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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 20-F
ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1998
COMMISSION FILE NUMBER 0-21742
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STOLT COMEX SEAWAY S.A.
(Exact name of Registrant as specified in its charter)
LUXEMBOURG
(Jurisdiction of incorporation or organization)
C/O STOLT COMEX SEAWAY M.S. LTD
BUCKSBURN HOUSE
HOWES ROAD
BUCKSBURN
ABERDEEN AB21 9RQ, SCOTLAND
(Address of principal executive offices)
SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None
SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Shares, $2.00 par value
Class A Shares, $2.00 par value
SECURITIES FOR WHICH THERE IS A REPORTING OBLIGATION PURSUANT TO SECTION 15(D)
OF THE ACT:
None
INDICATE THE NUMBER OF OUTSTANDING SHARES OF EACH OF THE ISSUER'S CLASSES OF
CAPITAL OR COMMON STOCK AS OF THE CLOSE OF THE PERIOD COVERED BY THE ANNUAL
REPORT:
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Common Shares, $2.00 par value:................................. 22,365,477*
Class A Shares, $2.00 par value:................................ 19,679,987*
Class B Shares, $2.00 par value:................................ 34,000,000*
</TABLE>
* The above figures reflect the Class A Share distribution on June 25, 1998.
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No / /
Indicate by check mark which financial statement item the registrant has
elected to follow.
Item 17 / / Item 18 /X/
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TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Description of Business......................................................... 1
General......................................................................... 1
History......................................................................... 1
Business Strategy............................................................... 2
Description of Operations....................................................... 2
Geographic Distribution......................................................... 4
Customers....................................................................... 5
Regulation...................................................................... 6
Competition..................................................................... 6
Other Matters................................................................... 6
Item 2. Description of Property......................................................... 8
Major Assets.................................................................... 8
Other Properties................................................................ 10
Item 3. Legal Proceedings............................................................... 11
Item 4. Control of Registrant........................................................... 11
Item 5. Nature of Trading Market........................................................ 12
Item 6. Exchange Controls and Other Limitations Affecting Security Holders.............. 13
Exchange Controls............................................................... 13
Limitations Affecting Shareholders.............................................. 13
Item 7. Taxation........................................................................ 14
U.S. Taxation................................................................... 14
Luxembourg Taxation............................................................. 14
Item 8. Selected Financial Data......................................................... 14
Dividends....................................................................... 14
Item 9. Management's Discussion and Analysis of Financial Condition and Results of 15
Operations......................................................................
Recent Developments............................................................. 15
The Year 2000 Issue............................................................. 15
Forward-looking Statements...................................................... 16
Factors Affecting Revenues and Costs............................................ 16
Item 9A. Quantitative and Qualitative Disclosures about Market Risk...................... 20
Item 10. Directors and Officers of Registrant............................................ 21
Item 11. Compensation of Directors and Officers.......................................... 23
Profit Sharing Plan............................................................. 23
Item 12. Options to Purchase Securities From Registrant or Subsidiaries.................. 24
Item 13. Interest of Management in Certain Transactions.................................. 25
PART III
Item 15. Defaults Upon Senior Securities................................................. 26
Item 16. Changes in Securities, Changes in Security for Registered Securities and Use of 26
Proceeds........................................................................
PART IV
Item 17. Financial Statements............................................................ 26
Item 18. Financial Statements............................................................ 26
Item 19. Financial Statements and Exhibits............................................... 26
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Note: Omitted items are inapplicable.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Stolt Comex Seaway S.A. ("SCS") is a holding company which through its
subsidiaries is among the leading subsea contractors in the world, providing
technologically sophisticated subsea engineering, flexible and rigid flowline
lay, subsea construction, inspection and maintenance services to its customers
in the offshore oil and gas industry. SCS operates in Europe, the Middle East,
West Africa, Asia Pacific and the Americas.
In this Report, "Company" refers to SCS and, unless the context otherwise
requires, its consolidated subsidiaries. References to Company activities by
years refer to fiscal years ended November 30. SCS was incorporated in
Luxembourg in 1993 as the holding company for all of the Company's activities.
References to matters relating to the Company for periods prior to the
incorporation of SCS in 1993 refer to such matters in respect of the combined
business of Comex Services S.A. ("Comex"), Stolt-Nielsen Seaway A/S ("Seaway"),
and their respective consolidated subsidiaries.
The Company is an indirect subsidiary of Stolt-Nielsen S.A. ("SNSA"), a
Luxembourg company which, through its subsidiaries, is engaged in three
businesses: Transportation Services, Subsea Services and Seafood. As of March
31, 1999 SNSA retains an economic interest of 44.9% and voting rights of 61.6%
in SCS.
The Company's Common Shares and Class A Shares are currently traded on both
the Nasdaq National Market System ("Nasdaq") and on the Oslo Stock Exchange
("OSE").
The registered office of SCS is located at 26, rue Louvigny, Luxembourg and
it is registered in the Companies' Registrar of the Luxembourg District Court
under the designation "R.C. Luxembourg B 43172." The principal executive offices
of the Company are c/o Stolt Comex Seaway M.S. Ltd., Bucksburn House, Howes
Road, Bucksburn, Aberdeen, AB21 9RQ, Scotland, telephone number (44)
1224-718200.
HISTORY
The subsea services industry developed as a support service to the oil and
gas industry and has grown as that industry has increasingly relied upon the
development of offshore fields to meet increased demand for oil and gas. The
offshore production of oil began in the Gulf of Mexico in the mid-1960s and, by
the end of the decade, had spread to the more hostile and deeper waters of the
North Sea. Although oil and gas producing companies perform some of their own
subsea construction, maintenance and repair work, subsea services has developed
as a separate industry, principally because of the need to develop new and
advanced technologies, expertise and custom-designed equipment and because of
the oil industry's refocus on its core oil and gas production business.
A publicly-traded company since May 1993, SCS was established through the
merger of the businesses of two leading diving support services companies, Comex
Services S.A. and Stolt-Nielsen Seaway A/S, which were acquired by SNSA in
separate transactions in 1992. At the time of acquisition, Comex was a leading
worldwide subsea services contractor, which pioneered deep water saturation
diving and subsea construction using both manned and unmanned techniques. Seaway
operated principally in the North Sea and pioneered the development and use of
specially designed, technologically sophisticated diving support ships and
remotely operated vehicles ("ROVs") to support operations in hostile deep water
environments.
SCS completed an initial public offering of 6,000,000 Common Shares in May
1993, raising additional share capital of approximately $43 million. During 1997
SCS raised additional share capital of approximately $240 million by means of
two equity offerings. These proceeds are net of offering expenses of $11
million. In March 1997, 8,050,000 Common Shares were sold by the Company and
during November 1997 an additional 4,000,000 Common Shares were sold. Concurrent
with the March offering the Company exchanged debt due to an affiliate of SNSA
for 14,000,000 Class B Shares. Concurrent with the
1
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November offering SNSA sold 4,000,000 Common Shares which had been converted
from 8,000,000 Class B Shares.
On January 9, 1998 the Company completed a two-for-one stock split which was
effected by means of a stock dividend distribution. On June 25, 1998 the Company
issued a stock dividend in the form of one new Class A Share for each two Common
Shares. All share data and per share data have been restated to reflect this.
In August 1998, SCS acquired Ceanic Corporation ("Ceanic"), a publicly
traded Houston-based subsea contractor, for approximately $219 million. Ceanic
provides both subsea services and products to the offshore oil and gas industry
in the Gulf of Mexico and inland underwater services and products to domestic
industrial and governmental customers. With Ceanic, SCS took ownership of a
substantial fleet of ships, ROVs, and other related technologies.
The acquisition of Ceanic was strategically important for SCS to access the
growing deep water market for subsea services in the Gulf of Mexico, and to
strengthen the dialogue with Houston-based oil and gas companies with regard to
providing them with subsea services for their worldwide needs. The Ceanic
acquisition provides SCS with a leading position in the traditional Gulf of
Mexico market for subsea services.
In December 1998 SCS acquired the ROV business of Dolphin A/S for
approximately $17 million. This acquisition included 21 ROVs, the majority of
which are on long-term contracts to major oil companies in Norway.
BUSINESS STRATEGY
The Company's strategy is to enhance its position as a leading full-service
subsea contractor providing technologically advanced and cost effective
life-of-field subsea services to its customers.
The Company has consistently expanded and upgraded its fleet in order to
provide cost effective solutions to its customers and to enable the development
of offshore fields that otherwise might not be commercially viable. Between 1993
and March 31, 1999, the Company invested $400 million in new technology and
equipment to respond to growing demand in the market, with an additional $47
million committed or planned for the remainder of 1999.
The acquisition of Ceanic has enabled the Company to enter the shallow water
maintenance market in the Gulf of Mexico, a new market for SCS. Through the
Ceanic acquisition, the Company also took over Ceanic's "Big Inch" Marine
Systems subsea pipeline connector business and the "Tarpon Tower" technology.
The Company believes that both of these businesses have considerable growth
potential. The "Big Inch" technology lends itself to our established robotic
skills for deepwater work and the "Tarpon Towers" have become an integral part
of our shallow water field development solutions worldwide.
SCS combines centralized product line profit centers and asset management
with regional management of customer relationships and project support, to
improve the utilization of assets and their allocation to projects to achieve
higher returns, improve risk management, provide superior customer service and
develop and share advanced technical expertise among regions.
DESCRIPTION OF OPERATIONS
The Company is one of the largest subsea services contractors in the world,
providing technologically sophisticated subsea engineering, flexible and rigid
flowline lay, subsea construction, inspection, maintenance and repair services
to its customers in the offshore oil and gas industry. SCS develops and applies
innovative and cost efficient subsea techniques that address the evolving
technical needs of oil and gas companies which are increasingly developing oil
and gas fields in deeper and more demanding offshore environments. SCS has
operated in more than 60 countries worldwide and currently operates in over 20
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countries. The Company's backlog at March 31, 1999 stands at $596 million, of
which $355 million is for 1999. This compares to a backlog at March 31, 1998 of
$517 million, of which $274 million was for 1998.
The Company's services cover all phases of offshore oil and gas operations
from exploration to decommissioning. During the exploration phase, the Company
provides seabed survey and drilling support services. During the development
phase, the Company provides, with partners when appropriate, engineering design,
component procurement, and the installation of subsea equipment, well control
umbilicals, flowlines and production risers. During the production phase, which
may continue for many years, the Company inspects, maintains and repairs
platforms, pipelines, flowlines and subsea equipment. Following the production
phase, the Company provides field decommissioning services including the removal
of offshore structures and subsea equipment.
The Company offers three principal product lines. Field development provides
complete subsea production systems from engineering and design through
procurement and installation of components and the commissioning of completed
systems and installation of rigid and flexible flowlines, small-diameter
pipelines and well control umbilicals. Subsea construction provides pipeline
tie-ins, installation of structures and moorings, hyperbaric welding, piling,
decommissioning, dredging, hot tapping, cold cutting and pipeline stabilization.
Subsea services provides pipeline and flowline survey, construction support,
drilling support and inspection, maintenance and repair.
In addition to its main product lines, the Company offers heavy lift
services through a joint venture company, Seaway Heavy Lifting Limited ("SHL"),
which operates the heavy lift ship, STANISLAV YUDIN, chartered from a subsidiary
of the Company's indirect joint venture partner Lukoil-Kaliningradmorneft Plc.
("LKMN"), a subsidiary of a major Russian oil company, Lukoil.
The remainder of the joint ventures in which the Company has interests have
been entered into on a project-specific basis to enhance the range of services
provided to the customer. In these joint ventures the Company will typically
have interests ranging from 22% to 50%.
The Company operates one of the world's most advanced fleets of subsea
construction and flowline lay ships, from which the majority of SCS's subsea
activities are performed. SCS owns or charters a fleet consisting of four
flexible flowline and umbilical lay ships, one rigid and flexible flowline lay
ship, three construction ships, two survey ships, seven inspection, repair and
maintenance ships, 16 shallow water ships, one heavy lift ship operated through
SHL, 11 lay barges and tugs, 108 ROVs and 13 hardsuits.
Investments in the fleet since 1993 include the acquisition and completion
of the SEAWAY EAGLE, a multi-purpose flowline lay and subsea construction ship,
the conversion of the SEAWAY OSPREY to lay flexible flowlines and flowline
bundles, the acquisition of the SEAWAY FALCON and its conversion to a rigid and
flexible flowline lay ship, the conversion of the SEAWAY CONDOR to a flexible
flowline and umbilical lay ship, the acquisition of the SEAWAY HAWK, a subsea
construction ship and continuous investment in new ROV technology and
construction equipment. SCS also took over the long-term lease on the DISCOVERY,
a multi-purpose subsea construction ship, as part of an asset swap with SubSea
Offshore Limited in 1997.
During the year the Company entered into a long-term charter for the NTL
900, a derrick/lay barge. In addition, the SEAWAY KINGFISHER, a diverless
inspection, repair and maintenance ship, was introduced into the North Sea
market at the end of August 1998.
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GEOGRAPHIC DISTRIBUTION
The Company's operations are managed through six regional offices: Aberdeen,
Scotland for the U.K. and Southern North Sea; Stavanger, Norway for Norway;
Perth, Australia for Asia Pacific; Marseille, France for Southern Europe, Africa
and the Middle East ("SEAME"); Macae City, Brazil for South America and Houston,
Texas for the Gulf of Mexico.
The following table sets forth the net operating revenue in the principal
areas of operations for the Company's six geographical regions for the periods
indicated:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
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<S> <C> <C> <C>
NOVEMBER 30,
1998 1997 1996
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<CAPTION>
(IN MILLIONS)
<S> <C> <C> <C>
U.K............................................................................. $ 333.1 $ 172.8 $ 95.5
Norway.......................................................................... 99.5 90.1 111.6
Asia Pacific.................................................................... 37.9 39.6 39.2
SEAME........................................................................... 58.3 75.7 44.6
South America................................................................... 58.5 43.7 14.3
Gulf of Mexico.................................................................. 62.5 9.2 8.2
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Total........................................................................... $ 649.8 $ 431.1 $ 313.4
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U.K.
The U.K. region's major clients are oil and gas producing companies and
large offshore engineering and construction companies. The majority of contracts
are short-term in nature with a long-term construction and maintenance contract
for BP Amoco and a long-term construction framework agreement for Arco British
Limited.
Significant projects in the U.K. backlog include the Amerada Hess Triton
engineering, procurement, installation and commissioning ("EPIC") field
development, the Burlington Resources Dalton field development and the Talisman
Energy Orion field development.
NORWAY
The Company's Norwegian business is primarily related to flowline lay,
subsea construction and subsea services, with a customer base consisting of all
of the oil and gas companies operating in Norway. The Company manages its survey
activities for the North Sea from Norway, where it has two long-term survey and
pipeline inspection contracts with Statoil.
The Company also has a long-term contract with Statoil for subsea
construction services which is conducted by a project alliance between the
Company and Brown and Root Energy Services A/S. Other significant contracts in
Norway's backlog include the flowline installation of the Aasgard umbilicals and
service lines for Statoil from 1998 to 2000, the installation of the moorings
for the Esso Jotun FPSO, the Eldfisk riser project and the Maersk caisson
installation.
ASIA PACIFIC
The Asia Pacific region is characterized by long distances between areas of
offshore oil operations and from other areas of the world with subsea
development activities. The Company is active in ROV work and drilling support
in this region. In Indonesia, the Company's operations are performed through a
subsidiary, PT Komaritim, which carries out shallow water pipelay and
construction work. The Company has entered into a long-term charter for the NTL
900 derrick/lay barge which will enhance the Company's capabilities in pipelay,
heavy lift and deeper water work around the Asia Pacific region. A new pipelay
barge has also been built for the Indonesia shallow water market.
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Significant contracts in the backlog include the Total Tunu phase 6 pipelay
contract and the Peciko contract for Saipem in Indonesia.
SEAME
The majority of the business conducted by the SEAME region is offshore from
West Africa and the Middle East. The significant contract in the backlog is the
Elf Exploration Angola Girassol contract. This contract was awarded to SCS and
its project partners, Bouygues Offshore and ETPM. The Company has a one-third or
$138 million share of this subsea EPIC contract. This is the first
ultra-deepwater field development off West Africa, a significant milestone in
the development of technology for installations of this type in extreme water
depths.
SOUTH AMERICA
The majority of operations in South America are located in Brazil which
currently operates as a single customer market controlled by Petrobras, the
Brazilian state oil company. Brazil is now in the process of opening its
offshore oil and gas fields to foreign operators who will finance the growth of
Brazilian offshore oil production by means of production sharing contracts. The
Company believes the introduction of foreign operators to Brazil will double the
demand for subsea contractor services within four years.
Current production in Brazil occurs at water depths down to 800 meters. The
Brazilian market contains a number of potentially large field developments which
are located in deep water (between 700 and 1,830 meters), and will require
extensive use of diverless subsea construction techniques. The Company believes
it is well positioned to capitalize upon its expertise in these techniques.
The Company currently has a three-year contract for the SEAWAY OSPREY with
Petrobras through September 1999, with an optional one-year extension, and a
four-year contract with Petrobras which started in May 1997 for the SEAWAY
HARRIER. These contracts are for flowline lay, diving support and ROV services.
The Company also operates a number of ROVs to provide construction and drilling
support services, usually under long-term contracts.
GULF OF MEXICO
The Company intends to capitalize on the acquisition of the Ceanic
Corporation, now renamed Stolt Comex Seaway Inc., to expand its presence in the
Gulf of Mexico by introducing established SCS deepwater technology and
sophisticated deepwater construction ships during 1999. Houston is the base from
which U.S. oil companies conduct their worldwide operations. The new SCS
organization in Houston will be the marketing point of contact for worldwide
operations for U.S. based customers. The SEAWAY HAWK, purchased in May 1997,
started a two-year contract offshore from Mexico in April 1998. The Company also
relocated the SEAWAY CONDOR to the Gulf of Mexico in December 1998. These
relocations will bring the number of dynamically positioned ships in the region
to eight.
A significant number of contracts in this region are short-term construction
and repair and maintenance contracts.
CUSTOMERS
In 1998, the Company had 88 customers worldwide, of which 46% were major
national and international oil and gas companies. The level of construction
services required by any particular customer depends on the size of that
customer's capital expenditure budget devoted to construction plans in a
particular year. Consequently, customers that account for a significant portion
of contract revenue in one fiscal year may represent an immaterial portion of
contract revenue in subsequent fiscal years. One customer, Amerada Hess,
accounted for more than 22% of the Company's net operating revenue and the seven
largest customers were responsible for approximately 60% of the Company's net
operating revenue in 1998.
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REGULATION
The Company's businesses are subject to international conventions and
governmental regulations, which strictly regulate various aspects of its
operations. In addition, SCS is required by various governmental and other
regulatory agencies to obtain certain permits, licenses and certificates with
respect to its equipment and operations. The kind of permits, licenses and
certificates required in the operations of the Company depend upon a number of
factors. The Company believes that it has or can readily obtain all permits,
licenses and certificates necessary to conduct its operations. Some countries
require that the Company enter into a joint venture or similar business
arrangement with local individuals or businesses in order to conduct business in
such countries.
The Company's operations are affected from time to time and to varying
degrees by political developments and federal and local laws and regulations. In
particular, oil and gas production, operations and economics are affected by
price control, tax and other laws relating to the petroleum industry, by changes
in such laws and by constantly changing administrative regulations. Such
developments directly or indirectly may affect the Company's operations and
those of its customers.
COMPETITION
The subsea contracting business is highly competitive. The consolidation in
the offshore oil and gas services industry in the last few years has resulted in
fewer but more substantial competitors. Although the Company believes customers
consider, among other things, the availability and technical capabilities of
equipment and personnel, efficiency, condition of equipment, safety record and
reputation, price competition is the primary factor in determining which
qualified contractor with available equipment will be awarded a contract. SCS's
ships are specialized and have few alternative uses and, because of their nature
and the environment in which they work, have relatively high maintenance costs
whether or not operating. Because these costs are essentially fixed, and in
order to avoid additional expenses associated with temporarily idling its ships,
the Company may from time to time be required to bid its ships in projects at
lower margins depending on the prevailing contractual rates in a given region.
SCS believes that it is one of only three companies capable of providing the
full range of subsea services on a worldwide basis in the major offshore oil and
gas producing regions. Competition across all main product lines is limited to
SCS and two competitors, Coflexip Stena Offshore and Rockwater, a subsidiary of
Brown and Root, itself a division of Halliburton. The Company is subject to
intense competition from these offshore contractors. In certain geographical
regions, and in certain product lines, SCS also competes with J. Ray McDermott
Inc., Global Industries Limited and DSND. The Company also faces substantial
competition from smaller regional competitors and less integrated providers of
subsea services.
OTHER MATTERS
CO-OPERATION ARRANGEMENTS
In certain project specific situations, the Company has entered into
alliances with its customers, engineering companies and other subsea services
providers. The Company has an alliance with NKT Cables, which manufactures
flexible flowlines and risers.
EMPLOYEES
The Company's workforce varies based on the Company's workload at any
particular time. As of March 31, 1999, the Company had approximately 4,000
employees. A significant number of the Company's offshore employees are
represented by labor unions. As part of normal business, a number of union
agreements come up for annual renegotiation in 1999. The Company believes that
it maintains a good relationship with its employees and their unions. In
addition, many workers are hired on a contract basis and are available on short
notice.
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SAFETY AND QUALITY ASSURANCE
The Company maintains a stringent quality assurance program in accordance
with ISO 9001 which encompasses all areas of its operations. Each of the
Company's regional operations has dedicated safety and quality assurance staff
who are responsible for overseeing the projects in that particular region. In
addition, a quality assurance manager located in Aberdeen, Scotland formulates
corporate policies with respect to quality assurance and oversees the
implementation and enforcement of such policies on a Company-wide basis.
RISKS AND INSURANCE
The Company's operations are subject to all the risks normally associated
with offshore development and production and could result in damage to or loss
of property, suspension of operations or injury or death to personnel or third
parties. The Company insures its assets at levels which management believes
reflect their current market value. Such assets include all capital items, such
as ships, major equipment and land-based property. The only assets not insured
are those where the cost of such insurance would be disproportionate to their
value. The Company believes its insurance should protect it against, among other
things, the cost of replacing its ships as a result of total or constructive
total loss.
The Company's operations are conducted in hazardous environments where
accidents involving catastrophic damage or loss of life could result, and
litigation arising from such an event may result in the Company being named a
defendant in lawsuits asserting large claims. The Company insures itself for
liability arising from its operations, both onshore and offshore, including loss
of or damage to third-party property, death or injury to employees or third
parties, statutory workers compensation protection and pollution. Although there
can be no assurance that the amount of insurance carried by the Company is
sufficient to protect it fully in all events, all such insurance is carried at
levels of coverage and deductibles that the Company considers financially
prudent. A successful liability claim for which the Company is underinsured or
uninsured could have a material adverse effect on the Company.
INSPECTION BY A CLASSIFICATION SOCIETY AND DRYDOCKING
The hull and machinery (including diving equipment) of most of the SCS ships
must be "classed" by a classification society authorized by its country of
registry. The classification society certifies that the ship is safe and
seaworthy in accordance with the classification rules as well as with applicable
rules and regulations of the country of registry of the ship and the
international conventions of which that country is a member. Certain of the SCS
ships are not required to be classed, but do comply with applicable regulations.
Each classed ship is inspected by a surveyor of the classification society.
