ETC. The Tax Matters Member shall use best
efforts to keep each Member informed of any administrative and judicial
proceedings for the adjustment at the Company level of any item required to be
taken into account by a Member for income tax purposes or any extension of the
period of limitations for making assessments of any tax against a Member with
respect to any Company item, or of any agreement with the Internal Revenue
Service that would result in any material change either in Income or Loss as
previously reported.
11.6 NOTICES TO TAX MATTERS MEMBER. Any Member that receives a notice of
an administrative proceeding under Section 6233 of the Code relating to the
Company shall promptly provide Notice to the Tax Matters Member of the treatment
of any Company item on such Member's Federal income tax return that is or may be
inconsistent with the treatment of that item on the Company's return. Any Member
that enters into a settlement agreement with the Internal Revenue Service or any
other government agency or official with respect to any Company item shall
provide Notice to the Tax Matters Member of such agreement and its terms within
sixty (60) days after its date.
11.7 PREPARATION OF TAX RETURNS. The Tax Matters Member shall arrange for
the preparation and timely filing of all returns of Company income, gains,
deductions, losses and other items necessary for Federal, state and local income
tax purposes and shall use all reasonable efforts to furnish to the Members
within ninety (90) days of the close of the taxable year a Schedule K-1 and such
other tax information reasonably required for Federal, state and local income
tax reporting purposes. The classification, realization and recognition of
income, gain, losses and deductions and other items shall be on the cash or
accrual method of accounting for Federal income tax purposes, as the Management
Committee shall determine in its sole discretion in accordance with applicable
law.
11.8 TAX ELECTIONS. Except as otherwise provided herein, the Tax Matters
Member shall, in its sole discretion, determine whether to make any available
election.
11.9 TAXATION AS A PARTNERSHIP. No election shall be made by the Company
or any Member for the Company to be excluded from the application of any of the
provisions of Subchapter K, Chapter I of Subtitle A of the Code or from any
similar provisions of any state tax laws or to be treated as a corporation for
federal tax purposes.
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ARTICLE 12
ACCOUNTING AND BANK ACCOUNTS
12.1 FISCAL YEAR AND ACCOUNTING METHOD. The fiscal year and taxable
year of the Company shall be as designated by the Management Committee in
accordance with the Code. The Company shall use an accrual method of accounting.
12.2 BOOKS AND RECORDS. The Company shall maintain at its principal
office, or such other office as may be determined by the Management Committee,
all the following:
(a) A current list of the full name and last known business or
residence address of each Member and of the Manager together with
information regarding the amount of cash and a description and statement
of the agreed value of any other property or services contributed by each
Member and which each Member has agreed to contribute in the future, and
the date on which each Member became a Member of the Company;
(b) A copy of the Certificate and this Agreement, including any and
all amendments to either thereof, together with executed copies of any
powers of attorney pursuant to which the Certificate, this Agreement, or
any amendments have been executed;
(c) Copies of the Company's Federal, state, and local income tax or
information returns and reports, if any, which shall be retained for at
least six fiscal years;
(d) The financial statements of the Company, which shall be
retained for at least six fiscal years; and
(e) The Company's books and records, which shall be retained for at
least six fiscal years.
12.3 DELIVERY TO MEMBERS; INSPECTION. Upon the request of any Member, for
any purpose reasonably related to such Member's interest as a member of the
Company, the Management Committee shall cause to be made available to the
requesting Member the information required to be maintained by clauses (a)
through (d) of Section 14.2 and such other information regarding the business
and affairs of the Company as any Member may reasonably request.
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12.4 FINANCIAL STATEMENTS. The Management Committee shall cause to be
prepared for the Members at least annually, at the Company's expense, financial
statements of the Company, CJP1 and CJP2, prepared in accordance with generally
accepted accounting principles and audited by Arthur Andersen & Co., or another
nationally recognized accounting firm. The financial statements so furnished
shall include a balance sheet, statement of income or loss, statement of cash
flows, and statement of Members' equity. In addition, the Management Committee
shall provide on a timely basis to the Members monthly and quarterly financials,
statements of cash flow, any available internal budgets or forecast or other
available financial reports, as well as any reports or notices as are provided
by the Company, CJP1 or CJP2 to any financial institution.