A visual inspection is carried out annually to ascertain the general condition
of the ship or relevant items. Intermediate surveys are carried out at the
second or third annual survey. This survey includes a visual inspection of the
hull structure, machinery and electrical installations and equipment. Renewal
surveys which involve a major inspection of the hull structure, machinery
installations and equipment are carried out at five-yearly intervals. A classed
ship is also required to be drydocked every 30 to 36 months for inspection of
the underwater parts of the ship. As a general policy, the Company drydocks its
classed ships every second year during the winter off-season. Should any defect
be found, the classification society surveyor will issue its report as to
appropriate repairs which must be made by the shipowner within the time limit
prescribed. Insurance underwriters make it a condition of insurance coverage
that a classed ship be "in class," and all of the Company's major classed ships
currently meet that condition.
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The U.S. flagged SCS ships that are U.S. Coast Guard inspected but not
classed are drydocked twice in each five year cycle. The intermediate drydocking
is due between the end of the second and third years of the cycle. The U.S.
flagged Load Line only ships as well as the un-classed Panama and Honduras
flagged ships are drydocked according to the same schedule for Condition Surveys
as required by the respective national Load Line regulations. The annual topside
safety and equipment surveys are very similar to and parallel the traditional
class surveys.
ITEM 2. DESCRIPTION OF PROPERTY
MAJOR ASSETS
The Company operates one of the world's most advanced fleets of subsea
construction support and flowline lay ships from which the majority of SCS's
subsea activities are performed. The following table describes the Company's
major assets, as of March 31, 1999:
<TABLE>
<CAPTION>
YEAR BUILT/ LENGTH OWNED/
NAME CAPABILITIES MAJOR UPGRADE ROVS (METERS) CHARTERED
- -------------------------------- -------------------------------- ----------------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
FLOWLINE LAY SHIPS
SEAWAY EAGLE.................... Flexible flowline lay, multi-
purpose subsea construction 1997 2 140 Owned(1)
SEAWAY CONDOR................... Flexible flowline and umbilical
lay, module handling system,
trenching 1982/1994 2 101 Owned(1)
SEAWAY OSPREY................... Flexible flowline and umbilical
lay, accepts coiled tubing,
straightener for tubing, stern
roller 1984/1992 2 102 Owned(1)
DISCOVERY....................... Flexible flowline lay, subsea
construction 1990 1 120 Chartered(2)
SEAWAY FALCON................... Rigid and flexible flowline and
umbilical lay 1976/1995/1997 2 162 Owned(1)
CONSTRUCTION SHIPS
SEAWAY HARRIER.................. Subsea construction 1985 1 84 Owned(1)
SEAWAY PELICAN.................. Subsea construction 1986/1990 1 94 Chartered(3)
SEAWAY HAWK..................... Subsea construction 1978 -- 94 Owned(1)
SURVEY / INSPECTION, REPAIR AND
MAINTENANCE SHIPS
TOISA PUMA...................... Diving support, light
construction 1985 -- 77 Chartered(4)
SEAWAY SURVEYOR................. Survey 1987/1991 2 66 Chartered(5)
SEAWAY COMMANDER................ Survey 1982/1988 2 75 Chartered(6)
SEAWAY KINGFISHER............... Diverless inspection, repair and
maintenance 1990/1998 2 90 Chartered(7)
SEAWAY INVINCIBLE............... ROV support, subsea construction 1971 -- 70 Chartered(8)
SEAWAY LEGEND................... ROV and hardsuit diving support,
subsea construction 1985/1998 2 64 Owned(1)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
YEAR BUILT/ LENGTH OWNED/
NAME CAPABILITIES MAJOR UPGRADE ROVS (METERS) CHARTERED
- -------------------------------- -------------------------------- ----------------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
CEANIC ROVER.................... ROV support, subsea construction 1966/1991 -- 64 Chartered(9)
AMERICAN DEFENDER............... ROV and hardsuit diving support,
subsea construction 1976 1 67 Owned(1)
AMERICAN PIONEER................ ROV and hardsuit diving support,
subsea construction 1966/1996 1 63 Owned(1)
SHALLOW WATER FLEET
AMERICAN ENDEAVOR............... Utility tug, ROV support 1962 -- 19 Owned
AMERICAN PATRIOT................ Four-point anchor system, 40-ton
crane 1962/1997 -- 50 Owned(1)
AMERICAN CONSTITUTION........... Four-point anchor system,
saturation diving, moonpool 1997 -- 56 Owned(1)
AMERICAN DIVER.................. Diving support 1996 -- 34 Owned
AMERICAN INDEPENDENCE........... Four-point anchor system 1996 -- 47 Owned(1)
AMERICAN LIBERTY................ Four-point anchor system 1996 -- 35 Owned
AMERICAN RECOVERY............... Tug, diving support 1965/1995 -- 43 Owned(1)
AMERICAN SCOUT.................. Diving support 1978 -- 34 Owned
AMERICAN SPIRIT................. Four-point anchor system 1961/1996 -- 36 Owned
AMERICAN STAR................... Four-point anchor system,
saturation diving 1967/1998 -- 47 Owned(1)
AMERICAN TRIUMPH................ Four-point anchor system 1965/1997 -- 48 Owned(1)
AMERICAN VICTORY................ Four-point anchor system 1976/1997 -- 48 Owned(1)
PIPELINE OBSERVER............... Diving support 1982 -- 28 Owned
PIPELINE SURVEYOR............... Diving support 1965/1996 -- 34 Owned
AMERICAN EAGLE.................. Four-point anchor system 1996 -- 44 Owned(1)
AMERICAN PRIDE.................. Four-point anchor system 1977/1992 -- 51 Owned(1)
HEAVY LIFT SHIP / LAY BARGES /
TUGS / OTHER
STANISLAV YUDIN................. Heavy lift, 2,500-ton crane 1985 -- 183 Chartered(10)
NTL 900 (NAN TIAN LONG)......... Derrick lay barge 1992 -- 100 Chartered(11)
ANNETTE......................... Pipelay barge, marine
construction 1989/1997 -- 61 Owned
ARWANA.......................... Pipelay barge 1998 -- 70 Owned
APM 205......................... Barge 1966/1997 -- 61 Owned
JASAMARINE V (EX SIN THAI HIN Flat top barge fitted out for
IV)........................... inshore diving/construction 1978 -- 55 Owned
BULDRA.......................... Work barge, shallow water diving
operations 1977 -- 25 Owned
GOLEK........................... Transport barge 1983/1992 -- 46 Owned
DE ZHONG........................ Offshore tug, supply ship 1997 -- 64 Chartered(11)
POLKA........................... River tug and anchor handler 1971 -- 12 Owned
KAREGINA........................ Push boat 1979 -- 8 Owned
MINDY ANN....................... Push boat 1986 -- 8 Owned
</TABLE>
9
<PAGE>
- ------------------------
(1) Subject to mortgage under the Company's current credit facilities.
(2) Chartered from Friary Ocean Surveyor NV through September 2002, with options
to extend through 2011 and with options to purchase.
(3) Chartered from DSND Shipping AS through December 1999.
(4) Chartered from Toisa Ltd. through December 2000, with options to extend
through 2001.
(5) Chartered from DSND Chartering I KS through December 1999.
(6) Chartered from DSND Chartering I KS through December 1999, with options to
extend through 2002.
(7) Chartered from Kingfisher DA in which the Company has a 50% ownership, for
five years starting in 1998, with options to extend through December 2013
and with options to purchase.
(8) Chartered from Tidewater Inc. through September 2001 with option to
purchase.
(9) Chartered from Tidewater Inc. through July 2001 with option to purchase.
(10) Chartered to SHL by a subsidiary of the ship's owner, LKMN, through October
2001 with a possibility for extensions.
(11) Chartered from Guangzhou Salvage Co., Ltd through October 2000 with options
to extend through 2003.
OTHER PROPERTIES
As of March 31, 1999, SCS owns or holds under long-term leases real estate
property as described below:
<TABLE>
<CAPTION>
WORK OR STORAGE
OFFICE SPACE SPACE OR LAND
(SQUARE METERS) (SQUARE METERS) STATUS
----------------- --------------- -----------------
<S> <C> <C> <C>
Aberdeen, Scotland........................................... 7,761 103,369 Owned/Leased
Baku, Azerbaijan............................................. 66 -- Leased
Buenos Aires, Argentina...................................... 100 -- Leased
Columbus, Ohio............................................... 279 8,614 Leased
Dhahran, Saudi Arabia........................................ 330 750 Leased
Dundee, Scotland............................................. -- 8,234 Leased
Haugesund, Norway (1)........................................ 2,570 22,860 Owned/Leased
Houston, Texas............................................... 4,208 15,489 Leased
Jakarta, Indonesia........................................... 915 601 Leased
Lagos, Nigeria............................................... 200 -- Leased
Luanda, Angola............................................... 53 690 Leased
Macae City, Brazil........................................... 1,285 3,685 Owned/Leased
Marseille, France............................................ 1,005 416 Leased
New Orleans, Louisiana....................................... 305 56,658 Owned
Oxnard, California........................................... 929 6,643 Leased
Perth, Australia............................................. 1,783 2,233 Leased
Port Gentil, Gabon........................................... 305 5,070 Leased
Port Harcourt, Nigeria....................................... 400 300 Leased
Port of Fourchon, Louisiana.................................. 650 74,240 Leased
Port of Iberia, Louisiana.................................... 1,796 95,688 Owned
Rio de Janeiro, Brazil....................................... 295 -- Leased
Singapore.................................................... 369 1,383 Leased
Stavanger, Norway............................................ 3,346 100 Leased
Vancouver, Canada............................................ 1,161 785 Leased
</TABLE>
- ------------------------
(1) Owned subject to mortgage
10
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Swiss Court of Insurance "Tribunal Federal des Assurances" entered a
judgement on April 29, 1992 against Sogexpat S.A. ("Sogexpat"), a subsidiary of
the Company, in litigation brought by a Swiss governmental entity claiming
payment of social security contributions in arrears. During the year ended
November 30, 1993, the Company wound up Sogexpat and transferred the employees
to other Group companies. The French government has investigated Stolt Comex
Seaway S.A. of France alleging violations of French labor and social security
legislation, which has resulted during 1998 in a condemnation by the French
Supreme Court of Stolt Comex Seaway S.A. of France and two of its former
directors. In addition, a number of former and present employees have started
civil proceedings against certain subsidiaries of the Company alleging loss of
employment and social security benefits. Some of the proceedings have recently
commenced while some have already resulted in court decisions. One such decision
has been appealed to the French Supreme Court. While the Company believes that
its subsidiaries have meritorious defenses in these cases, there can be no
certainty as to the number of claims which may be brought or the amount for
which the Company may eventually be liable with respect thereto. Comex S.A., a
former shareholder of Comex Services S.A. ("Comex"), in an agreement with SNSA
executed on June 5, 1992 for the sale of Comex, agreed to indemnify the Company
with respect to certain aspects of the foregoing. There can be no assurance,
however, as to the amount which the Company may ultimately recover from Comex
S.A. pursuant to such indemnity.
Coflexip S.A. commenced legal proceedings in the Patents Court, Chancery
Division of the High Court of Justice in the U.K. against three subsidiaries of
the Company claiming infringement of a certain patent relating to flexible
flowline laying technology. In holdings on January 22, 1999 and January 29,
1999, the Court found the disputed patent valid. The Company has appealed. The
Company has provided in the November 30, 1998 financial statements an amount to
cover the estimated liability for Coflexip S.A.'s legal costs resulting from the
litigation. No provision has been made for damages. The extent of the liability
for damages, if any, to Coflexip S.A. for patent infringement in the U.K. is
unknown at this time.
The Company is a party to various other legal proceedings arising in the
ordinary course of business.
The Company believes that such legal proceedings will not have a material
effect on the Company's business or financial condition.
ITEM 4. CONTROL OF REGISTRANT
Except as set forth below, SCS is not, directly or indirectly, owned by
another corporation or by any government. There are no arrangements known to the
Company, the operation of which may at a subsequent date result in a change in
control of SCS.
Set forth below is information concerning the share ownership of all persons
who owned beneficially 10% or more of the Common Share equivalents, and the
beneficial ownership of all Directors and persons employed by the Company's
subsidiaries who perform executive and administrative functions for the
Company's combined businesses, as a group, as of March 31, 1999:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF NUMBER OF
COMMON CLASS A CLASS B
NAME OF BENEFICIAL OWNER OR SHARES PERCENTAGE SHARES PERCENTAGE SHARES PERCENTAGE
IDENTITY OF GROUP OWNED OF CLASS OWNED OF CLASS OWNED OF CLASS
- ------------------------------ ----------- --------------- ----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Stolt-Nielsen Transportation
Group Ltd ("SNTG").......... 700,000 3.13% 8,800,000 44.72% 34,000,000 100%
Directors and officers as a
group (19 persons).......... 111,350 0.50% 145,900 0.74% -- --
<CAPTION>
PERCENTAGE OF
ECONOMICALLY
NAME OF BENEFICIAL OWNER OR EQUIVALENT
IDENTITY OF GROUP SHARES OWNED
- ------------------------------ ---------------
<S> <C>
Stolt-Nielsen Transportation
Group Ltd ("SNTG").......... 44.88%
Directors and officers as a
group (19 persons).......... 0.44%
</TABLE>
- ------------------------
(1) SNTG owns 34,000,000 Class B Shares, constituting 100% of that class. Each
Class B Share represents one-half of the economic interest of one Common
Share (with dividend and liquidation rights equivalent to one-half of a
Common Share) and is convertible into Common Shares on a two-for-one basis.
If SNSA or its affiliates dispose of Class B Shares to a third party, such
Class B Shares automatically convert into Common Shares on such two-for-one
basis.
11
<PAGE>
SNSA is the 100% owner of SNTG. Fiducia Ltd., a company owned by trusts of
which the Stolt-Nielsen family are beneficiaries, owns approximately 61% of the
outstanding Common Shares of SNSA. Jacob Stolt-Nielsen, owns all of the
Founder's Shares of SNSA. The Common Shares owned by Fiducia Ltd. represent
approximately 48.5% of SNSA's outstanding voting securities and the Founder's
Shares owned by Mr. Stolt-Nielsen represent approximately 21% of SNSA's
outstanding voting securities. The Common Shares of SNSA are traded on Nasdaq
and the Oslo Stock Exchange.
ITEM 5. NATURE OF TRADING MARKET
SCS's Common Shares are primarily traded on Nasdaq under the symbol "SCSWF".
The Common Shares are also listed for trading on the Oslo Stock Exchange under
the symbol "SCS". SCS's Class A Shares are listed for trading on Nasdaq as
American Depositary Shares ("ADSs"), each of which represents one Class A Share,
under the symbol "SCSAY" and on the Oslo Stock Exchange under the symbol "SCSA".
Trading in the Class A Shares and ADSs commenced in June 1998.
The following table sets forth, for the fiscal periods indicated, the range
of high and low closing sale prices for the Common Shares and the Class A
Shares, in each case to reflect the two-for-one stock split completed on January
29, 1998 and the Class A Share distribution made on June 25, 1998:
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
NASDAQ
COMMON SHARES
1998
1st Quarter............................................................. $ 18.016 $ 12.625
2nd Quarter............................................................. 24.422 14.422
3rd Quarter............................................................. 20.344 7.875
4th Quarter............................................................. 13.500 8.125
1997
1st Quarter............................................................. $ 6.594 $ 4.953
2nd Quarter............................................................. 7.734 5.875
3rd Quarter............................................................. 17.797 7.547
4th Quarter............................................................. 22.141 16.391
CLASS A SHARES
1998
1st Quarter............................................................. -- --
2nd Quarter............................................................. -- --
3rd Quarter............................................................. $ 18.500 $ 5.688
4th Quarter............................................................. 11.938 6.500
OSLO STOCK EXCHANGE (NORWEGIAN KRONER)
COMMON SHARES
1998
1st Quarter............................................................. 134.73 94.05
2nd Quarter............................................................. 178.09 115.39
3rd Quarter............................................................. 154.00 67.00
4th Quarter............................................................. 101.00 61.00
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1997
1st Quarter............................................................. -- --
2nd Quarter............................................................. -- --
3rd Quarter............................................................. 126.73 57.36
4th Quarter............................................................. 181.76 119.56
CLASS A SHARES
1998
1st Quarter............................................................. -- --
2nd Quarter............................................................. -- --
3rd Quarter............................................................. 143.50 45.00
4th Quarter............................................................. 83.00 45.30
</TABLE>
As of March 1, 1999 (the record date for voting at the Annual General
Meeting), 22,361,280 Common Shares, representing 99.98% of the outstanding
Common Shares, were registered in the names of 39 shareholders having U.S.
addresses (although some of such shares may be held on behalf of non-U.S.
persons). The Common Shares were held by a total of 44 shareholders of record.
Based on communications with banks and securities dealers who hold the Common
Shares in street name for individuals, the Company estimates that the number of
beneficial owners of the Common Shares exceeds 3,000.
As of March 1, 1999, approximately 5,389,336 Common Shares were registered
in the names of 507 shareholders in the Norwegian Verdipapirsentralen ("VPS")
system in Norway. The registration of Common Shares in the VPS system is a
"sub-registrar" arrangement, effected through a U.S. nominee shareholder, so
that the total number of Common Shares in the VPS system is also included in the
total number of Common Shares in the preceding paragraph.
As of March 1, 1999, there were a total of 10,354,574 ADSs of which
10,351,438 were registered in the names of 24 shareholders having U.S. addresses
(although some of such ADSs may be held on behalf of non-U.S. persons). Based on
communications with banks and security dealers who hold SCS's ADSs in street
name for individuals, the Company estimates that the number of beneficial owners
of ADSs exceeds 2,000. As of such date, the ADSs represented 52.61% of the
outstanding Class A Shares of SCS.
All of the Class A Shares (including ADSs) are registered in the VPS system
in Norway. As of March 1, 1999, excluding the Class A Shares held represented by
ADSs and Class A Shares held by SNTG, it is estimated that the free float of
Class A Shares traded on the Oslo Stock Exchange is 825,413 shares registered in
the names of 193 shareholders.
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
EXCHANGE CONTROLS
SCS has been advised by Elvinger, Hoss & Prussen, Luxembourg counsel to the
Company, that at the present time there are no exchange controls in existence in
Luxembourg which would impact the Company's operations or affect the Company's
ability to pay dividends to non-resident shareholders.
LIMITATIONS AFFECTING SHAREHOLDERS
The Company's Articles provide restrictions on the shareholdings of certain
"U.S. Persons." Persons includes any individual, firm, corporation or other
entity, and certain associates and affiliates thereof. The Articles provide that
no one U.S. Person (including any Person who is a citizen or resident of the
U.S., a corporation organized under the laws of the U.S. or any State thereof, a
corporation organized under the laws of any other jurisdiction whose shares are
owned by U.S. Persons, a partnership organized under the
13
<PAGE>
laws of any State of the U.S., and certain trusts and estates) may own, directly
or indirectly, more than 9.9% of the Company's total outstanding shares at any
particular time.
In addition, the Board is authorized to restrict, reduce or prevent the
ownership of the Company's shares if it appears to the Board that such ownership
may threaten the Company with "imminent and grave damage." Luxembourg company
law does not provide a specific definition of imminent and grave damage, but
instead leaves the interpretation of the phrase within the Board's discretion.
The Company has been advised by its Luxembourg counsel, Elvinger, Hoss &
Prussen, that there are no Luxembourg judicial interpretations of the phrase,
but that situations involving hostile takeovers, adverse tax consequences to the
Company or governmental sanctions are likely to be among the situations covered
by such phrase.
In order to enforce the foregoing restrictions, the Articles empower the
Board to take certain remedial action including causing the Company: (i) to
decline to register any prohibited transfer; (ii) to decline to recognize any
vote of a shareholder precluded from holding shares; (iii) to require any
shareholder on the Company's Register of Shareholders or any prospective
shareholder to provide information to determine whether such person is precluded
from holding shares and (iv) upon the issuance of a notice, to require the sale
of shares to the Company at the lesser of (A) the amount paid for the shares if
acquired within the twelve months immediately preceding the date of the notice,
and (B) the last quoted sale price for the shares on the day immediately
preceding the day on which the notice is served (provided that the Board may in
its discretion pay the amount calculated under (B) in situations where (A) would
otherwise apply and result in a lower purchase price, if the Board determines it
equitable after taking into account specified factors); and to remove the name
of any shareholder from the Register of Shareholders immediately after the close
of business on the day the notice is issued and payment is made available. The
foregoing defensive measures may have the effect of making more difficult a
merger involving the Company, or a tender offer, open-market purchase program or
other purchase of the Company's shares, in circumstances that could give
shareholders the opportunity to realize a premium over the then prevailing
market price for their shares.
There are no limitations currently imposed by Luxembourg law on the rights
of non-resident SCS shareholders to hold or vote their shares.
ITEM 7. TAXATION
U.S. TAXATION
U.S. corporations, citizens and residents will be subject to U.S. income
taxation on dividends and other distributions paid by SCS and on any gains
derived from the sale of SCS shares.
LUXEMBOURG TAXATION
Other than certain former Luxembourg residents, current Luxembourg residents
and those non-residents who maintain a permanent establishment in Luxembourg
with which the holding of SCS Common Shares is connected, SCS shareholders are
not subject to taxation in Luxembourg.
ITEM 8. SELECTED FINANCIAL DATA
The information under the caption "Selected Consolidated Financial Data" on
page 25 of the Company's 1998 Annual Report filed with the Securities and
Exchange Commission on Form 6-K is incorporated herein by reference.
DIVIDENDS
The Company has made no cash dividend payments since going public in May
1993.
14
<PAGE>
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information included under the caption "Management's Discussion and
Analysis of Results of Operations and Financial Condition" on pages 17 through
24 of the Company's 1998 Annual Report filed with the Commission on Form 6-K is
incorporated herein by reference.
RECENT DEVELOPMENTS
For the first quarter of 1999, SCS reported a net income of $0.6 million on
net operating revenue of $145.1 million. This compares with a net income of $0.9
million, before the cumulative effect of a change in accounting policy, on net
operating revenue of $92.4 million for the same period in 1998. The results for
the first quarter of 1998 have been restated to reflect the change in drydocking
accounting policy that occurred in the third quarter of 1998. Net income in the
first quarter of 1998 after the effect of the change in accounting policy for
drydocking was $4.0 million.
On December 9, 1998, the Company acquired the remotely operated vehicle
business of Dolphin A/S in a cash transaction for $16.9 million.
In March 1999 the Company acquired the diving division of J. Ray McDermott
Inc. in the Gulf of Mexico and is now providing all diving and related subsea
services to J. Ray McDermott Inc. in this region for a five-year period under an
exclusive agreement.
Subsequent to November 30, 1998, the Company reached agreement for a new
credit facility with Den norske Bank ASA, Bank of America NT & SA, Midland Bank
plc, and ASKL-CGER Bank nv/sa. This new facility is in the form of a five year
revolving credit line. The initial available amount is $150 million which will
be reduced by $12.5 million semi annually leaving $37.5 million due at maturity.
This facility will be used to repay the long-term debt due to SNSA of $150
million.
THE YEAR 2000 ISSUE
The Company has established a company-wide initiative to identify, evaluate
and address Year 2000 issues. Beginning in 1997 the Company's Year 2000 effort
has encompassed five main areas; asset integrity, information technology,
infrastructure, business systems and commercial integrity, and is split into
five main phases. These phases, the first three of which are largely complete,
are: an awareness program for the Company's staff, a complete inventory of the
issues, development of an action plan, testing and redevelopment of systems and
the development of a business contingency plan. In addition the project includes
a review of the Year 2000 compliance efforts of key suppliers, customers and
other principal business partners.
Work is progressing on the testing and redevelopment phase of the project
and this is planned to be substantially complete by June 1999 for all those
areas assessed to be of high or medium impact to the business. The Company's
ability to meet that target is dependent on a variety of factors including the
timely provision of necessary upgrades and notifications by suppliers. In
addition the Company has no method of ensuring that third parties who supply
essential services such as utilities will convert their critical systems and
processes in a timely manner. Failure or delay by any of these parties could
significantly disrupt the business. However a supplier compliance program has
been established and the Company is working with its key suppliers to minimize
such risks.
It is currently estimated that the Company will incur approximately $0.6
million of expenses through 2000 in connection with the efforts on Year 2000
issues. At March 31, 1999 the Company had incurred $0.2 million. The timing of
the expenses may vary and are not necessarily an indication of the progress to
date on the project.
15
<PAGE>
The Company has started contingency planning for critical operational areas
that may be affected by the Year 2000 issue and expects to have a full plan in
place by June 1999. This will include contingency plans which may be required
should any third parties fail to achieve Year 2000 compliance.
While the Company believes its efforts to address the Year 2000 issue will
be successful in avoiding any material adverse effect on the Company's
operations or functional condition, it recognizes that failing to resolve Year
2000 issues on a timely basis would, in a "most reasonably likely worst case
scenario", significantly limit its ability to provide its services for a period
of time, especially if such failure occurs in conjunction with third party or
infrastructure failures.
Similarly, the Company could be significantly affected by the failure of one
or more significant suppliers, customers or components of the infrastructure, to
conduct their respective activities after 1999. Adverse effects on the Company
could include, among other things, business disruption, increased costs, and
loss of business.
FORWARD-LOOKING STATEMENTS
This Report contains "forward-looking statements" within the meaning of the
U.S. Private Securities Litigation Reform Act of 1995. These forward-looking
statements include, but are not limited to, statements in the subsections of
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" entitled "Overview", "North Sea", "Asia Pacific", "Gulf of Mexico",
"Liquidity and Capital Resources", "Euro", "The Year 2000 Issue", "Subsequent
Events", "Market Risk Discussion" and "Impact of New Accounting Standards". In
addition, this Report contains forward-looking statements relating to the
Company's performance in the "Description of Business" section. Actual and
future results and trends could differ materially from those set forth in such
statements due to various factors. Such factors include, among others: general
economic and business conditions; industry capacity; industry trends;
competition; currency fluctuations; the loss of any significant customers;
changes in business strategy or development plans; project performance;
availability and reliability of ships and other assets; availability, terms, and
deployment of capital; the ability of the Company and its significant customers
and suppliers to successfully implement timely Year 2000 solutions; availability
of qualified personnel; changes in, or failure or inability to comply with,
governmental regulations; adverse weather conditions; and other factors
referenced in this Report.
FACTORS AFFECTING REVENUES AND COSTS
INDUSTRY CONDITIONS
Demand for the Company's subsea services depends upon the condition of the
oil and gas industry and particularly upon capital expenditure budgets of the
companies engaged in the exploration, development and production of offshore oil
and gas. The prices of oil and gas and their uncertainty in the future, along
with forecasted growth in world oil and gas demand, will strongly influence the
extent of offshore exploration and development activities. Offshore oil and gas
field capital expenditures also are influenced by the sale and expiration dates
of offshore leases, the discovery rate of new oil and gas reserves in offshore
areas, local and international political and economic conditions and the ability
of oil and gas companies to access or generate capital. These factors are beyond
the control of SCS.
OPERATING RISKS
Subsea services involves operational risk and is increasingly dependent on
large, expensive, special-purpose ships and equipment. Hazards, such as ships
capsizing, sinking, grounding, colliding and sustaining damage from severe
weather conditions are inherent in the marine operations of subsea services.
These hazards can cause personal injury and loss of life, severe damage to, and
destruction of, property and equipment, pollution or environmental damage and
suspension of operations. All employees engaged in SCS's offshore operations are
covered by provisions of local and maritime laws, which generally provide
16
<PAGE>
that employees or their representatives can bring actions against SCS for
damages for job-related injuries. In addition, although SCS generally seeks to
obtain indemnity agreements whenever possible from its customers requiring such
customers to hold SCS harmless in the event of structural damage, loss of
production or liability for pollution that originates below the water surface,
when obtained such contractual indemnification does not generally cover
liability resulting from the gross negligence or wilful misconduct of or
violation of law by employees or subcontractors of SCS and may not in all cases
be supported by adequate insurance maintained by the customer.
CONTRACT BIDDING RISKS
Reflecting market practice, a significant proportion of SCS's business is
performed on a fixed-price or turnkey basis. Gross profits realized on such
contracts vary, sometimes substantially, from the estimated amounts because of
changes in offshore job conditions, the risks inherent in marine construction
and variations in labor and equipment productivity from those originally
projected, and significant losses can result from performing fixed-price or
turnkey contracts. Under such contracts, SCS also typically bears a proportion
of the risk of delays and extra costs caused by adverse weather conditions or
other circumstances.
On some projects the Company may be performing work under joint venture
agreements where the Company and its partner are jointly and severally liable
towards the customer for the performance of the contract while they between
themselves carry the full responsibility only for their own share of the work.
If the Company's joint venture partner in such arrangement fails to fulfill its
obligations, the Company could have to carry the resultant liability towards the
customer.
PERCENTAGE-OF-COMPLETION PROJECT ACCOUNTING
As most of SCS's contract revenue is recognized on a
percentage-of-completion basis, based on the ratio of costs incurred to the
total estimated costs at completion, contract revenues and gross profits for a
project may be adjusted in subsequent reporting periods from those originally
reported in prior periods. To the extent that these adjustments result in a
reduction or elimination of previously reported profits, SCS would recognize a
charge against current earnings that may be significant depending on the size of
the project or the adjustment.
POLITICAL AND ECONOMIC RISK
SCS's operations are geographically spread throughout the world, and are
therefore subject to various political, economic and other uncertainties,
including, among others, political instability, civil unrest, the risks of war,
asset seizure, nationalization of assets, renegotiation or nullification of
existing contracts, taxation policies, foreign exchange restrictions or
fluctuations and changing political conditions. Additionally, the ability of SCS
to compete in international markets may be adversely affected by governmental
regulations that favor or require the awarding of contracts to local
contractors, or by regulations requiring foreign contractors to employ citizens
of, or purchase supplies from, a particular jurisdiction. Furthermore, SCS's
subsidiaries may face governmentally imposed restrictions from time to time on
their ability to transfer funds to the Company. No predictions can be made as to
what governmental regulations applicable to SCS's operations may be enacted in
the future.
SEASONALITY
Over the past three years, approximately two-thirds of the Company's revenue
has been generated from work performed in the North Sea. In the future there is
likely to be increased activity in the Gulf of Mexico. Although it is less
apparent than in the past due to advances in technology, adverse weather
conditions in the North Sea and the Gulf of Mexico generally result in less
activity in these regions during
17
<PAGE>
the winter months. Therefore, full year results are not likely to be a direct
multiple of any particular quarter or combination of quarters.
DEPENDENCE ON SIGNIFICANT CUSTOMERS
SCS's major customers are oil companies and large offshore contractors.
During 1998, one of SCS's customers accounted for more than 22%, and SCS's top
seven customers accounted for approximately 60%, of SCS's net operating revenue.
The loss of any one or more of these significant customers could have a material
adverse effect on SCS.
COMPETITION
The subsea business is highly competitive, and offshore subsea contractors
compete intensely for available projects. Contracts for SCS's services are
generally awarded on a competitive bid basis, and although customers may
consider, among other things, the availability and capability of equipment, and
the reputation and experience of the contractor, price is a primary factor in
determining which contractor is awarded a contract. Several of SCS's competitors
and potential competitors are larger and have greater financial and other
resources than SCS. In addition, increased activity levels may attract
additional competitors or equipment to the market and inhibit pricing
improvement.
HAZARDOUS ACTIVITIES
The operation of any ocean-going ship carries an inherent risk of
catastrophic marine disasters and property losses caused by adverse weather
conditions, mechanical failures, human error, war, terrorism, piracy, labor
stoppages and other circumstances or events. Any such event may result in loss
of revenues or increased costs.
The Company carries insurance to protect against most of the
accident-related risks involved in the conduct of its business and it maintains
environmental damage and pollution insurance coverage. There can be no
assurance, however, that all risks are adequately insured against, that any
particular claim will be paid or that the Company will be able to procure
adequate insurance coverage at commercially reasonable rates in the future. In
particular, more stringent environmental regulations may result in increased
costs for, or the lack of availability of, insurance against the risks of
environmental damage or pollution.
While the Company currently insures its ships against property loss due to a
catastrophic marine disaster, mechanical failure or collision, the loss of any
ship as a result of such an event could result in a substantial loss of
revenues, increased costs and other liabilities in excess of available insurance
and could have a material adverse effect on operating performance. Litigation
arising from such an occurrence may result in the Company being named as a
defendant in lawsuits asserting large claims.
REGULATORY AND ENVIRONMENTAL MATTERS
The Company operates in a number of different jurisdictions and is subject
to and affected by various types of governmental regulation, including national
laws and regulations and international conventions relating to ship safety and
design requirements, disposal of hazardous materials, discharge of oil or
hazardous substances, protection of the environment, food safety, and various
import and export requirements. These laws and regulations are becoming
increasingly complex, stringent and expensive to comply with, and there can be
no assurance that continued compliance with existing or future laws or
regulations will not adversely affect the operations of the Company. Significant
fines and penalties may be imposed for non-compliance.
In addition, the Company could be held liable for remediation of, and
damages arising from, pollution caused by its ships and for releases of oil and
hazardous substances and debris from offshore production platforms, pipelines,
subsea facilities and other assets owned or operated by its customers, and for
releases
18
<PAGE>
resulting from activities of, or equipment owned by, its subcontractors.
Although the Company generally negotiates contractual provisions requiring
customers to indemnify the Company in the event any such liability is imposed,
the Company has not obtained such indemnification in all cases. Moreover, such
indemnification does not generally cover liability resulting from the gross
negligence or wilful misconduct of, or violation of law by, employees or
subcontractors of the Company.
CERTAIN FINANCIAL REQUIREMENTS
The Company is party to material bank credit and other financing agreements
which impose certain financial requirements such as limitations on debt and the
types of businesses the Company may engage in. At the end of 1998, the Company
was in compliance with all of these credit/financing agreements. Except for
these financial requirements, none of these agreements imposes material
restrictions on the ability of the Company to incur additional indebtedness or
operate its businesses. Although management believes that current operating
plans will not be restricted by these requirements in the future, changes in
economic or business conditions, results of operations or other factors may in
the future result in circumstances in which the requirements restrict the
Company's plans or business operations
LEVERAGE
The degree to which the Company is leveraged may affect its ability to
obtain additional financing in the future for working capital, capital
expenditures, product and service development, and general corporate purposes,
to utilize cash flow from operations for purposes other than debt service, and
to overcome seasonal or other cyclical variations in its business. The ability
of the Company to satisfy its obligations and to reduce its debt is dependent on
the future performance of the Company, which will be subject to the prevailing
economic conditions and to financial, business, and other factors including
those beyond the Company's control.
INTEREST RATES
Approximately 40% of the Company's long-term indebtedness at March 31, 1999
is accrued at rates that fluctuate with the prevailing interest rates and,
accordingly, increases in such rates may increase the Company's interest cost.
CAPITAL REQUIREMENTS
The acquisition of new assets and properties, both for growth as well as
replacement, is capital intensive. The availability of new capital to finance
these expenditures depends on the prevailing market conditions and the
acceptability of financing terms offered to the Company. Management believes
that capital expected to be available under the various lines of credit,
financing agreements, and other sources and from disposition of existing assets
and properties as well as cash generated from operations, should be sufficient
to meet its capital requirements for the foreseeable future. No assurance,
however, can be given that financing will continue to be available on attractive
terms.
FOREIGN CURRENCY FLUCTUATIONS
Substantial portions of the Company's revenue and expenses are denominated
in currencies other than U.S. dollars. Fluctuations in these currencies can have
a significant impact on the Company's financial results. The Company engages in
hedging programs intended to reduce part of the Company's short-term exposure to
currency fluctuations. However, there can be no assurances that such efforts
will be successful. Hedging is limited to known and foreseeable exposures that
develop through normal business operations and to long-term business
investments. The Company does not attempt to hedge foreign earnings that are
translated into dollars for reporting purposes. Foreign currency fluctuations
have had and will continue to have an impact on reported financial results.
19
<PAGE>
TAXES
The Company's operations are conducted in Norway and the U.K. as well as
certain other countries in Europe, Africa, the Middle East, Asia Pacific, North
America and South America. Net income earned from operations in most of such
countries are subject to corporate income taxes and withholding taxes on
dividends paid to other members of the Company's group.
Certain of the Company's subsidiaries may be subject to income tax in the
U.S. and other jurisdictions. The subsidiaries which are incorporated in the
U.S. file a consolidated Federal income tax return, and other subsidiaries file
separate tax returns if and as required.
RESTRUCTURING
To operate in a price competitive manner, the Company regularly reviews its
operations. This review process may result in the closure of offices or
departments, the sale of assets or business lines, the termination of personnel,
or the reassessment of the useful life of assets or technology. Such actions may
affect the Company's results.
LABOR RELATIONS
The Company considers its relations with its employees and their unions to
be good and has not experienced any significant work stoppages. There can be no
assurances however that disruption of the Company's services or production, or
that larger labor disputes involving the industries the Company operates in will
not adversely affect the Company's results.
ACQUISITION AND EXPANSION STRATEGY
One element of the Company's strategy is to continue to grow through
selected acquisitions that further consolidate the markets in which the Company
operates. Likewise the Company plans on expanding its operations at existing or
new locations. There can be no assurance that any currently planned acquisitions
or expansions will be completed or that any currently planned or any additional
acquisitions or expansions will be successful in enhancing the operations or
profitability of the Company; that the Company will be able to identify suitable
additional acquisition candidates or areas for expansion; that it will have the
financial ability to consummate additional acquisitions or expansions; or that
it will be able to consummate such additional acquisitions or expansions on
terms favorable to the Company.
ITEM 9A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk, including changes in interest rates
and currency exchange rates. To manage the volatility relating to these
exposures on a consolidated basis, the Company nets the exposure and takes
advantage of natural offsets and enters into derivative transactions for the
remaining currency exposures in accordance with the Company's policies. The
financial impact of these instruments are offset by corresponding changes in the
underlying exposure being hedged. The Company does not hold or issue derivative
instruments for trading purposes.
The primary purpose of the Company's foreign currency hedging activities is
to protect against the volatility associated with foreign currency liabilities
or receipts created in the normal course of business. The Company's policy
prescribes the range of allowable hedging activity. The Company primarily
utilizes forward exchange contracts and purchased options with a duration of
generally less than twelve months.
The Company uses a value-at-risk ("VAR") model to assess the market risk of
its derivative financial instruments. The model utilizes a variance/covariance
modeling technique. VAR models are intended to measure the maximum potential
loss for an instrument or portfolio assuming adverse changes in market
conditions, for a specific time period and confidence level. The Company's
estimated maximum potential one day loss in fair value of foreign exchange rate
instruments, calculated using the VAR model given a
20
<PAGE>
95% confidence level, would not materially affect the consolidated financial
position, results of operations, or cash flow. Actual results in the future may
differ materially from these projected results due to actual developments in the
global financial markets.
Based on the Company's overall interest rate exposures as of March 31, 1999,
a near-term change in interest rates would not materially affect the
consolidated financial position, results of operations, or cash flows.
All of the Company's derivative activities are over the counter instruments
entered into with major financial credit institutions to hedge the Company's
committed exposures. All of the Company's derivative instruments are straight
forward foreign exchange forward contracts which subject the Company to a
minimum level of exposure risk. The Company does not consider it has a material
exposure to credit risk from third parties failing to perform according to the
terms of hedge instruments.
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT
SCS is a Luxembourg holding company and does not have officers as such. The
following is a list of the Directors of the Company and persons employed by its
subsidiaries who perform the indicated executive and administrative functions
for the combined business of the Company's subsidiaries:
<TABLE>
<CAPTION>
NAME AGE* POSITION
- ------------------------------------------ ----- --------------------------------------------------------
<S> <C> <C>
Jacob Stolt-Nielsen....................... 67 Chairman of the Board of Directors
Christopher J. Wright..................... 64 Deputy Chairman of the Board of Directors
Alan Brunnen.............................. 37 Chief Operating Officer and Vice President, U.K.
Andre Bursaux............................. 47 Vice President, SEAME
Brian Butler.............................. 49 Vice President, Asia Pacific
Paul Frikstad............................. 48 Chief Financial Officer
John P. Laborde........................... 74 Director
Phillippe Lamoure......................... 46 Vice President, South America
Bjorn Myklatun............................ 51 Vice President, Norway
Kevin Peterson............................ 41 Vice President, North and Central America
Fernand Poimboeuf......................... 66 Director
Malcolm Seeley............................ 47 Vice President, Engineering
J. Frithjof Skouveroe..................... 55 Director
Julian Thomson............................ 50 Group Manager, Marketing and Communications
Stephen Vorley............................ 44 Vice President, Field Development
Bernard Vossier........................... 54 Chief Executive Officer
Tom Welsh................................. 41 Vice President, Operations
Alan West................................. 40 Vice President, Subsea Construction
Mark Woolveridge.......................... 64 Director
</TABLE>
- ------------------------
* As of March 31, 1999.
Under the terms of the Company's Articles of Incorporation, its Directors
may be elected for terms of up to six years and serve until their successors are
elected. It has been the Company's practice to elect directors for one year
terms. Under the Articles, the Board consists of not fewer than three Directors.
As of March 31, 1999, the Company's Board of Directors consisted of six members.
Mr. Stolt-Nielsen has served as Chairman of the Board since 1993. Mr.
Stolt-Nielsen also serves as Chairman and Chief Executive Officer of SNSA. He
founded Seaway in 1973. Mr. Stolt-Nielsen is a Norwegian citizen.
Mr. Wright has served as Deputy Chairman of the Board since 1993. He has
served as President and Chief Operating Officer of SNSA since 1986. Mr. Wright
was employed by British Petroleum plc ("BP")
21
<PAGE>
from 1958 until the time he joined SNSA. Mr. Wright held a variety of positions
at BP including Senior Vice President of BP North America from 1982 to 1986. He
is a British citizen.
Mr. Brunnen was appointed Chief Operating Officer on February 15, 1999. He
joined Seaway in 1992 and was involved in managing several major projects prior
to his appointment as Vice President, U.K. in 1995, a role which he continues to
fulfill. Prior to his appointment as Chief Operating Officer, he held the
position of Vice President, Organization and Process Development from February
15, 1998.
Mr. Bursaux rejoined the Company in 1995 and was appointed Vice President,
SEAME, as of April 3, 1995. He came from a consulting firm specializing in
strategic marketing and management of company mergers. When previously with
Comex between the years of 1971-1985, he held various positions in engineering
and commercial activities, ultimately as Vice President, North Sea.
Mr. Butler joined the Company as Vice President, Asia Pacific, as of
September 15, 1995. He was previously Managing Director of Swire Pacific
Offshore in Singapore and had held various technical and management positions in
the Swire Group involved with the oil and gas industry in the Middle East and
Far East.
Mr. Frikstad joined the Company as Chief Financial Officer in June 1995. He
was previously Vice President, Offshore, in Mosvold Shipping A.S. and has more
than twenty years of experience in the offshore industry working for oil
companies and oil service contractors.
Mr. Laborde has been a Director since 1993. He retired in 1995 as Chairman
of the Board, President and Chief Executive Officer of Tidewater Inc. and
continues to serve as a member of the Board of Directors of Tidewater. He is now
Chief Executive Officer of Laborde Marine Lifts, Inc. and also serves on the
boards of Stone Energy Corporation and Stewart Enterprises as well as the
Council of the American Bureau of Shipping. Mr. Laborde is a U.S. citizen.
Mr. Lamoure was appointed Vice President, South America, as of March 1,
1995. He has been employed by the Company since 1974 when he joined Comex, most
recently General Manager for the Company's operations in France, Africa and
South America from 1994 to March 1995 and Operations Manager in Brazil from 1981
to 1994.
Mr. Myklatun joined the company as Vice President, Norway as of September 7,
1998. Prior to joining the Company, he held the position of Managing Director of
Groner A.S. and has more than 23 years engineering experience in the North Sea.
Mr. Peterson was appointed Vice President, North and Central America on
August 18, 1998, upon the acquisition of Ceanic Corporation. He has held various
senior management positions in the offshore industry over the last 25 years.
Mr. Poimboeuf was appointed as a Director to the Company on April 16, 1998.
He has had a career of 33 years with Elf Aquitaine which included periods as
Deputy General Manager in Gabon, Executive Vice President of Texasgulf Inc. in
Houston and General Manager in Angola. Mr. Poimboeuf is a French citizen.
Mr. Seeley was appointed Vice President, Engineering, as of September 27,
1996. He joined Comex in 1976 and was initially involved in engineering and
design engineering projects prior to being appointed manager for a number of
major subsea construction and development projects.
Mr. Skouveroe has been a Director since 1993. He was Chairman of the Board
and Chief Executive Officer of Seaway from 1990 until it was acquired by SNSA in
1992. From 1985 to 1990, he was President and Second Vice Chairman of Seaway.
From 1982 until 1985, Mr. Skouveroe served as President of Stolt-Nielsen Seaway
Contracting A/S, a predecessor of Seaway. Mr. Skouveroe is a Norwegian citizen.
Mr. Thomson first joined Seaway in September 1990 as Business Development
Manager. He rejoined the Company in November 1995 as Group Manager, Marketing
and Communications. A former Royal Navy officer, he has 20 years of experience,
most of which have been in the offshore and subsea industry.
22
<PAGE>
Mr. Vorley was appointed Vice President, Field Development, as of July 17,
1995. He joined Comex in 1983 and prior to 1995 worked in engineering, project
and commercial posts in the U.K. and Norway.
Mr. Vossier was appointed Chief Executive Officer of the Company as of May
23, 1995. He previously served as Chief Operating Officer of the Company from
December 1994 to May 1995. He joined Comex in 1974 and has held numerous
management positions in operations and marketing.
Mr. Welsh was appointed Vice President, Operations, as of December 1, 1998.
He first worked for Comex from 1985 to 1988. After working as a consultant for a
number of years he rejoined the Company in 1992 and worked in engineering and
project management roles on a number of important projects as well as Vice
President, Flowline Lay, prior to his current position.
Mr. West was appointed Vice President, Subsea Construction, as of July 17,
1995. He joined Comex in 1982 and has worked in engineering and the management
of major projects in the North Sea and other parts of the world.
Mr. Woolveridge has been a Director since 1993. He held a number of
positions with BP since 1968 and most recently served as Chief Executive of BP
Engineering from 1989 until his retirement in 1992. He also was General Manager,
Oil and Gas Developments, responsible for field development projects in the U.K.
and Norwegian sectors of the North Sea, and served on the board of BP Oil Ltd.
Mr. Woolveridge is a British citizen.
CHANGES SINCE MARCH 31, 1999
Mr. Niels Gregers Stolt-Nielsen was elected as a Director on April 15, 1999.
Mr. Stolt-Nielsen has also served as Managing Director of Stolt Sea Farm since
June 1996. He previously worked in Stolt-Nielsen's transportation group. He is a
Norwegian Citizen.
Mr. Niels Gregers Stolt-Nielsen is the son of Mr. Jacob Stolt-Nielsen.
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS
As described above, SCS does not have officers, but certain persons employed
by its subsidiaries perform executive and administrative functions for the
combined business of the Company's subsidiaries. The aggregate annual
compensation paid to the 13 officers performing such executive functions for
SCS, as a group, for the fiscal year ended November 30, 1998 (including certain
benefits) was $2,426,000. In addition, $178,000 was contributed on behalf of
such officers to defined contribution pension plans. During 1998, Directors of
Stolt Comex Seaway S.A. who were affiliated with the Company or a subsidiary of
SNSA received no compensation for their services, as such, but received
reimbursement of their out-of-pocket expenses. All non-executive directors of
the Company received an annual fee of $20,000, plus expenses in 1998.