12.5 FILINGS. At the Company's expense, the Management Committee shall
cause the income tax returns for the Company to be prepared and timely filed
with the appropriate authorities and to have prepared and to furnish to each
Member such information with respect to the Company as is necessary (or as may
be reasonably requested by a Member) to enable the Members to prepare their
Federal, state and local income tax returns. The Management Committee, at the
Company's expense, shall also cause to be prepared and timely filed, with
appropriate Federal, state and local regulatory and administrative bodies, all
reports required to be filed by the Company with those entities under then
current applicable laws, rules, and regulations. The reports shall be prepared
on the accounting or reporting basis required by the regulatory bodies.
12.6 NON-DISCLOSURE. Each Member agrees that, except as otherwise
consented to by the Management Committee in writing, all non-public and
confidential information furnished to it pursuant to this Agreement will be kept
confidential and will not be disclosed by such Member, or by any of its agents,
representatives, or employees, in any manner whatsoever, in whole or in part,
except that (a) each Member shall be permitted to disclose such information to
those of its agents, representatives, and employees who need to be familiar with
such information in connection with such Member's investment in the Company, so
long as such agents, representatives and employees agree to keep such
information confidential on the terms set forth herein, (b) each Member shall be
permitted to disclose such information to its partners, stockholders and
affiliates so long as they agree to keep such information confidential on the
terms set forth herein, (c) each Member shall be permitted to disclose
information to the extent required by law, legal process or regulatory
requirements, so long as such Member shall have used its reasonable efforts to
first afford the Company with a reasonable opportunity to contest the necessity
of disclosing such information, (d) each Member shall be permitted to disclose
such information to possible purchasers of all or a portion of the Member's
Interest, provided that such prospective purchaser shall execute a suitable
48
<PAGE>
confidentiality agreement containing terms not less restrictive than the terms
set forth herein, and (e) each Member shall be permitted to disclose information
to the extent necessary for the enforcement of any right of such Member arising
under this Agreement.
12.7 BANK ACCOUNTS. All funds of the Company shall be deposited in a
separate bank, money market or similar account(s) approved by the Management
Committee and in the Company's name. Withdrawals therefrom shall be made only by
Persons authorized to do so by the Management Committee.
ARTICLE 13
MISCELLANEOUS
13.1 TITLE TO PROPERTY. Title to the Property shall be held in the name of
the Company. No Member shall individually have any ownership interest or rights
in the Property except indirectly by virtue of such Member's ownership of a
Membership Interest.
13.2 WAIVER OF DEFAULT. No consent or waiver, express or implied, by the
Company or a Member with respect to any breach or default by the Company or a
Member hereunder shall be deemed or construed to be a consent or waiver with
respect to any other breach or default by any party of the same provision or any
other provision of this Agreement. Failure on the part of the Company or a
Member to complain of any act or failure to act of the Company or a Member or to
declare such party in default shall not be deemed or constitute a waiver by the
Company or the Member of any rights hereunder.
13.3 AMENDMENT.
(a) Except as otherwise expressly provided elsewhere in this Agreement,
this Agreement shall not be altered, modified or changed except by an amendment
approved by Members holding a Majority in Interest of the Group A Members and a
Majority in Interest of the Group B Members; provided, however, that if any such
amendment adversely effects the economic rights of a Member, such amendment
shall only be effective if consented to in writing by such Member.
(b) In addition to any amendments otherwise authorized herein, the Manager
or Management Committee may make any amendments to any of the Schedules to this
Agreement from time to time to reflect transfers of Membership Interests and
issuances of additional Membership Interests. Copies of such amendments shall be
delivered to the Members upon execution thereof.
49
<PAGE>
(c) The Manager shall cause to be prepared and filed any amendment to the
Certificate that may be required to be filed under the Act as a consequence of
any amendment to this Agreement.
(d) Any modification or amendment to this Agreement or the Certificate
made in accordance with this Section 13.3 shall be binding on all Members and
the Manager.