PROFIT SHARING PLAN
SCS has a Profit Sharing Plan which pays 10% of the Company's net profit
(after specified adjustments) to its officers and employees worldwide other than
those covered by collective bargaining agreements. The determination of an
employee's individual award is based on performance, salary and overall
contribution to the Company. The Profit Sharing Plan is administered by a
Compensation Committee appointed by the SCS Board of Directors. For the fiscal
year ended November 30, 1998, a total provision of $5,700,000 has been made for
payment under the Profit Sharing Plan. The payment of Profit Sharing for 1998
will not be made until July 1999 and the portion to be allocated to officers has
not yet been determined.
23
<PAGE>
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
The Company has a Stock Option Plan (the "Plan") covering 3.3 million Common
Shares and 1.6 million Class A Shares. Options may be granted under the Plan
exercisable for periods of up to ten years. The options granted under the Plan
will be at an exercise price not less than the fair market value per share at
the time the option is granted. The Plan is administered by a Compensation
Committee appointed by the SCS Board of Directors. The Compensation Committee
awards options based on the grantee's position in the Company, degree of
responsibility, seniority, contribution to the Company and such other factors as
it deems relevant under the circumstances.
As of April 30, 1999, a total of 1,137,400 options exercisable for Common
Shares and 340,965 options exercisable for Class A Shares had been granted to
the Company's subsidiaries' employees, of which 615,555 Common and 314,465 Class
A Shares remain outstanding and 264,880 Common and 137,316 Class A Shares are
currently exercisable. Of the total remaining outstanding, options for 467,254
Common Shares and 143,812 Class A Shares have been granted to employees who are
Directors and executive officers of SCS. The outstanding options are exercisable
at the respective prices set forth below and expire on the dates indicated:
<TABLE>
<CAPTION>
OPTIONS
OPTIONS CURRENTLY EXERCISE
AWARD YEAR OUTSTANDING EXERCISABLE PRICE EXPIRATION DATE
- ------------------------------------------------------- ----------- ----------- ------------- ---------------
<S> <C> <C> <C> <C>
COMMON SHARES
1993................................................... 11,580 11,580 $ 5.1667 May 2003
1994................................................... 27,875 27,875 3.0000 Apr 2004
1995................................................... 87,000 65,250 2.7917 Jun 2005
1996................................................... 96,500 72,375 2.7083 Mar 2006
1997................................................... 175,600 87,800 5.7917 Mar 2007
1998................................................... 217,000 -- 16.5830 Jun 2008
----------- -----------
Total................................................ 615,555 264,880
----------- -----------
----------- -----------
CLASS A SHARES
1993................................................... 5,790 5,790 $ 5.1667 May 2003
1994................................................... 13,375 13,375 3.0000 Apr 2004
1995................................................... 47,750 35,813 2.7917 Jun 2005
1996................................................... 51,250 38,438 2.7083 Mar 2006
1997................................................... 87,800 43,900 5.7917 Mar 2007
1998................................................... 108,500 -- 16.5830 Jun 2008
----------- -----------
Total................................................ 314,465 137,316
----------- -----------
----------- -----------
</TABLE>
As part of the acquisition of the former Ceanic Corporation, holders of
Ceanic shares were entitled to exercise all vested and one-third of their
unvested Ceanic options, or to convert any portion thereof to vested SCS Common
Shares. Their remaining two-thirds unvested Ceanic shares were automatically
converted to unvested SCS Common Shares at the date of acquisition. As of April
30, 1999, a total of 1,018,908 options exercisable for Common Shares and nil
options exercisable for Class A Shares had been granted to the Company's
subsidiaries' employees. Options outstanding and options currently exercisable
24
<PAGE>
as of April 30, 1999 include 953,201 Common and nil Class A Shares and 139,179
Common and nil Class A Shares, respectively. The following table reflects this:
<TABLE>
<CAPTION>
OPTIONS
OPTIONS CURRENTLY EXERCISE
AWARD YEAR OUTSTANDING EXERCISABLE PRICE EXPIRATION DATE
- ------------------------------------------------------- ----------- ----------- ------------- ---------------
<S> <C> <C> <C> <C>
COMMON SHARES
1994................................................... 3,838 3,838 $ 5.2100 Jul 2004
1996................................................... 5,758 5,758 5.8200 Apr 2006
1997................................................... 197,665 -- 6.2500 Apr 2007
1997................................................... 15,353 -- 7.4700 Jun 2007
1997................................................... 7,676 7,676 7.8200 Jun 2007
1997................................................... 500,294 85,443 10.8100 Sep 2007
1997................................................... 9,596 -- 8.3800 Dec 2007
1998................................................... 7,196 2,399 7.8200 Jul 2008
1998................................................... 7,677 -- 6.7700 Feb 2008
1998................................................... 3,839 -- 7.1200 Feb 2008
1998................................................... 3,839 -- 6.7000 Feb 2008
1998................................................... 19,190 -- 7.3800 Feb 2008
1998................................................... 1,919 -- 8.7300 Mar 2008
1998................................................... 8,636 2,879 8.4200 Mar 2008
1998................................................... 7,676 -- 10.2900 Mar 2008
1998................................................... 17,274 9,596 10.2500 Apr 2008
1998................................................... 14,393 4,797 11.2000 May 2008
1998................................................... 52,294 5,278 10.7700 Mar 2008
1998................................................... 47,977 -- 11.0300 May 2008
1998................................................... 5,757 -- 10.9900 May 2008
1998................................................... 5,758 1,919 10.3300 May 2008
1998................................................... 9,596 9,596 7.3800 Nov 2008
----------- -----------
Total 953,201 139,179
----------- -----------
----------- -----------
</TABLE>
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
The discussion of related party transactions appearing as Note 14 to
Consolidated Financial Statements, which is part of Item 18 of this Report, is
incorporated herein by reference.
25
<PAGE>
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 16. CHANGES IN SECURITIES, CHANGES IN SECURITY FOR REGISTERED SECURITIES
AND USE OF PROCEEDS
None.
PART IV
ITEM 17. FINANCIAL STATEMENTS
The Company has elected to provide financial statements for the fiscal year
ended November 30, 1998 and the related information pursuant to Item 18.
ITEM 18. FINANCIAL STATEMENTS
1. Consolidated Financial Statements of Stolt Comex Seaway S.A. and
Subsidiaries
Report of Independent Public Accountants.
Consolidated Balance Sheets as of November 30, 1998 and 1997.
Consolidated Statements of Income for the years ended November 30, 1998,
1997 and 1996.
Consolidated Statements of Shareholders' Equity for the years ended
November 30, 1998, 1997, and 1996.
Consolidated Statements of Cash Flows for the years ended November 30,
1998, 1997 and 1996.
Notes to Consolidated Financial Statements.
The consolidated financial statements and related notes referred to above
and the report of Arthur Andersen, the Company's independent public accountants,
appearing on pages 26 through 45 of the Company's 1998 Annual Report filed with
the Securities and Exchange Commission on Form 6-K are incorporated herein by
reference.
2. Report of Independent Public Accountants on Schedules
Supplementary Schedules
Schedule II Valuation and Qualifying Accounts
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements.
See list in Item 18.
(b) Exhibits.
<TABLE>
<C> <S>
2.1 Consent of Arthur Andersen, Independent Public Accountants.
2.2 Consent of Elvinger, Hoss & Prussen.
2.3 Amended Articles of Incorporation.
2.4 Company's 1998 Annual Report, pages 17 through 45.
2.5 Revolving Credit Facility, dated as of December 19, 1997, among Stolt Comex
Seaway S.A., Midland Bank plc, Den norske Bank ASA and the Banks listed
therein.
2.6 Loan Facility Agreement, dated April 1, 1999, among Adviesburo Energietechniek
Van De Pol B.V., Stolt Comex Seaway S.A., Den norske Bank ASA, Bank of America
National Trust and Savings Association and the Banks listed therein.
27 Financial Data Schedule.
</TABLE>
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant certifies that it meets all of the requirements for filing
on Form 20-F and has duly caused this annual report to be signed on its behalf
by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C> <C>
STOLT COMEX SEAWAY S.A.
By: /s/ CHRISTOPHER J. WRIGHT
-----------------------------------------
Name: Christopher J. Wright
Title: Deputy Chairman of the Board of
Directors
By: /s/ PAUL FRIKSTAD
-----------------------------------------
Name: Paul Frikstad
Title: Chief Financial Officer
</TABLE>
Date: May 12, 1999
27
<PAGE>
INDEX TO REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
AND SUPPLEMENTARY SCHEDULES
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Public Accountants................................................................... F-2
Supplementary Schedules
Schedule II--Valuation and Qualifying Accounts........................................................... F-3
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO STOLT COMEX SEAWAY S.A.:
We have audited in accordance with generally accepted auditing standards in
the United States, the consolidated financial statements included in Stolt Comex
Seaway S.A.'s Annual Report to Shareholders incorporated by reference in this
Form 20-F, and have issued our report thereon dated February 24, 1999. Our
audits were made for the purpose of forming an opinion on those statements taken
as a whole. The schedules listed in the Index on page F-1 are the responsibility
of the Company's management and are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
consolidated financial statements. These schedules have been subjected to the
auditing procedures applied in the audits of the basic consolidated financial
statements and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN
Glasgow, Scotland
May 11, 1999
F-2
<PAGE>
SCHEDULE II
STOLT COMEX SEAWAY S.A. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO WRITE-OFFS
BEGINNING OF COSTS AND AGAINST THE OTHER ADD BALANCE AT
PERIOD EXPENSES RESERVE (DEDUCT) (A) END OF PERIOD
------------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
For the year ended November 30, 1996:
Allowance for doubtful accounts............... $ 1,449 $ 1,123 $ (124) $ (24) $ 2,424
------ ----------- ----- ----- ------
------ ----------- ----- ----- ------
For the year ended November 30, 1997:
Allowance for doubtful accounts............... $ 2,424 $ 222 $ (137) $ (300) $ 2,209
------ ----------- ----- ----- ------
------ ----------- ----- ----- ------
For the year ended November 30, 1998:
Allowance for doubtful accounts............... $ 2,209 $ 2,766 $ (282) $ 12 $ 4,750
------ ----------- ----- ----- ------
------ ----------- ----- ----- ------
</TABLE>
- ------------------------
(a) Includes the effect of exchange rate changes on beginning balances of
valuation and qualifying accounts, except as otherwise noted.
F-3
<PAGE>
Exhibit 2.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Form 20-F of our Report dated February 24,
1999, and to the incorporation of our reports included and incorporated by
reference to this Form 20-F, into the Company's previously filed Registration
Statements on Form S-8, File Nos. 33-85168, 333-09292 and 333-74321. It
should be noted that we have not audited any financial statements of the
Company subsequent to November 30, 1998 or performed any audit procedures
subsequent to the date of our report.
ARTHUR ANDERSEN
Glasgow, Scotland
May 11, 1999
<PAGE>
Exhibit 2.2
[LETTERHEAD OF ELVINGER, HOSS & PRUSSEN]
We hereby consent to being named and to the summarisation of advice
attributed to us in the response to Item 6 of the Annual Report on Form 20-F of
Stolt Comex Seaway S.A. for the fiscal year ended November 30, 1998.
ELVINGER, HOSS & PRUSSEN
Luxembourg,
May 12, 1999
<PAGE>
EXHIBIT 2.3
E T U D E
D E
ME PAUL FRIEDERS
N O T A I R E
A
L U X E M B O U R G
STOLT COMEX SEAWAY S.A.
ARTICLES OF INCORPORATION
RESTATED EFFECTIVE DECEMBER 31,1998
(CERTIFIED BY NOTARY FEBRUARY 17, 1999)
<PAGE>
STOLT COMEX SEAWAY S.A.
SOCIETE ANONYME
LUXEMBOURG, 11, RUE ALDRINGEN
RC LUXEMBOURG B 43 172
-----------------------------
Constituee suivant acte recu par Maitre Paul FRIEDERS, notaire
de residence a Luxembourg, en date du 10 mars 1993, publie au Recueil Special du
Memorial C, numero 190 du 28 avril 1993.
Les statuts ont ete modifies suivant actes recus par ledit
notaire Paul FRIEDERS, en date du 28 avril 1993, publie au Recueil Special du
Memorial C, numero 300 du 22 juin 1993, en date du 27 juillet 1994, publie au
Recueil Special du Memorial C, numero 491 du 29 novembre 1994, en date des 25 et
26 fevrier 1997, publies au Recueil Special du Memorial C, numero 305 du 18 juin
1997, en date du 2 mai 1997, publie au Recueil Special du Memorial C, numero 418
du ler aout 1997, en date du 13 juin 1997, publie au Recueil Special du Memorial
C, numero 524 du 25 septembre 1997, en date du 29 juillet 1997, publie au
Recueil Special du Memorial C, numero 650 du 21 novembre 1997, en date du 10
novembre 1997, publie au Recueil Special du Memorial C, numero 112 du 20 fevrier
1998, en date du 20 novembre 1997, publie au Recueil Special du Memorial C,
numero 173 du 24 mars 1998, en date du 16 decembre 1997, publie au Recueil
Special du Memorial C, numero 246 du 16 avril 1998 et en date du 18 fevrier
1998, publie au Recueil Special du Memorial C, numero 379 du 26 mai 1998,
suivant deux actes recus en date du 16 avril 1998, publies au Memorial C, numero
529 du 20 juillet 1998, suivant actes recus en date du 11 juin 1998, publie
Memorial C, numero 674 du 21 septembre 1998, en date du 30 juillet 1998, publie
au Memorial C, numero 767 du 22 octobre 1998, en date du 23 novembre 1998,
publie au Memorial C, numero __ du _________ et en date du 31 decembre 1998,
publie au Memorial C, numero __ du _________________.
---------------------------------------------
STATUTS COORDONNES
---------------------------------------------
<PAGE>
CHAPTER 1. NAME, REGISTERED OFFICE, OBJECTS, DURATION
ARTICLE 1: There is incorporated by these presents a
Luxembourg holding company in the form of a limited liability company.
It will be styled "STOLT COMEX SEAWAY S.A."
ARTICLE 2: The registered office of the Company is situated in
Luxembourg. It may be transferred to any other place in the Grand Duchy of
Luxembourg by resolution of the Board of Directors.
When extraordinary events of political, economic or social
policy occur or shall be imminent, which might interfere with the normal
business at the registered office or with the easy communication between such
office and foreign parts, the registered office may be declared to have been
transferred abroad provisionally until the complete cessation of these abnormal
circumstances; without this measure, however, having any effect on the
nationality of the Company, which, notwithstanding this provisional transfer of
the registered office, shall remain of Luxembourg nationality.
A similar declaration of the transfer of the registered office
of the Company shall be made and brought to the attention of third parties by
one of the executive departments of the Company, which has power to bind it for
current and everyday acts of management.
The Board of Directors shall also have the right to set up
offices, administrative centres, agencies and subsidiaries wherever it shall see
fit, either within or outside the Grand Duchy of Luxembourg.
ARTICLE 3: The objects of the Company are to invest in
subsidiaries which will provide sub-sea construction, maintenance, inspection,
survey and engineering services, predominantly for the offshore oil and gas
industry.
More generally, the Company may participate in any manner in
all commercial, industrial, financial and other enterprises of Luxembourg or
foreign nationality through the acquisition by participation, subscription,
purchase, option or by any other means of all shares, stocks, debentures, bonds
or securities; the acquisition of patents and licenses which it will administer
and exploit; it may lend or borrow with or without security, provided that any
moneys so borrowed may only be used for the purposes of the Company, or
companies which are subsidiaries of or associated with or affiliated to the
Company; in general it may undertake any operations directly or indirectly
connected with these objects whilst nevertheless remaining within the limits set
out by the law on holding companies of the thirty-first of July, nineteen
hundred and twenty-nine.
ARTICLE 4: The Company is incorporated for an unlimited
period. It may be wound up in accordance with legal requirements.
<PAGE>
CHAPTER 2. CAPITAL, SHARES, BOND-ISSUES
ARTICLE 5:
The authorized capital of the Company is fixed at Two Hundred
and Seventy-Two Million United States Dollars (U.S. $272,000,000) to be
represented by (a) Sixty-Eight Million (68,000,000) non-voting Class A Shares,
par value U.S. $2.00 per share, Thirty-Four Million (34,000,000) Common Shares,
par value U.S. $2.00 per share and (c) Thirty-Four Million (34,000,000) Class B
Shares, par value U.S. $2.00 per share. Any authorized but unissued Common
Shares or Class A Shares shall lapse five (5) years after publication of the
resolution of the Shareholders meeting of June 11, 1998 in the Memorial.
The issued capital of the Company is set at One Hundred and
Fifty-Two Million Eighty Thousand One Hundred and Eighty United States Dollars
(U.S. $152,808,180) represented by (a) Nineteen Million Six Hundred and
Seventy-Nine Thousand Eight Hundred and Sixty-Three (19,679,863) non voting
Class A Shares, par value two United States Dollars (U.S. $2.00) per share, (b)
Twenty-Two Million Three Hundred and Sixty Thousand Two Hundred and Twenty-Seven
(22,360,227) Common Shares, par value two United States Dollars (U.S. $2.00) per
share and (c) Thirty-Four Million (34,000,000) Class B Shares, par value two
United States Dollars (U.S. $2.00) per share, all of said shares being fully
paid.
The Board of Directors or delegates(s) duly appointed by the
Board may from time to time issue shares out of the total authorised shares at
such times and on such terms and conditions, including issue price, as the Board
or its delegate(s) may in its or their discretion resolve. The holders of Common
Shares shall be entitled to preemptive rights in respect of any future issuance
of Common Shares for cash. The holders of Class B Shares shall be entitled to
preemptive rights in respect of any future issue of Class B Shares for cash. The
holders of Class A Shares shall be entitled to preemptive rights in respect of
any future issue of Class A Shares for cash. The holders of any class of shares
shall not be entitled to preemptive rights with respect to any other class of
shares. In each case, the Board of Directors may suppress the preemptive rights
of shareholders to the extent it deems advisable.
Each time the Board of Directors or its delegate(s) shall have
issued authorized Common Shares, Class B Shares or Class A Shares and accepted
payment therefore, this Article shall be amended to reflect the result of such
issue and the amendment will be recorded by notarial deed at the request of the
Board of Directors or its delegate(s).
ARTICLE 6: Any share premium which shall be paid in addition
to the par value of the Common Shares, the Class B Shares or Class A Shares
shall be transferred to paid-in surplus.
ARTICLE 7: Common Shares, Class B Shares and Class A Shares
being fully paid up shall not be subject to any restriction in respect of their
transfer but such shares shall be subject to the restriction on shareholdings
set forth in Article 34 hereof.
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<PAGE>
ARTICLE 8: The Common Shares, Class B Shares and Class A
Shares (all three classes herein sometimes collectively referred to as the
"Shares," and the Common Shares and Class B Shares herein sometimes jointly
referred to as the "Voting Shares") shall be issued in registered form only.
Share certificates or other evidence of ownership will be
issued for Shares in such denomination as the Board of Directors shall
prescribe. The share certificates or other evidence of ownership shall be in
such form and shall bear such legends and such numbers of identification as
shall be determined by the Board of Directors. The forms of share certificates
or other evidence of ownership, may be different in respect of the Shares
entered in the various Registers which may be established in accordance with
this Article 8. The share certificates shall be signed manually or by facsimile
by two directors of the Company. The Board of Directors may provide for
compulsory authentication of the share certificates by the Registrar(s).
All Shares in the Company shall be registered in the
Register(s) of Shareholders which shall be kept by the persons designated
therefor by the Company and such Register(s) of Shareholders shall contain the
name of each holder of Shares, his residence and/or elected domicile and the
number of Shares held by him and other information as may be required from time
to time by applicable law. Every transfer or devolution of Shares shall be
entered into the Register(s) of Shareholders and every such entry shall be
signed by one or more officers of the Company or by one or more persons
designated by the Board of Directors.
The Company may appoint Registrars in different jurisdiction
who will each maintain a separate Register for the Shares entered therein and
the holders of Shares may elect to be entered in one of the Registers and to be
transferred from time to time from one Register to another Register. The Board
of Directors may, however, restrict the ability to transfer Shares that are
registered, listed, quoted, dealt in, or have been placed in certain
jurisdictions. The transfer to the Register kept at the registered office of the
Company in Luxembourg may always be requested by any shareholder.
On transfers of Shares, new certificates or other evidence of
ownership in respect of Shares transferred and retained, respectively, shall be
issued in each case without charge to the holder thereof.
Transfers of Shares shall be effected upon delivery of the
certificate or certificates or other evidence of ownership representing such
Shares to the Registrar together with (i) a stock power or other instrument of
transfer satisfactory to the Company, (ii) with the form of endorsement which
may be provided on the certificate duly completed and executed, (iii) a written
declaration of transfer inscribed in the Register of Shareholders, dated and
signed by the transferor and transferee, or by persons holding suitable powers
of attorney to act therefor, in each case in such form and with such evidence of
authority as shall be satisfactory to the Company.
Except as provided in Article 12 hereof, the Company may
consider the Person in whose name the Shares are registered in the Register(s)
of Shareholders as the full owner of such
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<PAGE>
Shares. The Company shall be completely free of responsibility in dealing with
such Shares towards third parties and shall be justified in considering any
right, interest or claims of such third parties in or upon such Shares to be
non-existent, subject, however, to any right which such person might have, to
demand the registration or change in registration of Shares.
In the event that a holder of Shares does not provide any
address to which all notices or announcements from the Company may be sent, the
Company may permit a notice to this effect to be entered into the Register(s) of
Shareholders and such holder's address will be deemed to be at the registered
office of the Company or such other address as may be so entered by the Company
from time to time, until a different address shall be provided to the Company by
such holder. The holder may, at any time, change his address as entered in the
Register(s) of Shareholders by means of written notification to the Registrar.
Lost, stolen or mutilated share certificates for Shares will
be replaced by the Registrar who issued the share certificates in the first
place upon such evidence, undertakings and indemnities as may be deemed
satisfactory to the Company, provided that mutilated share certificates shall be
delivered before new share certificates are issued.
ARTICLE 9: Except for matters where applicable law requires
the approval of both classes voting as a separate class and as otherwise
provided for in these Articles, Common Shares and Class B Shares shall vote as a
single class on all matters submitted to a vote of shareholders, with each share
entitled to one vote.
Class A Shares are non-voting shares and shall not be entitled
to vote at meetings of Shareholders unless such right is granted by applicable
law. In such cases where the Class A Shares are granted the right to vote, each
Class A Share shall also be entitled to one vote. The Class A Shares will in
such a case vote with the Common Shares and Class B Shares as one class, unless
applicable law would call for a class vote. For the avoidance of doubt, it is
specified that the Class A Shares will not, under the provisions of the Articles
of Incorporation, meet and vote as a class, unless the holders of Class A Shares
are called upon to vote on amendments affecting adversely the rights attaching
to the Class A Shares.
Furthermore, for so long as Stolt Parcel Tankers Inc. (or any
entity controlling, controlled by or under common control with said Stolt Parcel
Tankers Inc.) owns shares representing a majority of the combined voting power
of the then-outstanding shares of the Company, any proposed amendment to the
Company's Articles in respect of a recapitalisation, reclassification and
similar transactions affecting the relative rights, preferences and priorities
of the Common Shares and Class B Shares shall also require (x) the simple
majority vote of those Common Shares not so owned by Stolt Parcel Tankers Inc.
and (y) when the meeting is first convened, a quorum of 50% of the then
outstanding Common Shares not so owned by Stolt Parcel Tankers Inc. is present
or represented.
ARTICLE 10: Class B Shares are convertible into Common Shares
on a two-for-one basis, at any time at the option of the holders thereof. In
addition, in the event that any Class B Share ceases to be owned by Stolt Parcel
Tankers Inc. (or any entity controlling, controlled by or
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<PAGE>
under common control with said Stolt Parcel Tankers Inc.), then, without any
action on the part of the holder(s) thereof, each such Class B Share shall
automatically convert into one-half of one Common Share. Furthermore, in the
event that Stolt Parcel Tankers Inc. (or any entity controlling, controlled by
or under common control with said Stolt Parcel Tankers Inc.), shall own shares
(whether Class B Shares or Common Shares) representing less than a majority of
the combined voting power of the then-outstanding shares of the Company, then,
without any action on the part of the holder(s) thereof, each such Class B Share
shall automatically convert into one-half of one Common Share.
ARTICLE 11: Without prejudice to the provisions of Article 5
hereof, the authorised or issued capital of the Company may be increased in one
or more installments by resolution of shareholders adopted in the manner
required for amendment of these Articles of Incorporation or as otherwise
provided by applicable law.
ARTICLE 12: The Shares shall be indivisible as far as the
Company is concerned. Only one titleholder will be recognized in connection with
each Share.
If any Share shall be held by more than one person, the
Company has the right to suspend the exercise of all rights attached to such
share(s) until one person has been appointed titleholder with regard to such
share(s).
The same rule shall apply in the case of a conflict between an
usufructuary and a bare owner or between a pledgor and a pledgee.
The Company shall not issue fractions of Shares. The Board of
Directors shall be authorised at its discretion to provide for the payment of
cash or the issuance of script in lieu of any fraction of a Share.
ARTICLE 13: The Board of Directors may decide the issuance of
bonds and debentures not containing an element of stock, which may be in bearer
or other form in any denomination or denominations and payable in any currency
or currencies.
The Board of Directors shall fix the rate of interest,
conditions of issue and repayment and all other terms and conditions thereof.
The bonds and debentures must be signed by two Directors of
the Company, manually or by facsimile.
CHAPTER 3. ADMINISTRATION AND CONTROL
ARTICLE 14: The Company shall be managed by a Board of
Directors composed of members who need not be shareholders of the Company.
The business of the Company shall be supervised by one or more
Statutory Auditors, whether shareholders or not.
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<PAGE>
The Board of Directors shall be composed of not less than
three (3) persons who shall be elected in accordance with the provisions of this
Article 14.
The Directors and Statutory Auditors shall be appointed by the
general meeting of shareholders for such term not to exceed six years as the
meeting may decide.
The Company may, by a resolution of the general meeting of
shareholders, dismiss any Director before the expiry of the term of his office,
notwithstanding any agreement between the Company and such Director. Such
dismissal may not prejudice the claims that such Director may have for a breach
of any contract existing between him and the Company.
The Directors may be re-elected. The term of office of
Directors shall end immediately after the ordinary general meeting in the year
of the expiry thereof.
In the case where the office of a Director shall become vacant
following death, resignation or otherwise, the remainder of the Directors may
convene and elect on the majority of votes thereat, a Director to carry out the
duties attaching to the office becoming vacant, to hold such office until the
next meeting of shareholders.
With the exception of a candidate recommended by the Board of
Directors or a Director whose term of office shall expire at a general meeting
of shareholders, no candidate may be appointed unless three days at least before
the date fixed for the meeting and twenty-one days at the most before this date
a written declaration, signed by a shareholder duly authorised, shall have been
deposited at the registered office of the Company, and in the terms of which he
intends to propose the appointment of this person together with a written
declaration, signed by the candidate in question, expressing the wish of the
candidate to be appointed.
ARTICLE 15: The Board of Directors shall elect a Chairman from
among its members. Should the Chairman not be available at a meeting, the Deputy
Chairman, or, in his absence, the Managing Director (if there is one), or in his
absence, the oldest Director present at the meeting, shall act in his stead.
ARTICLE 16: The Board of Directors shall convene on the notice
of the Chairman of the Board of Directors, of the Managing Director (if there is
one) or of any two Directors.
Meetings shall be held at the place, on the day and at the
time set out in the convening notice.
The Board of Directors may only deliberate validly if the
majority of its members shall take part in the proceedings by voting personally
or by proxy given in writing, by telegram, fax or telex.
A proxy may only be given to another Director.
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<PAGE>
Decisions of the Board of Directors shall be taken by a
majority of the votes cast by the Directors present or represented at a meeting.
Resolutions signed by all members of the Board will be as
valid and effective as if passed at a meeting duly convened and held. Such
signatures may appear on a single document or multiple copies of an identical
resolution and may be evidenced by letters, cables, telexes or faxes.
Any Director may, simultaneously with his office of Director,
be employed by the Company in any other capacity (except the office of Statutory
Auditor) or remunerated for a duration and on conditions that the Board of
Directors shall determine and shall receive in respect thereof a special
remuneration (by way of salary, commission, share in the profits or otherwise)
to be determined by the Board, subject to ratification by the general meeting of
shareholders, and such special remuneration shall be added to any remuneration
provided for by virtue of, or arising from any other provision of, these
Articles of Incorporation or pursuant to resolutions of shareholders adopted in
a general meeting.
No Director may be counted for the quorum present, nor cast a
vote in respect of Board resolutions, that shall relate to his own appointment
to an office or position being remunerated within the Company or which shall lay
down or amend the conditions thereof.
Any Director who, when a contract or an agreement shall be
submitted for approval of the Board of Directors, has a personal interest
contrary to that of the Company, must inform the Board of Directors and require
that this information be entered in the minutes of the meeting. This Director
may not deliberate or vote in respect of such contract or agreement and he shall
not be counted for purposes of whether a quorum is present. At the next meeting
of shareholders and before any vote in respect of any other resolution, a report
must be made on any contract or agreement in respect of which a Director shall
have had an interest contrary to that of the Company. The provisions of this
paragraph shall not apply where a Director owns less than five percent of the
company or other entity whose contract or agreement with the Company is
submitted for approval by the Board of Directors.
ARTICLE 17: The minutes of any meeting of the Board of
Directors shall be signed by the Chairman and the Secretary of such meeting.
Copies of or extracts from such minutes or of resolutions
signed by all members of the Board shall be signed by the Chairman of the Board
of Directors or by the Managing Director (if there is one) or by two Directors.
ARTICLE 18: The Board of Directors has the widest powers to
carry out any acts of management or of disposition that shall interest the
Company. All that is not expressly reserved for the general meeting by law or by
these Articles of Incorporation is INTRA VIRES the Board.
The Board may more particularly, and without the enumeration
which follows being in any way exhaustive, make and enter into any contracts and
acts necessary for the
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<PAGE>
performance of any undertakings or business that shall interest the Company,
decide upon any contributions, assignments subscriptions, sleeping partnerships,
associations, participation or financial interests relating to such business,
receive any sums due and belonging to the Company, give a valid receipt
therefor, make and authorise any withdrawals, transfers and disposition of
funds, income, debts receivable or securities belonging to the Company.
The Board may take on lease, acquire, dispose of and exchange
any immovable property and movable property necessary for its operations, lend
or borrow on short or long term, even by way of the issue of debentures, with or
without guarantee, assume any surety undertakings, constitute and accept any
mortgage guarantee and otherwise, with or without stipulation of a similar
procedure, waive any preferential rights, mortgage rights, avoidance actions and
real rights in general; waive, with or without payment, any preferential
mortgages or entries, as well as in respect of any orders, registrations,
distraints, attachments and other encumbrances whatsoever; discharge all
official registrations, all of which with or without payment.
The Board shall represent the Company VIS-A-VIS third parties,
authorities and governments and exercise any actions, both as plaintiff and as
defendant, before any courts, obtain any judgments, decrees, decisions, awards
and proceed therewith to execution, acquiesce, compound and compromise, in any
event, in respect of any corporate interests.
ARTICLE 19: The Board of Directors may delegate all or part of
its powers, including the power to represent the Company in its daily business
either to an executive committee, whether formed from among its own members or
not, or to one or more Directors, managers or other agents, who need not be
shareholders in the Company. The Board shall decide the powers and remuneration
attached to any such delegation of authority.
If authority is delegated to a member of the Board for
day-to-day management, the prior consent of the general meeting of shareholders
is required. Any Director designated as the Managing Director of the Company
shall be given all necessary powers as are required for purposes of the daily
business and affairs of the Company.
The Board may also confer any special powers upon one or more
attorneys of its choice.
ARTICLE 20: Without prejudice to the performance of the duties
delegated, any transaction which binds the Company must, to be valid, be signed
by either the Chairman, the Managing Director (if there is one) or by two
Directors. These signatories shall not be required to prove to third parties
that they hold the powers under which they are acting.
ARTICLE 21: No contract or other transaction between the
Company and any other corporation or entity shall be affected or invalidated by
the fact that any one or more of the Directors or officers of the Company is
interested in or is a Director or employee of such other corporation or entity.
Any Director or officer of the Company who serves as director, officer or
employee of any corporation or entity with which the Company shall contract or
otherwise
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<PAGE>
engage in business shall not by reason of such affiliation with such other
corporation or entity be prevented from considering and voting or acting upon
any matters with respect to such contracts or other business.
All transactions, deeds and acts between the Company and any
shareholder, or with any company which is directly or indirectly controlled by a
shareholder, or in which a shareholder has a direct or indirect interest in or a
commercial relationship with, shall be carried out on an arm's length basis.
ARTICLE 22: Subject to the exceptions and limitations liste
below:
(i) Every Person who is, or has been, a Director or officer of
the Company shall be indemnified by the Company to the fullest extent
permitted by law against liability and against all expenses reasonably
incurred or paid by him in connection with any claim, action, suit or
proceeding in which he becomes involved as a party or otherwise by
virtue of his being or having been such Director or officer and against
amounts paid or incurred by him in the settlement thereof.
(ii) The words "claim", "action", "suit" or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal or
otherwise, including appeals), actual or threatened and the words
"liability" and "expenses" shall include without limitation attorney's
fees, costs, judgements, amounts paid in settlement and other
liabilities.
No indemnification shall be provided to any Director or
officer:
(i) Against any liability to the Company or its shareholders
by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office;
(ii) With respect to any matter as to which he shall have been
finally adjudicated to have acted in bad faith and not in the interest
of the Company; or
(iii) In the event of a settlement, unless the settlement has
been approved by a Court of competent jurisdiction or by the Board of
Directors of the Company.
The right of indemnification herein provided shall be
severable, shall not affect any other rights to which any Director or officer of
the Company may now or hereafter be entitled, shall continue as to a person who
has ceased to be such Director or officer of the Company and shall inure to the
benefit of the heirs, executors and administrators of such Person. Nothing
contained herein shall affect any rights to indemnification to which corporate
personnel, including Directors and officers, may be entitled by contract or
otherwise under law.
Expenses in connection with the preparation and representation
of a defense of any claim, action, suit or proceeding of the character described
in this Article 22 may be
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<PAGE>
advanced by the Company prior to final disposition thereof upon receipt of any
undertaking by or on behalf of the officer or Director, to repay such amount if
it is ultimately determined that he is not entitled to indemnification under
this Article 22.
ARTICLE 23: The general meeting may allot to the Directors and
the Statutory Auditors fixed or proportional emoluments and Directors' fees
which shall, if they arise, be entered in the books under the heading of general
expenses.
CHAPTER 4. GENERAL MEETING
ARTICLE 24: The general meeting properly constituted
represents the whole body of shareholders. Its decisions are binding on
shareholders who are absent, opposed or abstaining from voting.
The general meeting has the broadest powers to do or ratify
all acts which concern the Company.
ARTICLE 25: The annual general meeting shall IPSO FACTO
convene in the municipality of the registered office on the second Wednesday in
the month of June at 3:00 p.m. and for the first time in 1994. Should this be a
holiday, the meeting will take place on the first working day following, at the
same time.
The annual general meeting will hear the statement of the
Board of Directors and the Statutory Auditors, vote on the adoption of such
report and the accounts and on the distribution of profits, proceed to make all
nominations required by the Articles of Incorporation, act on the discharge of
the Directors and the Statutory Auditors, and take such further action on other
matters that may properly come before such meeting.
Any other general meetings shall be held either at the
registered office or at any other place stated in the convening notice made by
the Board of Directors.
ARTICLE 26: The Board of Directors shall be responsible for
calling both ordinary and extraordinary general meetings.
The Board shall be obligated to call a general meeting, to be
held within thirty (30) days after receipt of such request, whenever a group of
shareholders representing at least one-fifth of the issued and outstanding
shares entitled to vote thereat requests such a meeting in writing indicating
the agenda thereof.
General meetings may also be called by the Chairman or any two Directors.
ARTICLE 27: Ordinary general meetings shall be chaired by the
Chairman or, in his absence, by a Director or other person appointed by the
Board.
The agenda of ordinary general meetings shall be prepared by
the Board. The agenda must be set forth in the convening notice for the meeting
and no point not appearing on
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<PAGE>
the agenda may be considered, including the dismissal and appointment of
Directors or the Statutory Auditors.
The participants in the meeting may, if they deem fit, choose
from their own number, two scrutineers. The other members of the Board of
Directors present will complete the bureau of the meeting. A record will be
taken of those shareholders present and represented, which will be certified as
correct by the bureau.
Annual general meetings or extraordinary general meetings
shall only be validly constituted and may only validly deliberate by complying
with applicable legal provisions.
Notices for general meetings shall be given by mail, first
class, postage prepaid, to all holders of Common Shares, Class B Shares and
Class A Shares, sent to the address recorded in the Register(s), and posted not
later than twenty (20) days before the date set for the meeting. Notices shall
be deemed to be given when deposited in the mail as aforesaid.
General meetings, both ordinary and extraordinary, may convene
and their discussions shall be valid, even if no previous notice of meeting has
been given, on any occasion when all the shareholders entitled to vote thereat
shall be present or represented and agree to discuss the matters shown in the
agenda.
A shareholder may be represented at a general meeting by a
proxy who need not be a shareholder. Written proxies for any general meeting of
shareholders shall be deposited with the Company at its registered office or
with any Director at least five (5) days before the date set for the meeting.
During meetings, each member of the meeting shall have as many
votes as the number of Common Shares or Class B Shares (or in the case where
they are entitled to vote, the number of Class A Shares) that he represents,
both in his name and as proxy.
ARTICLE 28: The Board of Directors may close the Register(s)
of Shareholders of the Company for a period not exceeding sixty (60) days
preceding the date of any meeting of shareholders or the date for payment of any
dividend or the date for the allotment of rights or the date when any change or
conversion or exchange of shares shall go into effect, or for a period of not
exceeding sixty (60) days in connection with obtaining the consent of
shareholders for any purpose.
In lieu of closing the Registers of Shareholders as aforesaid,
the Board of Directors may fix in advance a date, not exceeding sixty (60) days
preceding the date of any meeting of shareholders or the date for the payment of
any dividend or the date for the allotment of rights or the date when any change
or conversion or exchange of shares shall go into effect, or may fix a date in
connection with obtaining any consent of shareholders, as a record date for the
determination of the shareholders entitled to notice and to vote at any such
meeting or any adjournment thereof, or to receive payment of any such dividend,
or to receive any such
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<PAGE>
allotment of rights, or to exercise the rights in respect of any such change,
conversion or exchange of shares or to give such consent.
Only such shareholders as shall be shareholders of record at
the close of business on the date of such closing of the Registers of
Shareholders or on such record date shall be entitled to notice of and to vote
at such meeting and any adjournment thereof, or to receive payment of such
dividend, or to give such allotment of rights, or to exercise such rights or to
give such consent, as the case may be, notwithstanding any transfer of any
shares on the register of the Company after any such closing or record date.
Notwithstanding the provisions of the foregoing paragraph of
this Article 28, the closing of the Register(s) of Shareholders and/or fixing of
a record date in respect of determination of shareholders entitled to vote at
any such meeting and any adjournment thereof shall be in conformity with the
requirements of any exchanges on which the Common Shares or Class B Shares (or
in the case where they are entitled to vote, the number of Class A Shares) of
the Company may be listed.
Any shareholder who is not a natural person may give a power
of attorney to an authorised agent duly authorised for this purpose.
CHAPTER 5. TRADING YEAR, ANNUAL REPORT, DISTRIBUTION OF PROFITS AND THE
RESERVES
ARTICLE 29: The Company's financial year shall begin on the
first day of December and end on the 30th day of November in each year.
As an exception to the above, the first financial year shall
begin on the day of the date hereof and end on the 30th day of November, 1993.
ARTICLE 30: Each year, and for the first time as of and for
the financial year ended on the 30th day of November, 1993, the Board of
Directors shall prepare a balance sheet of assets and liabilities and a profit
and loss account. The necessary amortisations must be made.
The Board of Directors report shall be annexed to such balance
sheet and profit and loss account and these reports and documents shall contain
the details required by the law applicable to the Company. A copy of all such
documents shall be forwarded, at least twenty (20) days before the date fixed
for the general meeting to which they are to be submitted, to all shareholders.
ARTICLE 31: The favorable surplus on the balance sheet, after
deduction of general and operational expenses, corporate charges and necessary
amortisation, shall be the profit of the Company.
The net profit thus arrived at, shall be subject to a
deduction of five (5) percent, to be allocated to a legal reserve fund; this
deduction will cease to be obligatory when the reserve
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<PAGE>
fund reaches one-tenth of the issued stated share capital. Any paid-in surplus
may be allocated to the legal reserve or may be applied towards the payment of
dividends on Common Shares, Class B Shares or Class A Shares or to offset
capital losses (whether realized or unrealized) or to capitalize the par value
of any free Common Shares, Class B Shares or Class A Shares.
The allocation of the balance of the profit shall be
determined annually by the ordinary general meeting on the basis of
recommendations made by the Board of Directors.
This allocation may include the distribution of dividends, of
bonus shares or of subscription rights, the creation or maintenance of reserve
funds, contingency provisions, and also carrying the balance forward to the
account for the next financial year.
Dividends which may be allocated shall be paid at the places
and on the dates decided by the Board of Directors. Common Shares, Class B
Shares and Class A Shares shall participate in annual dividends, if any are
declared by the Company, in the following order of priority:
- ten percent of the par value thereof (I.E., U.S. $0.20
per share) to Class A Shares as the preferred dividend;
- U.S. $0.20 per share to Common Shares and U.S. $0.10
per share to Class B Shares; and
- thereafter, each Class B Share shall receive an amount
equal to one-half the cash or value paid on each Common
Share and Class A Share.
Class A Shares being non-voting shares shall also be entitled
to such other priorities and preferences concerning accrued but unpaid dividends
for past years as shall be provided by applicable law.
With the exception of the cumulative preferred dividend of the
Class A Shares no dividend, in cash or property, may be paid separately on any
class of shares. If share dividends are declared, holders of Common Shares will
receive Common Shares, holders of Class B Shares will receive Class B Shares and
holders of Class A Shares will receive Class A Shares.
The General Meeting may authorise the Board of Directors to
pay dividends in any other currency from that in which the balance sheet is
drawn up and make to a final decision on the exchange rate of the dividend into
the currency in which payment will actually be made.
The Board of Directors may also under the conditions laid down
by law pay interim dividends in cash or in kind (including by way of free
shares).
ARTICLE 32: The general meeting shall hear the reports of the
Board of Directors and the Statutory Auditors and shall discuss the balance
sheet.
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<PAGE>
After the balance sheet has been approved, the general meeting
shall take a special vote on the discharge of the Directors and Auditors. This
discharge is only valid if the balance sheet contains no omission or false
declaration which conceals or misrepresents the true situation of the Company,
and as to acts made ULTRA VIRES the Articles of Incorporation or the law, only
if such acts have been specifically pointed out in the convening notice.
CHAPTER 6. DISSOLUTION, WINDING UP
ARTICLE 33: At any time an extraordinary general meeting may,
on the recommendation of the Board of Directors, resolve upon the liquidation
and winding up of the Company. In such an event, the extraordinary general
meeting shall decide upon the method of liquidation and nominate one or more
liquidators whose task shall be to realise all movable and immovable assets of
the Company and to extinguish all liabilities. It shall, after the discharge and
satisfaction of all liabilities, set aside from the net assets resulting from
liquidation the sum needed to reimburse the amount of the shares paid up and
unredeemed. Any balance resulted shall be paid to the holders of Common Shares,
Class B Shares and Class A Shares in the following order of priority:
- Class A Shares to the extent, if any, of accrued and
unpaid preferred dividends on such shares, and
thereafter ratably to the full aggregate issuance prior
thereof;
- Common Shares and Class B Shares ratably to the extent
of the par value thereof (I.E., U.S. $2.00 per share);
- Common Shares and Class B Shares ratably to the full
aggregate issue price thereof; and
- thereafter, all remaining assets of the Company are to
be paid to the holders of Common Shares, Class B Shares
and Class A Shares, provided that each Class B Share
receive an amount per share equal to one-half the cash
or value paid to each Common Share and Class A Share.
Class A Shares being non-voting shares shall also be entitled
to such other priorities and preferences concerning liquidation as shall be
provided by applicable law.
CHAPTER 7. RESTRICTION ON CERTAIN SHAREHOLDINGS
ARTICLE 34:
(a) In recognition of the fact that certain shareholdings may
threaten the Company with Imminent and Grave Damage (as defined hereinafter),
including, but not limited to, that arising from adverse tax consequences, a
hostile takeover attempt or adverse governmental sanctions, no U.S. Person (as
defined hereinafter) shall own, directly or indirectly, more than 9.9% of the
total Common Shares, Class B Shares and Class A Shares outstanding at
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<PAGE>
any particular time. The foregoing restriction shall apply to all Persons who
become shareholders after March 10, 1993.
In addition, the Board of Directors may, in its sole
discretion, further restrict, reduce or prevent the ownership of Common Shares,
Class B Shares and Class A Shares by any Person or by one or more Persons of a
given nationality and/or domiciled in a given country, if it appears to the
Board that such ownership may threaten the Company with Imminent and Grave
Damage.
(b) For the purposes of implementing and enforcing the terms
hereof the Board of Directors may, and may instruct any Director, officer or
employee of the Company, to do any one or more of the following to the extent
deemed appropriate:
(i) decline to issue any shares and decline to register any
transfer of shares where it appears to it that such registration or
transfer would or might result in beneficial ownership of such shares
by a Person who is precluded from holding shares or acquiring
additional shares in the Company;
(ii) at any time require any Person whose name is entered in,
or any Person seeking to register the transfer of shares on, the
Register(s) of Shareholders to furnish it with any information,
supported by affidavit, which it may consider necessary for the purpose
of determining whether or not beneficial ownership of such
shareholder's shares rests or will rest in a Person who is precluded
from holding shares or a proportion of the capital of the Company;
(iii) where it appears to the Board that any Person who is
precluded in whole or in part from holding shares in the Company,
either alone or in conjunction with any other Person, is a beneficial
owner of shares in excess of the amount such Person is permitted to
hold, compulsorily purchase from any such shareholder or shareholders
any or all shares held by such shareholder as the Board may deem
necessary or advisable in order to satisfy the terms of these Articles
of Incorporation; and
(iv) decline to accept the vote of any Person who is precluded
from holding shares in the Company at any meeting of shareholders of
the Company in respect of the shares which he is precluded from
holding.