13.4 NO THIRD PARTY RIGHTS. Except as provided in Article 8, none of the
provisions contained in this Agreement shall be for the benefit of or
enforceable by any third parties, including creditors of the Company. Subject to
Article 8, the parties to this Agreement expressly retain any and all rights to
amend this Agreement as herein provided, notwithstanding any interest in this
Agreement or in any party to this Agreement held by any other Person.
13.5 SEVERABILITY. In the event any provision of this Agreement is held to
be illegal, invalid or unenforceable to any extent, the legality, validity and
enforceability of the remainder of this Agreement shall not be affected thereby
and shall remain in full force and effect and shall be enforced to the greatest
extent permitted by law.
13.6 NATURE OF INTEREST IN THE COMPANY. A Member's Membership
Interest shall be personal property for all purposes.
13.7 BINDING AGREEMENT. Subject to the restrictions on the disposition of
Membership Interests herein contained, the provisions of this Agreement shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective heirs, personal representatives, successors and permitted assigns.
13.8 HEADINGS. The headings of the Certificate and sections of this
Agreement are for convenience only and shall not be considered in construing or
interpreting any of the terms or provisions hereof.
13.9 WORD MEANINGS. The words such as "herein", "hereinafter", "hereof",
and "hereunder" refer to this Agreement as a whole and not merely to a
subdivision in which such words appear unless the context otherwise requires.
The singular shall include the plural, and vice versa, unless the context
otherwise requires.
13.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, all of which together shall constitute one agreement binding on
all parties hereto, notwithstanding that all the parties have not signed the
same counterpart.
50
<PAGE>
13.11 ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties hereto and thereto and supersedes all prior writings or
agreements with respect to the subject matter hereof.
13.12 PARTITION. The Members agree that the Property is not and will not
be suitable for partition. Accordingly, each of the Members hereby irrevocably
waives any and all right such Member may have to maintain any action for
partition of any of the Property. No Member shall have any right to any specific
assets of the Company upon the liquidation of, or any distribution from, the
Company.
13.13 GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. This Agreement
shall be construed according to and governed by the laws of the State of
Delaware without regard to principles of conflict of laws. The parties hereby
submit to the exclusive jurisdiction and venue of the state courts of New York
County, New York or to the Court of Chancery of the State of Delaware and the
United States District Court for the Southern District of New York and of the
United States District Court for the District of Delaware, as the case may be,
and agree that the Company or Members may, at their option, enforce their rights
hereunder in such courts.
13.14 DISCRETION. Whenever a Manager shall have discretion to act
hereunder, such Person agrees to act in a reasonable manner on behalf of the
Company and its Affiliates.
51
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
GROUP A MEMBER:
SEACOR OFFSHORE RIGS INC.
By:
Name:
Title:
GROUP B MEMBER:
COI, LLC
By:
William E. Chiles
Duly Authorized Member
Agreed and Accepted
as of the date first
written above solely
with respect to Section 3.4
SEACOR SMIT INC.
By:
Name:
Title:
52
<PAGE>
SCHEDULE 1
A. GROUP A MEMBERS
Total
Capital Percentage
Name and Address Cash Contributed Contribution Interest1
- ---------------- ---------------- ------------ ---------
SEACOR Offshore Rigs Inc. $8,850,000 $8,850,000 50%
1370 Avenue of the Americas
25th Floor
New York, N.Y. 10019-4602
Attn: Randall Blank
- --------
1. Includes both Group A Members and Group B Members.
53
<PAGE>
SCHEDULE 1 (cont'd)