(c) Any purchase pursuant to subsection (b) above shall be
effected in the following manner:
(i) The Company shall serve a notice (hereinafter called a
"Purchase Notice") upon the shareholder or shareholders appearing in
the Register(s) of Shareholders as the owner of the shares to be
purchased, specifying the shares to be purchased as aforesaid, the
price to be paid for such shares, and the place at which the purchase
price in respect for such shares is payable. Any such notice may be
served upon such shareholder or shareholders by posting the same in a
prepaid registered envelope addressed to each such
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<PAGE>
shareholder at his latest address known to or appearing in the
books of the Company. The said shareholders shall thereupon forthwith
be obliged to deliver to the Company the share certificate or
certificates representing the shares specified in the Purchase Notice.
Immediately after the close of business on the date specified in the
Purchase Notice, each such shareholder shall cease to be the owner of
the shares specified in such notice and his name shall be removed from
the Company's Register of Shareholders.
(ii) The price at which the shares specified in any Purchase
Notice shall be purchased (herein called the "purchase price") shall be
an amount equal to the lesser of (A) the aggregate amount paid for the
shares (if acquired within the preceding twelve months from the date of
any such Purchase Notice) or (B) in case the shares of the Company
shall be listed on any exchange or otherwise quoted in any market
(including, but not limited to, the National Association of Securities
Dealers Automated Quotation System in the United States), the last
price quoted for the shares on the business day immediately preceding
the day on which the notice is served, or if the shares shall not be so
listed or quoted, the book value per share determined by the auditors
of the Company for the time being on the date as of which a balance
sheet was most recently prepared prior to the day of service of the
Purchase Notice; provided, however, that the Board may cause the amount
calculated under clause (B) hereof to be paid in situations where
clause (A) would otherwise apply and would result in a lower purchase
price if the Board determines that inequities would otherwise result
after taking into account the following as to any such shareholder so
affected: (1) length of time the affected shares were held; (2) the
number of shares so affected; (3) whether such shareholdings would have
resulted in Imminent and Grave Damage to the Company and the
circumstances relating thereto; and (4) any other situations or
circumstances which the Board may legally consider in making such a
determination.
(iii) Payment of the purchase price will be made to the owner
of such shares in U.S. Dollars except during periods of U.S. Dollar
exchange restrictions (in which case the currency of payment shall be
at the Board's discretion) and will be deposited by the Company with a
bank in Luxembourg, the United States or elsewhere (as specified in the
Purchase Notice) for payment to such owner upon surrender of the share
certificate or certificates representing the shares specified in such
notice. Upon deposit of such price as aforesaid, no Person interested
in the shares specified in such Purchase Notice shall have any further
interest in such shares or any of them, or any claim against the
Company or its assets in respect thereof, except the right of the
shareholder appearing as the owner thereof to receive the price so
deposited (without interest) from such bank upon effective surrender of
the share certificate or certificates as aforesaid.
(d) For the purposes of this Article 34, any Person holding
shares in its name solely as depositary or nominee in the ordinary course of its
business and without any beneficial interest therein shall not be deemed to be a
holder of such shares, provided such depositary shall disclose the name and
particulars of the beneficial owner of such shares immediately upon request by
the Company.
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<PAGE>
ARTICLE 35: For the purpose of these Articles of
Incorporation:
(a) An "Affiliate" of, or a Person "affiliated" with, a
specified Person, is a Person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under
common control with, the Person specified.
(b) The term "Associate" used to indicate a relationship with
any Person, means (i) any corporation or organisation (other than the
Company or a subsidiary of the Company) of which such Person is an
officer or partner or is, directly or indirectly, the beneficial owner
of ten (10) percent or more of any class of equity securities, (ii) any
trust or other estate in which such Person serves as trustee or in a
similar fiduciary capacity, and (iii) any relative or spouse of such
Person, or any relative of such spouse, who has the same home as such
Person or who is a director or officer of the Company or any of its
parents or subsidiaries.
(c) "Imminent and Grave Damage" shall have the meaning given
thereto under the Luxembourg Company Law of August 10, 1915, as
amended.
(d) "Person" means any individual, firm, corporation or other
entity, and shall include any Affiliate or Associate of such Person and
any Group comprised of any Person and any other Person with whom such
Person or any Affiliate or Associate of such Person has any agreement,
arrangement or understanding, directly or indirectly, for the purpose
of acquiring, holding, voting or disposing of Common Shares, Class B
Shares or Class A Shares.
(e) "Subsidiary" means any corporation with respect to which
the Company beneficially owns securities that represent a majority of
the votes that all holders of securities of such corporation can cast
with respect to elections of directors.
(f) "U.S. Person" means (a) an individual who is a citizen or
resident of the United States; (b) a corporation, partnership,
association or other entity organised or created under the laws of the
United States or any state or subdivision thereof; (c) an estate or
trust subject to United States federal income tax without regard to the
source of its income; (d) any corporation or partnership organised or
created under the laws of any jurisdiction outside of the United States
if any of its shareholders or partners are, directly or indirectly,
U.S. Persons as defined under clauses (a) through (c) above; (e) any
trust or estate, the income of which from sources without the United
States which is not effectively connected with the conduct of a trade
or business within the United States is not inclusive in gross income
for United States Federal income tax purposes, with respect to which
there is a beneficiary which is a U.S. Person as defined under clauses
(a) through (c) above; or (f) any corporation organised or created
under the laws of any jurisdiction outside the United States, any of
the outstanding capital stock of which is subject to an option to
acquire such stock held directly by a U.S. Person as defined in clauses
(a) through (c) above, and "United States" and "U.S." means the United
States of America, its territories, possessions and areas subject to
its jurisdiction.
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<PAGE>
(g) References to "dollars", "U.S. dollars" or to "cents"
shall mean the currency of the United States of America.
(h) References to "free" shares, whether Common Shares, Class
B Shares or Class A Shares, shall be to shares issued pursuant to the
terms hereof without cash consideration, e.g., in the case of share
dividends.
CHAPTER 8. MISCELLANEOUS
ARTICLE 36: In any case not governed by these Articles of
Incorporation, ordinary and extraordinary general meetings of the shareholders
of the Company shall be governed by the Luxembourg Company Law of August 10,
1915, as amended.
In the event that any one or more provisions contained in
these Articles of Incorporation shall, for any reason, be held to be invalid,
illegal, or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of these Articles, and the
Articles shall be construed as if such invalid, illegal or unenforceable
provision were not contained herein.
ARTICLE 37: In the event that Stolt Parcel Tankers Inc. (or
any entity controlling, controlled by or under common control with said Stolt
Parcel Tankers Inc.) no longer owns at least thirty-three and one-third percent
(33 1/3%) of the Common Shares of the Company, the Company shall, if requested
by said Stolt Parcel Tankers Inc., immediately take steps to change its
corporate name (and any service mark(s)) so that the word "Stolt" no longer
forms a part thereof.
THESE ARTICLES OF INCORPORATION ARE WORDED IN ENGLISH FOLLOWED
BY A FRENCH TRANSLATION AND IN CASE OF ANY DIVERGENCE BETWEEN THE ENGLISH AND
THE FRENCH TEXT, THE ENGLISH TEXT SHALL PREVAIL.
FOLLOWS THE FRENCH VERSION:
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<PAGE>
Exhibit 2.4
17 1998 ANNUAL REPORT [LOGO]
- ---------------------------------------------------------------
Management's Discussion and Analysis of
Results of Operations and Financial Condition
- --------------------------------------------------------------------------------
Overview
Stolt Comex Seaway S.A.("the Company" or "SCS") is one of the largest subsea
contractors in the world with services covering all phases of subsea offshore
oil and gas operations from exploration to decommissioning. The Company operates
in more than 60 countries worldwide and maintains regional offices in the U.K.,
Norway, Asia Pacific, Southern Europe, Africa and the Middle East ("SEAME"),
South America, and North America.
In August 1998, SCS acquired the Ceanic Corporation ("Ceanic"), in a strategic
move to secure a major position in the growing and important Gulf of Mexico
market. The acquisition gives SCS an established base in Houston from where
major U.S. customers direct their worldwide business. With Ceanic, SCS took
ownership of a substantial fleet of ships, remotely operated vehicles ("ROV's"),
and other related technologies. Following the acquisition, SCS will become the
largest subsea contractor in the Gulf of Mexico.
The market for the Company's services is dependent upon the success of
exploration and the level of development and production expenditures in the oil
and gas industry. Such expenditures are cyclical in nature and influenced by
prevailing and anticipated oil and gas prices.
The price of oil fell dramatically in the latter part of 1998. This affects
different segments of the industry in different ways. New field developments in
shallow water can be turned on or off at relatively short notice. However, new
developments in deeper water, SCS's core business, are more complex, have longer
lead times, and require a greater length of time for the planning and
installation phases. Management believes the major oil companies will remain
committed to these deepwater developments while exploration and production
budgets elsewhere may be reduced. Producing oil and gas fields require regular
inspection and maintenance services. The worldwide market for technologically
advanced maintenance and repair services now represents 40% of SCS's business.
Because most maintenance work is either unavoidable or related to meeting
certification requirements, it is less sensitive to the price of oil.
The Company's backlog at January 31, 1999 stands at $597.6 million, of which
$382.3 million is for 1999. This compares to a backlog at January 31, 1998 of
$582 million, of which $339 million was for 1998.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the period. Actual results
could differ from those estimates. Estimates are used in the determination of
allowances for doubtful accounts, depreciation and amortization, employee
benefit plans, taxes and contingencies among others.
Seasonality
Over the past three years, approximately two-thirds of the Company's revenue has
been generated from work performed in the North Sea. In the future there is
likely to be increased activity in the Gulf of Mexico. Although it is less
apparent than in the past due to advances in technology, adverse weather
conditions in the North Sea and the Gulf of Mexico generally result in less
activity in these regions during the winter months. Therefore, full year results
are not likely to be a direct multiple of any particular quarter or combination
of quarters.
Subsea Construction Support Ship Utilization
The following table sets forth average ship utilization rates by quarter through
November 30, 1998 for the Company's deepwater construction support ships. The
utilization percentage is calculated by dividing the total number of days for
which the ships were engaged in project related work in a quarter by the total
number of days that the ships were owned or chartered by the Company in such
quarter, expressed as a percentage.
================================================================================
Ship Days
- --------------------------------------------------------------------------------
For the years ended
November 30, Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4 Year
- --------------------------------------------------------------------------------
1998 990 1,012 1,012 1,092 4,106
1997 630 759 895 970 3,254
1996 668 644 644 637 2,593
================================================================================
% Utilization
- --------------------------------------------------------------------------------
Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4 Year
- --------------------------------------------------------------------------------
1998 74% 83% 90% 94% 85%
1997 81% 93% 94% 96% 91%
1996 45% 72% 73% 92% 70%
================================================================================
Utilization in both 1998 and 1997 was high due to favourable market conditions
and the Company's success in securing contracts worldwide. In 1998 utilization
was lower than in 1997 as a result of repositioning the Seaway Hawk and Seaway
Eagle to the Gulf of Mexico and
<PAGE>
18 STOLT COMEX SEAWAY [LOGO]
- ---------------------------------------------------------------
Management's Discussion and Analysis of
Results of Operations and Financial Condition continued
- --------------------------------------------------------------------------------
North Sea, respectively. Utilization in 1996 was lower as a result of weak
market conditions and extensive repair and upgrading to the Seaway Osprey.
In addition to the fleet of deepwater construction ships at November 30, 1998
the Company also operated 4 construction barges which operate predominantly in
the Asia Pacific region, and 18 shallow water ships and barges, which operate
predominantly in the Gulf of Mexico. In addition, 3 ships and barges will become
operational during the first quarter of 1999. The utilization of these ships and
barges will also have an impact on the Company's results.
Results of Operations
The following table shows annual net operating revenue and gross profit (loss)
earned by each region for the past three fiscal years.
<TABLE>
<CAPTION>
==========================================================================================================
For the years ended November 30, (in millions) 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net operating revenue
North Sea $432.6 66% $262.9 61% $207.1 66%
Asia Pacific 37.9 6 39.6 9 39.2 12
SEAME 58.3 9 75.7 18 44.6 14
South America 58.5 9 43.7 10 14.3 5
Gulf of Mexico 62.5 10 9.2 2 8.2 3
- ----------------------------------------------------------------------------------------------------------
Total $649.8 100% $431.1 100% $313.4 100%
==========================================================================================================
Gross profit (loss)
North Sea $ 62.7 58% $ 45.2 59% $ 16.3 77%
Asia Pacific 13.6 12 10.5 13 3.0 14
SEAME 5.5 5 12.1 15 0.1 0
South America 6.2 6 9.0 12 4.6 22
Gulf of Mexico 20.9 19 1.0 1 (2.8) (13)
- ----------------------------------------------------------------------------------------------------------
Total $108.9 100% $ 77.8 100% $ 21.2 100%
==========================================================================================================
</TABLE>
Net operating revenue increased to $649.8 million in 1998 from $431.1 million in
1997 largely as a result of additional business won in the North Sea, the full
year impact of the ships added to the fleet during 1997, and the impact of the
acquisition of Ceanic. The gross profit increase to $108.9 million from $77.8
million in 1997 reflects the above.
Net operating revenue increased to $431.1 million in 1997 from $313.4 million in
1996 largely as a result of improved market demand for the Company's services
which lead to higher ship utilization and improved pricing. During 1997 four
additional ships Seaway Eagle, Seaway Hawk, Discovery, and Toisa Puma were
brought into service. Gross profit increased to $77.8 million in 1997 from $21.2
million in 1996 which reflects the above.
North Sea
Net operating revenue increased to $432.6 million in 1998 from $262.9 million in
1997 mainly as a result of improved market conditions, particularly in the U.K.
sector, the increase in the numbers of ships available and the commencement of
the Amerada Hess Triton field development project. These factors and
improvements in project performance also impacted gross profit which improved
from $45.2 million in 1997 to $62.7 million in 1998. The North Sea continues to
be a major part of the Company's business and, despite the current low oil
price, the demand for the Company's services remains strong with the recent
award of several contracts in both the U.K. and Norwegian sectors. The addition
of a fleet of ROVs acquired from Dolphin AS during December 1998 should also
enhance the Company's position in the North Sea.
Net operating revenue increased to $262.9 million in 1997 from $207.1 million in
1996, mainly as a result of improved market conditions, increased project
activity and the increase in the fleet. This also impacted gross profit which
improved to $45.2 million for 1997 from $16.3 million in 1996.
Asia Pacific
Net operating revenue for the region of $37.9 million in 1998 decreased from
$39.6 million in 1997. Gross profit of $13.6 million in 1998 increased from
$10.5 million in 1997. This increase was the result of very good project
performance in Indonesia and China and the favorable settlement of several
outstanding claims and variation orders from previous years. Despite a number of
national oil and gas companies in the region forecasting a reduction in their
level of expenditure on exploration and production, demand for the Company's
services remains good and further growth is expected with the addition of the
NTL 900
<PAGE>
19 1998 ANNUAL REPORT [LOGO]
- --------------------------------------------------------------------------------
a derrick/lay barge to the Asia Pacific fleet. This versatile barge with pipelay
and lift capacity will give the Company access to a larger market in this
region.
Net operating revenue for the region of $39.6 million in 1997 compared to $39.2
million in 1996. Gross profit increased to $10.5 million in 1997 from $3.0
million in 1996 largely as a result of improved project margins.
Southern Europe, Africa and Middle East
Net operating revenue decreased to $58.3 million in 1998 from $75.7 million in
1997. The level of activity reduced in 1998 largely as a result of the Company's
assets being deployed elsewhere in the world. The gross profit of $5.5 million
in 1998 compared to $12.1 million in 1997 was reduced as a result of the
decreased level of activity. The major development in this region in 1998 was
securing the Elf Exploration Angola subsea Engineering Procurement Installation
and Commissioning ("EPIC") contract for the subsea development of the Girassol
field, as part of a consortium. SCS has developed unique riser tower technology
for this project which will be applicable, not only in West Africa, but also in
other deepwater markets such as Brazil and the Gulf of Mexico.
Net operating revenue was $75.7 million in 1997 compared to $44.6 million in
1996. This high level of activity was due to the delay of projects from 1996 and
improved ship availability due to increases in the Company's fleet. The gross
profit was $12.1 million in 1997 compared to $0.1 million in 1996 as a result of
an increase in market demand which led to improved margins on flowline lay
projects in the region.
South America
Net operating revenue was $58.5 million for 1998 compared to $43.7 million in
1997. The increase was due to this being the first full year of work for both
the Seaway Harrier and Seaway Osprey on long-term contracts to Petrobras and an
increase in subsea construction work in Argentina. The gross profit was $6.2
million in 1998 compared to $9.0 million in 1997. Unscheduled drydockings for
both ships early in 1998 and technical problems encountered on a project in
Argentina impacted the gross profit. On June 1, 1998 the Company repurchased the
remaining 20% of its subsidiary in Brazil from Oceaneering Inc.
Net operating revenue increased to $43.7 million in 1997 from $14.3 million in
1996. This increase was due to the initial deployment of the Seaway Osprey and
Seaway Harrier in the region. The gross profit increased to $9.0 million in 1997
from $4.6 million in 1996.
Gulf of Mexico
Net operating revenue of $62.5 million in 1998 increased from $9.2 million in
1997 partly due to the acquisition of Ceanic and partly due to securing a
long-term charter for the Seaway Hawk in the Gulf of Mexico. The Seaway Hawk
project is anticipated to continue until the first quarter of 2000. Gross profit
of $20.9 million in 1998 increased from $1.0 million in 1997 also as a result of
the above.
The acquisition of the Ceanic Corporation in August 1998 makes SCS the largest
subsea contractor in the Gulf of Mexico. Management expects the acquisition of
Ceanic with its fleet of shallow water ships, combined with SCS deepwater
expertise, will give the Company a strong position in the Gulf of Mexico market
in future. It is anticipated that the merger of SCS and Ceanic will result in
significant cost reductions in 1999.
Net operating revenue of $9.2 million in 1997 increased from $8.2 million in
1996. Gross profit was $1.0 million in 1997 compared to a gross loss of $2.8
million in 1996. This increase was the result of the successful completion of
the Mensa project for Shell.
Business acquisition
The acquisition of Ceanic was for a cash purchase price of approximately $218.9
million, including transaction costs. The transaction was accounted for under
the purchase method of accounting. Goodwill of approximately $114.8 million is
being amortized over 25 years.
The following unaudited pro forma information presents a summary of the
consolidated results of operations of the Company and the former Ceanic
Corporation as if the acquisition occurred at the beginning of each respective
year. Pro forma adjustments include depreciation and amortization, interest
charges on debt and lines of credit and tax benefit related to additional
interest charges (unaudited).
The pro forma consolidated results do not purport to be indicative of results
that would have occurred had the acquisitions been in effect for the period
presented, nor do they purport to be indicative of the results that will be
obtained in the future.
<PAGE>
20 STOLT COMEX SEAWAY [LOGO]
- ---------------------------------------------------------------
Management's Discussion and Analysis of
Results of Operations and Financial Condition continued
- --------------------------------------------------------------------------------
For the years ended November 30,
===================================
1998 1997 1996
-----------------------------------
Net operating revenue $ 769,584 $561,608 $418,059
Net income (loss)
before cumulative
effect of change in
accounting policy 41,051 26,906 (24,967)
Cumulative effect of
change in accoun-
ing policy 3,060 -- --
-----------------------------------
Net income (loss) $ 44,111 $ 26,906 $(24,967)
===================================
Depreciation and amortization
Depreciation and amortization in 1998 of $35.5 million increased from $25.5
million in 1997. This increase was the result of additions to fixed assets
during 1997 and 1998 and the acquisition of Ceanic. The increases as a result of
the Ceanic acquisition consisted of $5.2 million on fixed assets and $2.0
million on intangibles.
Depreciation and amortization was $25.5 million in 1997 decreased from $25.6
million in 1996. The decrease was a result of capital expenditure offset by the
effect of the strengthening of the U.S. dollar against the currency in which the
fixed assets were denominated.
Equity in net income of non-consolidated joint ventures
Equity in net income of non-consolidated joint ventures of $14.8 million in 1998
increased from $12.2 million in 1997. The increase was the result of a good
performance of Seaway Heavy Lifting Limited ("SHL"), a joint venture with a
subsidiary of the Russian oil company Lukoil-Kaliningradmorneft plc. During the
year the joint venture was extended for a further three years on revised terms.
The Company's share of the joint venture profits is now 30% but control of the
venture remains unchanged. The remainder of the increase was the result of the
continuation of project specific joint ventures. Equity in net income of
non-consolidated joint ventures was $12.2 million in 1997 compared to $5.5
million in 1996. The increase resulted from the increased profitability in SHL
and the commencement of operations in a project specific joint venture in the
North Sea.
Administrative and general expenses
Administrative and general expenses in 1998 were $45.9 million compared to $31.4
million in 1997. The increase is largely due to the acquisition of the Ceanic
businesses and an increased profit share provision. Administrative and general
expenses in 1997 were $31.4 million compared to $30.1 million in 1996.
Write down of certain assets
During 1997 there was a write down of certain assets amounting to $4.2 million.
In accordance with Statement of Financial Accounting Standards No. 121 ("SFAS"
No. 121) the write down of assets was largely the result of management's
assessment that certain subsea assets were unlikely to generate sufficient
cashflows to justify their current book value. These assets have been written
down to what management considers to be their fair market value.
Non-operating (expense) income
Net interest expense In 1998 net interest expense decreased from $9.5 million in
1997 to $5.1 million as a result of lower borrowings subsequent to the equity
offerings in 1997. Net interest expense in 1999 is likely to be substantially
higher as a result of debt incurred to fund the acquisition of Ceanic. In 1997
net interest expense decreased from $11.0 million in 1996 to $9.5 million as a
result of lower borrowings following the equity offerings in 1997.
Income taxes The Company recorded a net tax provision of $17.5 million in 1998,
compared to $11.1 million in 1997 and a net tax benefit of $1.8 million in 1996.
The increase in the tax provisions relate, for the most part, to increases in
pre-tax income recognized in Norwegian and U.K. tax jurisdictions.
Cumulative effect of change in accounting policy
As a consequence of the Ceanic acquisition, the Company changed its accounting
policy for drydocking from an accrual basis to a deferral basis. Under
Accounting Principles Board Opinion No. 20 the Company is required to separately
disclose the cumulative effect at December 1, 1997 separately. This amounted to
$3.1 million net of tax.
Capital stock and earnings per share
On January 9, 1998 the Company completed a two-for-one stock split by means of a
stock dividend distribution.
In June 1998 the Shareholders approved the creation of an additional class of
shares. These Class A Shares have equivalent economic rights to Common Shares
but are not entitled to vote. On June 25, 1998 the Company issued a stock
dividend of one Class A Share for each two Common Shares.
In March 1997 8,050,000 Common Shares were sold by the Company and during
November 1997 an additional 4,000,000 Common Shares were sold. Concurrent with
the first offering the Company exchanged approximately $57.6 million of debt due
to an affiliate of Stolt-Nielsen S.A. ("SNSA"), the Company's ultimate holding
company, for
<PAGE>
21 1998 ANNUAL REPORT [LOGO]
- --------------------------------------------------------------------------------
14,000,000 of Class B Shares. Concurrent with the second offering SNSA sold
4,000,000 of Common Shares which had been converted from 8,000,000 Class B
Shares. The cash effect of these transactions is discussed below.
All share and earnings per share information contained within the Annual Report
have been restated to reflect the stock split and creation of Class A Shares.
Liquidity and capital resources
The primary liquidity needs of the Company are to fund working capital and
capital expenditures. The Company's principal sources of funds have been cash
generated from operations, borrowings from commercial banks and SNSA and
fundings in the equity markets.
On December 19, 1997 the Company obtained a revolving credit facility led by
Midland Bank plc and Den norske Bank ASA, which provides for a five year
revolving credit line in the principal amount of $125.0 million, such principal
reducing to $100.0 million and $75.0 million in years four and five
respectively. The facility is based on the ratio of the Company's debt to EBITDA
(as defined) and will range from LIBOR + 0.40% to LIBOR + 0.80% per annum.
As of November 30, 1998 the Company had available bank facilities of $171.1
million, of which $83.6 million were utilized, $66.0 million of the bank
facilities utilized are classified as long-term debt.
As of November 30, 1998 the Company had long-term debt due to SNSA of $150.0
million. Subsequent to November 30, 1998, SCS has obtained a commitment for a
new credit facility with Den norske Bank ASA, Bank of America NT&SA, Midland
Bank plc and ASKL-CGER Bank nv/sa. This new facility is in the form of a five
year revolving credit line. The initial available amount is $150.0 million which
will be reduced by $12.5 million semi annually leaving $37.5 million due at
maturity. This facility will be used to repay SNSA.
The Company expects to make capital expenditures of about $90.0 million in 1999
of which about $44.3 million was committed as of November 30,1998. Scheduled
debt service is expected to be $24.0 million. Based on the current level of
activity, cash from operations is expected to be about $90.0 million which
results in a funding requirement of about $24.0 million. The Company has
adequate facilities to meet this requirement.
Net cash provided by operating activities was $103.7 million during 1998
compared to $2.9 million in 1997. This large increase was a result of improved
profitability during the year, a reduction in average accounts receivable days
outstanding from 124 days in 1997 to 108 days (as adjusted for Ceanic) in 1998
and an increase in average accounts payable days outstanding from 90 days in
1997 to 117 days (as adjusted for Ceanic) in 1998.
Net cash provided by operating activities was $2.9 million during 1997 compared
to $1.0 million of cash used by operating activities during 1996. The variation
of $3.9 million was due to the changes in income from operations offset by a
larger working capital requirement resulting from the increased activity level.
At November 30, 1997 average accounts receivable days outstanding were
approximately 124 days compared to 135 days at November 30, 1996. This decrease
is a result of improved credit terms being negotiated with customers.
The year-to-year variations in the cash from operations are due to the
fluctuations in net operating income as discussed above under "Results of
operations."
Net cash used in investing activities in 1998 was $328.2 million compared to
$101.3 million in 1997. In 1998 the acquisition of Ceanic accounted for $213.1
million, net of cash acquired of $4.3 million; $123.3 million was used to
purchase fixed assets which was partly offset by dividends from non-consolidated
joint ventures of $12.6 million.
Net cash used in investing activities was $101.3 million in 1997 compared to
$33.6 million in 1996. In 1997 the expenditure was mainly on capital expenditure
of $108.6 million which included the acquisition and completion of the Seaway
Eagle and the purchase of the Seaway Hawk of $73.7 million, $8.5 million for
ROVs, and $15.0 million on rigid flowline lay capabilities. Cash distributions
from non-consolidated joint ventures were $7.0 million.
Net cash used in investing activities in 1996 was largely $40.2 million of
capital expenditure including $28.8 million of expenditure on the Seaway Falcon,
Seaway Osprey and Seaway Eagle. Cash distributions from non-consolidated joint
ventures were $10.4 million.
Net cash provided by financing activities amounted to $225.3 million in 1998
compared to $102.3 million in 1997. This comprised a long-term loan from SNSA
<PAGE>
22 STOLT COMEX SEAWAY [LOGO]
- ---------------------------------------------------------------
Management's Discussion and Analysis of
Results of Operations and Financial Condition continued
- --------------------------------------------------------------------------------
of $150.0 million, $66.0 million of new long-term debt, $4.1 million additional
drawdown on short-term bank facilities and $5.8 million of release of restricted
cash.
Net cash provided by financing activities was $102.3 million in 1997 compared to
$36.5 million in 1996. The increase in 1997 was due to the net proceeds from two
public offerings of Common Shares during the year, offset by the repayment of
long-term debt and a decrease in funding from SNSA. Concurrent with the first of
those offerings, the Company exchanged approximately $57.6 million of debt due
to SNSA into 14,000,000 Class B Shares. This exchange was a non-cash
transaction.
In 1996 financing provided net cash of $36.5 million which consisted principally
of borrowing from SNSA of $42.4 million, drawdowns on the Company's overdraft
facilities of approximately $7.4 million, and principal repayments on long-term
debt of $17.7 million.
Multi-currency activities
The reporting currency of the Company is the U.S. dollar. The majority of net
operating revenue and expenses are denominated in the functional currency of the
individual operating subsidiaries. In the North Sea region, which has been the
most significant part of the business, the functional currencies are the
Norwegian kroner and the British pound. The impact of the introduction of the
Euro is separately discussed below.
The Company ceased to treat activities in Brazil as occurring in a
hyperinflationary environment with effect from December 1, 1997 as a result in a
change in the status of this economy as determined by inflation factors laid
down by the Securities and Exchange Commission ("SEC").
The Company enters into forward exchange and options contracts to hedge capital
expenditures and operational non-functional currency exposures on a continuing
basis for periods consistent with its committed exposures. The Company does not
engage in foreign currency speculation.
Euro
The Company has carried out an initial review of the impact of carrying out
business in an additional currency, and it is anticipated that there is unlikely
to be a material impact on the Company in the short-term. Those financial
systems which must be upgraded to provide Euro compliance will be upgraded by
March 31, 1999. Any foreign exchange risks will be assessed and managed as part
of the Company's foreign exchange program. The longer term implications of the
Euro on the Company will be assessed during 1999.
The Year 2000 issue
The Company has established a company-wide initiative to identify, evaluate and
address Year 2000 issues. Beginning in 1997 the Company's Year 2000 effort
encompasses five main areas; asset integrity, information technology,
infrastructure, business systems and commercial integrity, and is split into
five main phases. These phases, the first three of which are largely complete
are; an awareness program for the Company's staff, a complete inventory of the
issues, development of an action plan, testing and redevelopment of systems and
the development of a business contingency plan. In addition the project includes
a review of the Year 2000 compliance efforts of key suppliers, customers and
other principal business partners.
Work is progressing on the testing and redevelopment phase of the project and
this is planned to be substantially complete by June 1999 for all those areas
assessed to be of high or medium impact to the business. The Company's ability
to meet that target is dependent on a variety of factors including the timely
provision of necessary upgrades and notifications by suppliers. In addition the
Company has no method of ensuring that third parties who supply essential
services such as utilities will convert their critical systems and processes in
a timely manner. Failure or delay by any of these parties could significantly
disrupt the business. However a supplier compliance program has been established
and the Company is working with its key suppliers to minimize such risks.
It is currently estimated that the Company will incur approximately $0.6 million
of expenses through 2000 in connection with the efforts on Year 2000 issues. At
November 30, 1998 the Company has incurred $0.1 million. The timing of the
expenses may vary and are not necessarily an indication of the progress to date
on the project.
The Company has started contingency planning for critical operational areas that
may be affected by the Year 2000 issue and expects to have a full plan in place
by June 1999. This will include contingency plans which may be required should
any third parties fail to achieve Year 2000 compliance.
<PAGE>
23 1998 ANNUAL REPORT [LOGO]
- --------------------------------------------------------------------------------
While the Company believes its efforts to address the Year 2000 issue will be
successful in avoiding any material adverse effect on the Company's operations
or functional condition, it recognizes that failing to resolve Year 2000 issues
on a timely basis would, in a "most reasonably likely worst case scenario,"
significantly limit its ability to provide its services for a period of time,
especially if such failure occurs in conjunction with third party or
infrastructure failures.
Similarly, the Company could be significantly affected by the failure of one or
more significant suppliers, customers or components of the infrastructure, to
conduct their respective activities after 1999. Adverse effects on the Company
could include, among other things, business disruption, increased costs, and
loss of business.
Subsequent events
On December 9, 1998, the Company acquired the Remotely Operated Vehicle business
of Dolphin Offshore AS for $16.9 million.
On January 14, 1999, the Company signed a letter of intent with J. Ray McDermott
pursuant to which the Company will acquire the Gulf of Mexico Diving Division of
J. Ray McDermott. The transaction is subject to certain conditions and is
expected to close in March 1999.
Subsequent to November 30, 1998, the Company reached agreement for a new credit
facility with Den norske Bank ASA, Bank of America NT & SA, Midland Bank plc and
ASKL-CGER Bank nv/sa. This new facility is in the form of a five year revolving
credit line. The initial available amount is $150.0 million which will be
reduced by $12.5 million semi annually leaving $37.5 million due at maturity.
This facility will be used to repay SNSA.
Market risk discussion
Currency rate exposure The Company is exposed to market risk, including changes
in interest rate and currency exchange rates. To manage the volatility relating
to these exposures on a consolidated basis, the Company nets the exposure and
takes advantage of natural offsets and enters into derivative transactions for
the remaining currency exposures in accordance with the Company's policies. The
financial impact of these instruments are offset by corresponding changes in the
underlying exposures being hedged. The Company does not hold or issue derivative
instruments for trading purposes.
The primary purpose of the Company's foreign currency hedging activities is to
protect against the volatility associated with foreign currency liabilities or
receipts created in the normal course of business. The Company's policy
prescribes the range of allowable hedging activity. The Company primarily
utilizes forward exchange contracts and purchased options with a duration of
generally less than twelve months.
The Company uses a value-at-risk ("VAR") model to assess the market risk of its
derivative financial instruments. The model utilizes a variance/covariance
modeling technique. VAR models are intended to measure the maximum potential
loss for an instrument or portfolio assuming adverse changes in market
conditions, for a specific time and confidence level. The Company estimated
maximum potential one day loss in fair value of foreign exchange rate
instruments, calculated using the VAR model given a 95% confidence level, would
not materially affect the consolidated financial position, results of operations
or cash flow. Actual results in the future may differ materially from these
projected results due to actual developments in the global financial markets.
Interest rate exposure Based on the Company's overall interest rate exposure as
of the year ended November 30, 1998, a near-term change in interest rates would
not materially affect the consolidated financial position, results of operations
or cash flows.
A discussion of the Company's accounting policies for financial instruments is
included in the Accounting Policies in the notes to the consolidated financial
statements, and disclosure relating to the financial instruments is included in
the Fair Value of Financial Instruments note (Note 23).
Impact of new accounting standards
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued the Statement of Position 98-1
("SOP 98-1"), "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use," which provides guidance on accounting for the costs
of computer software developed or obtained for internal use. This SOP requires
computer software costs that are incurred in the preliminary project stage to be
expensed as incurred. Once the capitalization criteria of the SOP have been met,
directly attributable development costs should be capitalized. It also provides
guidance on the treatment of upgrade and maintenance expenditure. SOP 98-1 is
effective for fiscal years beginning after December 15, 1998. Costs
<PAGE>
24 STOLT COMEX SEAWAY [LOGO]
- ---------------------------------------------------------------
Management's Discussion and Analysis of
Results of Operations and Financial Condition continued
- --------------------------------------------------------------------------------
incurred prior to initial application of this SOP, whether capitalized or not,
should not be adjusted to the amounts that would have been capitalized had this
SOP been in effect when those costs were incurred. SCS has not determined the
impact that this SOP will have on its consolidated financial statements.
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," have been issued and are effective for
fiscal years beginning after December 15, 1997. SFAS No. 130 defines
comprehensive income and outlines certain reporting and disclosure requirements
related to comprehensive income. SFAS No. 131 requires certain disclosures about
business segments of an enterprise, if applicable. The adoption of SFAS No. 130
and SFAS No. 131 is not expected to have a significant effect on the Company's
financial statements or disclosures.
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." The
Statement establishes accounting and reporting standards in the U.S. requiring
that every derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as either an asset
or liability measured at its fair value. The Statement requires that changes in
the derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company must formally
document, designate, and assess the effectiveness of transactions that receive
hedge accounting.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999. A
company may also implement the Statement as of the beginning of any fiscal
quarter after issuance (that is, fiscal quarters beginning June 16, 1998 and
thereafter). SFAS No. 133 cannot be applied retroactively. SFAS No. 133 must be
applied to (a) derivative (b) certain derivative instruments embedded in hybrid
contracts that were issued, acquired, or substantively modified after December
31, 1997.
The Company has not yet quantified the impacts of adopting SFAS No. 133 on the
amounts presented under U.S. generally accepted accounting standards. However,
the Statement could increase volatility in earnings and other comprehensive
income.
Forward Looking Statements
Certain statements in this Annual Report, including the Message from the
Chairman and Operational Review from the Chief Executive Officer, constitute
'forward-looking statements' as defined in the U.S. Private Securities
Litigation Reform Act of 1995. Actual and future results and trends could differ
materially from those set forth in such statements due to various factors. Such
factors include, among others: general economic and business conditions;
industry capacity; industry trends; competition; currency fluctuations; the loss
of any significant customers; changes in business strategy or development plans;
project performance; availability and reliability of ships and other assets;
availability, terms, and deployment of capital; availability of qualified
personnel; changes in, or the failure or inability to comply with, government
regulations; and adverse weather conditions. Additional information concerning
these as well as other factors is contained from time to time in the Company's
U.S. Securities and Exchange Commission ("SEC") filings, including but not
limited to the Company's report on Form 20-F for the year ended November 30,
1997. Copies of these filings may be obtained by contacting the Company or the
SEC.
<PAGE>
25 1998 ANNUAL REPORT [LOGO]
- -----------------------------------
Selected Consolidated
Financial Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
===========================================================
For the years ended November 30, (in millions, except per share data) 1998 1997 1996 1995 1994
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net operating revenue $649.8 $431.1 $313.4 $327.0 $266.9
Non-recurring items -- $ (3.1) -- $ (9.0) --
Net operating income (loss) $ 77.7 $ 54.5 $ (3.4) $ 19.2 $(22.7)
Cumulative effect of change in accounting policy $ 3.1 -- -- -- --
Net income (loss) $ 57.3 $ 39.0 $(14.9) $ 2.0 $(16.6)
Net income (loss) per Common Share and
Common Share equivalents before cumulative
effect of change in accounting policy(a)
Basic $ 0.92 $ 0.83 $(0.50) $ 0.07 $(0.55)
Diluted $ 0.91 $ 0.82 $(0.50) $ 0.07 $(0.55)
Net income (loss) per Common Share and
Common Share equivalents cumulative effect
of change in accounting policy(a)
Basic $ 0.05 $ -- $ -- $ -- $ --
Diluted $ 0.05 $ -- $ -- $ -- $ --
Net income (loss) per Common Share and
Common Share equivalents(a)
Basic $ 0.97 $ 0.83 $(0.50) $ 0.07 $(0.55)
Diluted $ 0.96 $ 0.82 $(0.50) $ 0.07 $(0.55)
Weighted average number of Common Shares and
Common Share equivalents outstanding(a)
Basic 59.0 47.0 30.0 30.0 30.0
Diluted 60.0 47.6 30.0 30.0 30.0
==========================================================
As of November 30, (in millions, except per share data) 1998 1997 1996 1995 1994
----------------------------------------------------------
Current assets less current liabilities (including
current portion of long-term debt and capital
lease obligations and debt due to SNSA) $ 67.4 $ 78.7 $(20.0) $ 12.2 $(21.5)
Long-term assets $574.2 $275.0 $207.7 $196.6 $177.9
Long-term debt, including long-term debt
due to SNSA, and capital lease obligations
(including current portion) $221.2 $ 2.6 $154.5 $128.3 $112.8
Other long-term liabilities $ 22.5 $ 3.5 $ 4.2 $ 6.6 $ 4.6
Shareholders' equity $400.6 $348.0 $ 76.9 $ 90.9 $ 87.6
Book value per Common Share and
Common Share equivalents(a)
Basic $ 6.79 $ 7.40 $ 2.56 $ 3.03 $ 2.92
Diluted $ 6.68 $ 7.31 $ 2.56 $ 3.03 $ 2.92
Weighted average number of Common Shares and
Common Share equivalents outstanding(a)
Basic 59.0 47.0 30.0 30.0 30.0
Diluted 60.0 47.6 30.0 30.0 30.0
Total number of Common Shares and
Common Share equivalents outstanding(a) 59.0 59.0 30.0 30.0 30.0
==========================================================
</TABLE>
(a) All share data and per share data have been restated to reflect the
two-for-one stock split completed on January 9, 1998 and the Class A Share
distribution on June 25, 1998.
<PAGE>
26 STOLT COMEX SEAWAY [LOGO]
- -----------------------------------
Report of Independent
Public Accountants
- --------------------------------------------------------------------------------
To Stolt Comex Seaway S.A.
We have audited the accompanying consolidated balance sheets of Stolt Comex
Seaway S.A. (a Luxembourg company) and its subsidiaries as of November 30, 1998
and 1997, and the related consolidated statements of income, shareholders'
equity and cash flows for each of the three years in the period ended November
30, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Stolt Comex Seaway S.A. and
subsidiaries as of November 30, 1998 and 1997 and the results of their
operations and their cash flows for each of the three years in the period ended
November 30, 1998, in conformity with accounting principles generally accepted
in the United States.
As discussed in Note 7 to the consolidated financial statements, effective
December 1, 1996 the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
Be Disposed Of." In addition, as explained in Note 2 to the consolidated
financial statements, effective December 1, 1997 the Company changed its method
of accounting for drydock costs.
Arthur Andersen
Edinburgh, Scotland
February 24, 1999
<PAGE>
27 1998 ANNUAL REPORT [LOGO]
- -----------------------------------
Consolidated
Statements of Income
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
===================================
For the years ended November 30, (in thousands, except per share data) 1998 1997 1996
-----------------------------------
<S> <C> <C> <C>
Net operating revenue $ 649,764 $ 431,126 $ 313,358
Operating expenses (540,891) (353,361) (292,177)
-----------------------------------
Gross profit - $ 108,873 77,765 21,181
- % 16.8% 18.0% 6.8%
Equity in net income of non-consolidated joint ventures 14,761 12,242 5,483
Administrative and general expenses (45,911) (31,363) (30,101)
Write down of certain assets (Note 7) -- (4,157) --
-----------------------------------
Net operating income (loss) 77,723 54,487 (3,437)
-----------------------------------
Non-operating (expense) income:
Interest expense (6,407) (10,209) (11,452)
Interest income 1,305 758 486
Foreign currency exchange (loss) gain, net (393) 65 53
Other (expense) income, net (443) 5,038 (2,310)
-----------------------------------
Income (loss) before income taxes 71,785 50,139 (16,660)
Income tax (provision) benefit (Note 9) (17,537) (11,138) 1,758
-----------------------------------
Net income before cumulative effect of a
change in accounting policy 54,248 39,001 (14,902)
Cumulative effect of change in accounting policy, net of tax 3,060 -- --
-----------------------------------
Net income (loss) $ 57,308 $ 39,001 $ (14,902)
-----------------------------------
Earnings per Common Share:
Netincome (loss) per Common Share and Common Share equivalents before
cumulative effect of change in accounting policy
Basic $ 0.92 $ 0.83 $ (0.50)
Diluted $ 0.91 $ 0.82 $ (0.50)
Net income (loss) per Common Share equivalents cumulative
effect of change in accounting policy
Basic $ 0.05 $ -- $ --
Diluted $ 0.05 $ -- $ --
Net income (loss) per Common Share and Common Share equivalents
Basic $ 0.97 $ 0.83 $ (0.50)
Diluted $ 0.96 $ 0.82 $ (0.50)
Weighted average number of Common Shares and Common Share equivalents
outstanding (Note 2)
Basic 58,999 47,043 30,000
Diluted 59,979 47,616 30,000
===================================
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these consolidated financial statements.
All share data and per share data have been restated to reflect the two-for-one
stock split completed on January 9, 1998 and the Class A Share distribution on
June 25, 1998.
<PAGE>
28 STOLT COMEX SEAWAY [LOGO]
- -----------------------------------
Consolidated
Balance Sheets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
=====================
As of November 30, (in thousands, except share data) 1998 1997
<S> <C> <C>
ASSETS
Current assets: ---------------------
Cash and cash equivalents $ 9,375 $ 8,345
Restricted cash deposits (Note 4) 1,246 762
Trade receivables (Note 5) 239,069 146,704
Inventories and work-in-progress (Note 6) 27,076 10,882
Prepaid expenses and other current assets 26,060 15,707
---------------------
Total current assets 302,826 182,400
---------------------
Fixed assets, at cost (Note 7) 549,327 356,249
Less accumulated depreciation and amortization (Note 7) 140,482 111,850
---------------------
408,845 244,399
---------------------
Deposits and long-term receivables 9,523 1,386
Investments in and advances to non-consolidated joint ventures (Note 8) 12,749 8,357
Deferred taxes (Note 9) 2,954 4,973
Goodwill and other intangible assets (Note 2) 136,565 12,046
Prepaid pension asset (Note 10) 3,575 3,815
---------------------
Total assets $ 877,037 $ 457,376
=====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities: ---------------------
Bank overdrafts (Note 11) $ 17,645 $ 13,399
Current maturities of long-term debt and capital lease obligations (Note 12) 2,673 395
Accounts payable and accrued liabilities (Note 13) 158,374 57,346
Accrued salaries and benefits 26,010 17,360
Other current liabilities 30,688 15,242
---------------------
Total current liabilities 235,390 103,742
---------------------
Long-term debt and capital lease obligations (Note 12) 68,575 2,174
Long-term debt due to SNSA (Note 14) 150,000 --
Deferred taxes (Note 9) 19,905 --
Minority interests (Note 21) -- 618
Other non-current liabilities 2,617 2,850
---------------------
241,097 5,642
---------------------
Commitments and contingencies (Notes 16 and 22)
Shareholders' equity: (Note 18)
Common Shares, $2.00 par value--34,000,000 shares authorized
(1997: 34,000,000), 22,365,477 (1997: 22,291,576) shares issued
and outstanding at November 30, 1998 and 1997, respectively 44,731 44,584
Class A Shares, $2.00 par value--68,000,000 shares authorized
(1997: nil), 19,679,987 (1997: nil) shares issued and outstanding
at November 30, 1998 and 1997, respectively 39,360 --
Class B Shares, $2.00 par value--34,000,000 shares authorized
(1997: 34,000,000), 34,000,000 (1997: 34,000,000) shares issued
and outstanding at November 30, 1998 and 1997, respectively 68,000 68,000
Paid-in surplus 178,290 217,770
Retained earnings 84,869 27,561
Cumulative translation adjustments (14,700) (9,923)
---------------------
Total shareholders' equity 400,550 347,992
---------------------
Total liabilities and shareholders' equity $ 877,037 $ 457,376
=====================
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these consolidated financial statements.
All share data and per share data have been restated to reflect the two-for-one
stock split completed on January 9, 1998 and the Class A Share distribution on
June 25, 1998.
<PAGE>
29 1998 ANNUAL REPORT [LOGO]
- -----------------------------------
Consolidated Statements
of Shareholders' Equity
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
==========================================================================
Cumulative
Common Class A Class B Paid-in Retained translation
(in thousands, except share data) Shares Shares Shares surplus earnings adjustments
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, November 30, 1995 $ 12,000 $ -- $ 56,000 $ 23,795 $ 3,462 $ (4,310)
Net loss -- -- -- -- (14,902) --
Translation adjustments, net -- -- -- -- -- 855
Exercise of stock options 14 -- -- 17 -- --
- ----------------------------------------------------------------------------------------------------------------------
Balance, November 30, 1996 12,014 -- 56,000 23,812 (11,440) (3,455)
Issuance of 8,050,000 Common Shares
by way of Public Offering 16,100 -- -- 48,640 -- --
Exchange of debt for 14,000,000
Class B Shares -- -- 28,000 29,593 -- --
Issuance of 4,000,000 Common Shares
by way of Public Offering 8,000 -- -- 107,057 -- --
Conversion of 8,000,000 Class B Shares
into Common Shares 8,000 -- (16,000) 8,000 -- --
Net income - -- -- -- 39,001 --
Translation adjustments, net - -- -- -- -- (6,468)
Exercise of stock options 470 -- -- 668 -- --
- ----------------------------------------------------------------------------------------------------------------------
Balance, November 30, 1997 44,584 -- 68,000 217,770 27,561 (9,923)
Issuance of 19,678,987 Class A Shares
by way of a Stock Dividend -- 39,358 -- (39,722) -- --
Net income -- -- -- -- 57,308 --
Translation adjustments, net -- -- -- -- -- (4,777)
Exercise of stock options 147 2 -- 242 -- --
- ----------------------------------------------------------------------------------------------------------------------
Balance, November 30, 1998 $44,731 $39,360 $68,000 $178,290 $ 84,869 $(14,700)
======================================================================================================================
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these consolidated financial statements.