B. CLASS B MEMBERS
<TABLE>
<CAPTION>
Total
Cash and/or Gross Asset Capital Percentage
Name and Address Property Contributed Value Contribution Interest1
- ---------------- -------------------- ----- ------------ ---------
<S> <C> <C> <C> <C>
COI, LLC The properties, assets $8,486,000 $8,850,000 50%
2000 West Loop South, and rights assigned by
Suite 2130 COI to the Company
Houston, TX 77027 pursuant to the
Assignment and
Assumption Agreement
$364,000 in cash N/A
</TABLE>
- --------
1. Includes both Group A Members and Group B Members.
54
EXHIBIT 11.1
SEACOR SMIT INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ------------------------------
1997 1996 1997 1996
-------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
EARNINGS PER COMMON SHARE - ASSUMING NO
DILUTION, AS ADJUSTED FOR COMMON STOCK
EQUIVALENTS (a)..........................................$ 2.71 $ 0.68 $ 4.74 $ 1.31
Weighted average shares outstanding........................... 13,854,468 9,840,314 13,889,663 9,835,707
Shares issuable from assumed conversion of common stock
equivalents (a)........................................... 224,731 265,870 229,979 235,710
-------------- -------------- --------------- --------------
Weighted average shares outstanding, as adjusted........ 14,079,199 10,106,184 14,119,642 10,071,417
============== ============== =============== ==============
EARNINGS PER COMMON SHARE - ASSUMING
FULL DILUTION.............................................$ 2.35 $ 0.60 $ 4.14 $ 1.16
Weighted average shares outstanding........................... 13,854,468 9,840,314 13,889,663 9,835,707
Shares issuable from assumed conversion of common stock
equivalents............................................... 233,640 271,403 235,276 271,403
Shares issuable from assumed conversion of
6.0% Convertible Subordinated Notes....................... - 2,156,076 - 2,156,076
Shares issuable from assumed conversion of
2.5% Convertible Subordinated Notes....................... - 156,650 - 156,650
Shares issuable from assumed conversion of
5-3/8% Convertible Subordinated Notes..................... 2,844,695 - 2,844,695 -
-------------- -------------- --------------- --------------
Weighted average shares outstanding, as adjusted........ 16,932,803 12,424,443 16,969,634 12,419,836
============== ============== =============== ==============
NET INCOME FOR EARNINGS PER COMMON
SHARE COMPUTATION :
Net income for earnings per common share
computation-- assuming no dilution........................$ 38,099 $ 6,916 $ 66,861 $ 13,239
Interest on 6.0% Convertible Subordinated Notes,
net of income tax effect................................ - 539 - 1,078
Interest and debt discount on 2.5% Convertible
Subordinated Notes, net of income tax effect............ 37 - - 74
Interest on 5-3/8% Convertible Subordinated Notes,
net of income tax effect................................ 1,676 - 3,369 -
-------------- -------------- --------------- --------------
Net income for earnings per common share
computation -- assuming full dilution, as adjusted.........$ 39,775 7,492 70,230 14,391
============== ============== =============== ==============
</TABLE>
(a) This computation is submitted in accordance with Regulation S-K item
601(b)(11). For the periods noted, it is contrary to APB Opinion No. 15
as per footnote to paragraph 14 which does not require the inclusion of
common stock equivalents in the earnings per share calculation if the
dilutive effect is less than 3%.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE BODY OF THE ACCOMPANYING FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<CASH> 162,213
<SECURITIES> 0
<RECEIVABLES> 65,630
<ALLOWANCES> 1,080
<INVENTORY> 1,827
<CURRENT-ASSETS> 236,592
<PP&E> 505,070
<DEPRECIATION> 100,715
<TOTAL-ASSETS> 720,710
<CURRENT-LIABILITIES> 36,625
<BONDS> 217,087
0
0
<COMMON> 140
<OTHER-SE> 411,003
<TOTAL-LIABILITY-AND-EQUITY> 720,710
<SALES> 0
<TOTAL-REVENUES> 164,427
<CGS> 0
<TOTAL-COSTS> 1,562
<OTHER-EXPENSES> 77,417
<LOSS-PROVISION> 600
<INTEREST-EXPENSE> 5,641
<INCOME-PRETAX> 100,085
<INCOME-TAX> 35,203
<INCOME-CONTINUING> 67,186
<DISCONTINUED> 0
<EXTRAORDINARY> (325)
<CHANGES> 0
<NET-INCOME> 66,861
<EPS-PRIMARY> 4.81
<EPS-DILUTED> 4.14
</TABLE>