All share data and per share data have been restated to reflect the two-for-one
stock split completed on January 9, 1998 and the Class A Share distribution on
June 25, 1998.
<PAGE>
30 STOLT COMEX SEAWAY [LOGO]
- -----------------------------------
Consolidated Statements
of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
================================
For the years ended November 30, (in thousands) 1998 1997 1996
--------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 57,308 $ 39,001 $(14,902)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 35,548 25,480 25,550
Amortization of drydock costs 2,700 -- --
Deferred tax provision on cumulative effect of change in accounting policy 926 -- --
Cumulative effect of change in accounting policy (3,986) -- --
Equity in earnings of non-consolidated joint ventures (14,761) (12,242) (5,483)
Minority interest in consolidated subsidiaries 360 150 (37)
Deferred tax provision (benefit) 9,102 9,147 (2,821)
Loss on disposal of subsidiary -- -- 2,180
Loss (gain) on sale of assets 342 (4,856) (231)
Write down of certain assets -- 4,157 --
Other, net 851 2,534 (2,197)
Changes in assets and liabilities, net of acquisitions:
Increase in trade receivables (22,245) (39,130) (24,751)
Decrease (increase) in prepaid expenses and other current assets 4,000 (3,599) (2,795)
Decrease (increase) in inventories and work-in-progress 11,560 (2,427) (1,348)
Increase (decrease) in accounts and notes payable 37,798 (10,094) 22,493
Increase in accrued salaries and benefits 8,325 1,467 1,126
(Decrease) increase in other current liabilities (17,346) (6,659) 2,228
Payments of drydock costs (6,815) -- --
--------------------------------
Net cash provided by (used in) operating activities: 103,667 2,929 (988)
--------------------------------
Cash flows from investing activities:
Acquisition of subsidiaries, net of cash acquired (213,147) -- --
Purchase of fixed assets (123,284) (108,609) (40,216)
Increase in restricted cash deposits for purchase of fixed asset -- -- (3,878)
Proceeds from sale of assets 938 157 500
Purchase of minority interest (1,030) -- --
Increase in investments and other long-term financial assets (4,223) 117 (367)
Dividends from non-consolidated joint ventures 12,586 7,031 10,380
--------------------------------
Net cash (used in) investing activities (328,160) (101,304) (33,581)
--------------------------------
Cash flows from financing activities
Net increase in bank overdrafts 4,091 5,745 7,356
Proceeds from issuance of long-term debt 66,000 -- 600
Repayments of long-term debt (969) (65,097) (17,731)
Decrease in restricted cash deposits securing capital
lease obligations and long-term debt 5,794 4,550 4,670
Repayments of capital lease obligations (22) (257) (887)
Increase (decrease) in funding from affiliate 150,000 (23,541) 42,411
Proceeds from the issuance of Common Shares -- 179,797 --
Exercise of stock options 391 1,138 31
--------------------------------
Net cash provided by financing activities 225,285 102,335 36,450
--------------------------------
Effect of exchange rate changes on cash 238 359 (18)
--------------------------------
Net increase in cash and cash equivalents 1,030 4,319 1,863
Cash and cash equivalents at beginning of year 8,345 4,026 2,163
--------------------------------
Cash and cash equivalents at end of year $ 9,375 $ 8,345 $ 4,026
================================
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these consolidated financial statements.
<PAGE>
31 1998 ANNUAL REPORT [LOGO]
- -----------------------------------
Notes to Consolidated
Financial Statements
- --------------------------------------------------------------------------------
1. THE COMPANY
- --------------
Stolt Comex Seaway S.A. ("the Company" or "SCS") is one of the largest subsea
services contractors in the world with services covering all phases of subsea
offshore oil and gas operations from exploration to decommissioning. The Company
operates in more than 60 countries worldwide and maintains regional offices in
the U.K., Norway, Asia Pacific, Southern Europe, Africa and the Middle East
("SEAME"), South America, and North America.
The market for the Company's services is dependent upon the success of
exploration and the level of development and production expenditures in the oil
and gas industry. Such expenditures are cyclical in nature and influenced by
prevailing and anticipated oil and gas prices.
Over the past three years over sixty percent of the Company's revenue has been
generated from work performed in the North Sea. During the year, revenue from
one customer represented $137.6 million or 21% (1997: $39.3 million or 9.1% and
1996: $41.1 million or 13.1%) of net operating revenue.
The Company has investments in several joint ventures, the most significant of
which is Seaway Heavy Lifting Limited, a joint venture with a subsidiary of the
Russian oil company, Lukoil-Kaliningradmorneft plc ("Lukoil"). This joint
venture conducts installation, construction support and decommissioning
activities with its heavy lift ship, the Stanislav Yudin. During the year the
joint venture was extended for a further three years on revised terms. The
Company's share of the joint venture profits is now 30% but control of the
venture remains unchanged. In accordance with the agreement, the joint venture
has timechartered the ship from Lukoil since 1992. In 1998 charterhire was $4.2
million.
The remainder of the joint ventures in which the Company has interests have been
entered into on project specific bases to enhance the range of services provided
to the customer. In these joint ventures the Company will typically have
interests ranging from 22% to 50%.
2. ACCOUNTING POLICIES
- ----------------------
Principles of consolidation
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in the U.S. and include the accounts of
all majority-owned companies. All significant intercompany transactions and
balances have been eliminated. The Company accounts for its non-consolidated
joint ventures under the equity method.
Foreign currency translation
The Company, incorporated in Luxembourg, has U.S. dollar ("$") share capital,
and dividends are expected to be paid in U.S. dollars. As a result the Company's
reporting currency is the U.S. dollar.
The Company translates the financial statements of its subsidiaries from their
functional currencies (usually local currencies) into U.S. dollars. Assets and
liabilities denominated in foreign currencies are generally translated at the
exchange rates in effect at the balance sheet date. Revenue and expenses are
translated at exchange rates which approximate the average exchange rates
prevailing during the period. The resulting translation adjustments are recorded
in a separate component of shareholders' equity as Cumulative Translation
Adjustments ("CTA"). Exchange gains and losses resulting from transactions
denominated in a currency other than that of the functional currency are
included in "Foreign currency exchange (loss) gain, net" in the accompanying
consolidated statements of income. The functional currencies of the companies
that comprise the North Sea region are Norwegian kroner and British pounds. The
U.S. dollar is the functional currency of the most significant subsidiaries
within the Asia Pacific, Gulf of Mexico, SEAME and South America regions.
The Company ceased to treat activities in Brazil as occurring in a
hyperinflationary environment with effect from December 1, 1997 as a result of a
change in the status of this economy as determined by inflation factors laid
down by the Securities and Exchange Commission ("SEC").
The Company uses various financial instruments to reduce its exposure to
currency fluctuations. All of the instruments used are hedges against underlying
operating or balance sheet exposures and the Company does not enter into open
speculative positions. Accordingly, the Company recognizes gains or losses only
on the completion of the underlying transaction. Losses are not deferred if it
is estimated that deferral would lead to recognizing losses in later periods.
The U.S. dollar equivalent of the currencies which the Company had contracted to
purchase was $11.5 million (1997: $10.1 million) and to sell was $5.0 million
(1997: $10.2 million) at November 30, 1998.
<PAGE>
32 STOLT COMEX SEAWAY [LOGO]
- -----------------------------------
Notes continued
- --------------------------------------------------------------------------------
Revenue recognition
Long-term contracts are accounted for using the percentage of completion method.
Revenue and gross profit are recognized each period based upon the advancement
of the work-in-progress unless the stage of completion is insufficient to enable
a reasonably certain forecast of gross profit to be established. In such cases,
no gross profit is recognized during the period. Provisions for anticipated
losses are made in the period in which they become known.
A major portion of the Company's revenue is billed under fixed-price contracts.
However, due to the nature of the services performed, variation orders are
commonly billed to the customers in the normal course of business. The majority
of such items are settled by the customers, but occasionally there is a time lag
between the end of the project and the agreement of such variation orders. In
these instances management make estimates of the recoverability of the sums
involved and establish a reserve against related contract receivables. The net
amounts recoverable at November 30, 1998 amounted to $1.9 million (1997: $3.8
million).
Fixed assets
Fixed assets are recorded at cost or fair market value at acquisition. Interest
costs incurred between the date that financing is provided for an asset and the
date that the asset is ready for use are capitalized. Capitalized interest was
$0.2 million for the year ended November 30, 1998 (1997: $1.1 million and 1996:
$ nil). Assets acquired pursuant to capital leases are capitalized at the
present value of the underlying lease obligations and amortized on the same
basis as fixed assets described below.
Depreciation of fixed assets is recorded on a straight-line basis over the
useful lives of the assets as follows:
Construction support ships 6 to 25 years
Operating equipment 7 to 10 years
Buildings 20 to 33 years
Other assets 5 to 10 years
Ships are depreciated to a residual value of 10% of acquisition cost which
reflects management's estimate of salvage or otherwise recoverable value. No
residual value is assumed with respect to other fixed assets.
Costs for fitting out construction support ships are capitalized and amortized
over a period similar to the remaining useful life of the related equipment.
Permanent marine stocks on ships are depreciated in a manner similar to their
related ships.
Depreciation expense, which includes amortization of assets under capital
leases, was approximately $33.1 million for the year ended November 30, 1998
(1997 and 1996: $25.0 million).
On December 1, 1997 the Company changed its accounting policy for drydocking
from an accrual basis to a deferral basis. Amortization of capitalized drydock
costs was $2.7 million for the year. The unamortized portion of capitalized
drydock costs of $6.2 million is included in "Deposits and long-term
receivables" in the accompanying consolidated balance sheet at November 30,
1998. At November 30, 1997 the drydocking accrual amounted to $3.7 million.
The following unaudited pro forma information presents a summary of the
consolidated results of operations of the Company as if the change in accounting
policy occurred at the beginning of each respective year:
For the years ended November 30,
================================
(in thousands, except
per share data) 1997 1996
--------------------------------
Net income (loss) $40,617 $(15,539)
Net income (loss) per share:
Basic $ 0.86 $ (0.52)
Diluted $ 0.85 $ (0.52)
================================
Maintenance and repair costs, which are expensed as incurred, were $17.2 million
for the year ended November 30, 1998 (1997 and 1996: $21.4 million and $19.6
million, respectively).
Goodwill and other intangible assets
Goodwill represents the excess of the purchase price over the fair value of net
assets acquired and is being amortized on a straight line basis over 15 to 30
years. Patents and brand names are being amortized over 5 and 30 years,
respectively. The acquisition of Ceanic (Note 3) generated goodwill of $114.8
million. Additional intangible assets acquired with Ceanic amounted to $12.2
million. At November 30, 1998 accumulated amortization of goodwill and other
intangible assets was $5.3 million (1997: $2.8 million).
Cash and cash equivalents
Cash and cash equivalents include time deposits and certificates of deposit with
an original maturity of three months or less.
<PAGE>
33 1998 ANNUAL REPORT [LOGO]
- --------------------------------------------------------------------------------
Earnings per share
Earnings per share is computed using the weighted average number of Common,
Class A Shares, and Class B Shares and equivalents outstanding during each
period. The computation for the year ended November 30, 1998 is based upon the
following:
As of November 30,
==========================================
1998 1997 1996
------------------------------------------
Basic:
Class A Shares 19,658,881 -- --
Class B Shares 17,000,000 17,000,000 17,000,000
Common Shares 22,340,015 30,043,000 13,000,000
------------------------------------------
Total 58,998,896 47,043,000 30,000,000
==========================================
Diluted:
Class A Shares 19,984,457 -- --
Class B Shares 17,000,000 17,000,000 17,000,000
Common Shares 22,994,532 30,616,000 13,000,000
------------------------------------------
Total 59,978,989 47,616,000 30,000,000
==========================================
Basic 58,998,896 47,043,000 30,000,000
Potentially dilutive
share options 980,093 573,000 --
------------------------------------------
Diluted 59,978,989 47,616,000 30,000,000
==========================================
Class B Shares have only 50% of the economic rights of Common and Class A
Shares.
All earnings per share information has been restated to reflect the two-for-one
stock split completed on January 9, 1998 and the Class A Share distribution on
June 25, 1998.
Stock based compensation
The Company has elected to account for its stock based compensation awards to
employees and directors under Accounting Principles Board ("APB") Opinion No. 25
and to provide the disclosures required by Statement of Financial Accounting
Standards No. 123 ("SFAS No. 123") in Note 19.
Consolidated statement of cash flows
Cash interest (net of amount capitalized) and cash paid for income taxes during
the year ended November 30, 1998 were $2.1 million and $5.5 million
respectively, (1997: $9.2 million and $0.9 million respectively and 1996: $8.0
million and $(0.9) million respectively). During the year ended November 30,
1997 debt due to Stolt-Nielsen S.A. ("SNSA"), of $57.6 million was converted
into 14,000,000 Class B Shares concurrent with the March 1997 equity offering.
This was treated as a non-cash transaction.
The Company completed two non-cash, asset swap transactions with third parties
during the year to November 30, 1997. The fair value of the assets received was
$9.1 million.
Impact of new accounting standards
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued the Statement of Position 98-1
("SOP 98-1"), "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use," which provides guidance on accounting for the costs
of computer software developed or obtained for internal use. This SOP requires
computer software costs that are incurred in the preliminary project stage to be
expensed as incurred. Once the capitalization criteria of the SOP have been met,
directly attributable development costs should be capitalized. It also provides
guidance on the treatment of upgrade and maintenance expenditure. SOP 98-1 is
effective for fiscal years beginning after December 15, 1998. Costs incurred
prior to initial application of this SOP, whether capitalized or not, should not
be adjusted to the amounts that would have been capitalized had this SOP been in
effect when those costs were incurred. SCS has not determined the impact that
this SOP will have on its consolidated financial statements.
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," have been issued and are effective for
fiscal years beginning after December 15, 1997. SFAS No. 130 defines
comprehensive income and outlines certain reporting and disclosure requirements
related to comprehensive income. SFAS No. 131 requires certain disclosures about
business segments of an enterprise, if applicable. The adoption of SFAS No. 130
and SFAS No. 131 is not expected to have a significant effect on the Company's
financial statements or disclosures.
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." The
Statement establishes accounting and reporting standards in the U.S. requiring
that every derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as either an asset
or liability measured at its fair value. The Statement requires that changes in
the derivative's fair value be recognized currently
<PAGE>
34 STOLT COMEX SEAWAY [LOGO]
- -----------------------------------
Notes continued
- --------------------------------------------------------------------------------
in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999. A
company may also implement the Statement as of the beginning of any fiscal
quarter after issuance (that is, fiscal quarters beginning June 16, 1998 and
thereafter). SFAS No. 133 cannot be applied retroactively. SFAS No. 133 must be
applied to (a) derivative (b) certain derivative instruments embedded in hybrid
contracts that were issued, acquired, or substantively modified after December
31, 1997.
The Company has not yet quantified the impacts of adopting SFAS No. 133 on the
amounts presented under U.S. generally accepted accounting standards. However,
the Statement could increase volatility in earnings and other comprehensive
income.
3. BUSINESS ACQUISITION
- -----------------------
In August 1998 the Company acquired Ceanic Corporation, (later renamed Stolt
Comex Seaway Inc.), for a cash purchase price of approximately $218.9 million,
including transaction costs. The transaction was accounted for under the
purchase method of accounting.
The Company does not believe that the final purchase price allocation will
differ significantly from the preliminary allocation.
The purchase price generated goodwill of approximately $114.8 million which is
being amortized over 25 years.
The following unaudited pro forma information presents a summary of the
consolidated results of operations of the Company and the former Ceanic
Corporation as if the acquisition occurred at the beginning of each respective
year. Pro forma adjustments include depreciation and amortization, interest
charges on debt and lines of credit and tax benefits related to additional
interest charges (unaudited):
The pro forma consolidated results do not purport to be indicative of results
that would have occurred had the acquisition been in effect for the period
presented, nor do they purport to be indicative of the results that will be
obtained in the future.
For the years ended November 30,
======================================
(in thousands, except
per share data) 1998 1997 1996
--------------------------------------
Net operating revenue $769,584 $561,608 $418,059
Net income (loss) before
cumulative effect of
change in accounting
policy $ 41,051 $ 26,906 $(24,967)
Cumulative effect of change
in accounting policy $ 3,060 $ -- $ --
Net income (loss) $ 44,111 $ 26,906 $(24,967)
Net income (loss) per share
before cumulative effect
of change in accounting
policy:
Basic $ 0.70 $ 0.57 $ (0.83)
Diluted $ 0.69 $ 0.57 $ (0.83)
Net income (loss) per share
cumulative effect of
change in accounting
policy:
Basic $ 0.05 $ -- $ --
Diluted $ 0.05 $ -- $ --
Net income (loss) per share:
Basic $ 0.75 $ 0.57 $ (0.83)
Diluted $ 0.74 $ 0.57 $ (0.83)
======================================
4. RESTRICTED CASH DEPOSITS
- ---------------------------
Restricted cash balances comprise both funds held in a separate Company bank
account, which will be used to settle accrued taxation liabilities, and deposits
made by the Company as security for certain third party obligations. There are
no significant conditions on the restricted cash balances.
5. TRADE RECEIVABLES
- --------------------
Trade receivables at November 30, 1998 of $239.1 million (1997: $146.7 million)
are net of allowances for doubtful accounts of $4.7 million (1997: $2.2
million). Included in trade receivables at November 30, 1998 was $94.6 million
(1997: 37.4 million) of unbilled receivables.
<PAGE>
35 1998 ANNUAL REPORT [LOGO]
- --------------------------------------------------------------------------------
6. Inventories and work-in-progress
- -------------------------------------
Inventories and work-in-progress are stated at the lower of cost or market value
and comprise the following:
As of November 30,
======================
(in thousands) 1998 1997
----------------------
Work-in progress and mobilizations $13,205 $ 5,680
Materials and supplies 9,983 1,290
Spare parts 2,646 2,868
Fuels 1,229 1,044
Other 13 --
----------------------
$27,076 $10,882
======================
Costs are generally determined in accordance with the weighted-average cost
method. Costs of fitting out and preparing equipment for specific contracts are
included in work-in-progress. Such costs, principally labor and materials, are
amortized over the shorter of the expected duration of the contracts or the
estimated useful life of the asset. Progress payments relating to
work-in-progress were $nil at November 30, 1998 (1997: $2.0 million).
7. FIXED ASSETS, NET
- --------------------
Fixed assets comprise the following:
As of November 30,
================================================
(in thousands) 1998 1997
------------------------------------------------
Operating equipment $247,241 45% $116,818 33%
Construction support
ships 270,191 49 215,302 60
Land and buildings 16,980 3 15,310 4
Other assets 14,915 3 8,819 3
-----------------------------------------------
$549,327 100% $356,249 100%
===============================================
Less: Accumulated
depreciation and
amortization 140,482 111,850
-----------------------------------------------
$408,845 $244,399
===============================================
During the year ended November 30, 1997 the Company recognized a SFAS No. 121
impairment loss of $4.2 million. This loss related to certain subsea assets
developed by the Company which were unable to generate sufficient utilization
and therefore cashflows to support their net book value at this time. These
assets were written down to values considered by management to be an assessment
of their fair market value. In addition a small number of obsolete items were
also written down to $nil as management considered it unlikely that they would
be utilized in future years.
During 1997 the Company completed two asset swap transactions with third parties
and recognized a gain of $4.9 million. This gain was included in other income
(expense), net in the income statement.
8. INVESTMENTS IN AND ADVANCES TO
NON-CONSOLIDATED JOINT VENTURES
- ----------------------------------
Investments in and advances to non-consolidated joint ventures comprise the
following:
As of November 30,
==================
(in thousands) Geographical Location 1998 1997
------------------
Seaway Heavy Lifting Cyprus $ 7,652 $5,488
Project joint ventures Norway, SEAME(a) 2,487 2,671
Other Norway, SEAME(a) 2,610 198
------------------
$12,749 $8,357
==================
(a) Southern Europe, Africa and the Middle East.
Taxation in respect of project joint ventures has been included in the results
of the relevant subsidiaries. Undistributed reserves of all other joint ventures
will not be taxed on distribution.
Summarized financial information for the Company's non-consolidated joint
ventures, representing 100% of the respective amounts included in the joint
ventures' financial statements is as follows:
Income statement data:
For the years ended November 30,
=====================================
(in thousands) 1998 1997 1996
-------------------------------------
Net operating revenue $140,651 $150,758 $90,272
Gross profit $ 28,258 $ 43,909 $20,598
Net income $ 29,531 $ 32,822 $11,224
=====================================
Balance sheet data:
As of November 30,
========================
(in thousands) 1998 1997
------------------------
Current assets $66,074 $50,721
Non-current assets $20,803 $ 834
Current liabilities $48,248 $31,287
Non-current liabilities $15,939 $ 3,000
========================
<PAGE>
36 STOLT COMEX SEAWAY [LOGO]
- -----------------------------------
Notes continued
- --------------------------------------------------------------------------------
For commercial reasons, the Company has structured certain contractual services
through its joint ventures. The income statement data for the non-consolidated
joint ventures presented above includes the following expenses related to
transactions with the Company in 1998, 1997 and 1996 respectively; charter hire
of $16.7 million, $11.0 million, $2.8 million and other expenses $1.8 million,
$3.8 million, $19.1 million. The joint ventures also received revenue of $2.9
million, $2.1 million, $nil from the Company. The balance sheet data includes
amounts payable to joint ventures by the Company of $1.5 million and $nil and
amounts receivable by the Company of $10.8 million and $8.3 million at November
30, 1998 and 1997 respectively.
9. INCOME TAXES
- ---------------
The income tax (provision) benefit is as follows:
For the years ended November 30,
=====================================
(in thousands) 1998 1997 1996
-------------------------------------
Current $ (8,435) $ (1,991) $(1,063)
Deferred (9,102) (9,147) 2,821
-------------------------------------
Income tax (provision)
benefit $(17,537) $(11,138) $ 1,758
=====================================
The tax effects of temporary differences and net operating loss carryforwards at
November 30, 1998 and 1997 are as follows:
As of November 30,
=======================
(in thousands) 1998 1997
-----------------------
Net operating loss carryforwards $ 22,694 $ 30,240
Other accruals, net 7,127 568
Fixed assets (39,481) (15,865)
-----------------------
Net deferred tax liability asset before
valuation allowance (9,660) 14,943
Valuation allowance (7,291) (9,970)
-----------------------
Net deferred tax (liability) asset $(16,951) $ 4,973
-----------------------
Deferred tax asset $ 2,954 $ 9,949
Deferred tax liability (19,905) (4,976)
-----------------------
$(16,951) $ 4,973
=======================
A valuation allowance has been recorded to reduce the deferred tax assets to an
amount that management believe is more likely than not to be realized.
French and U.K. companies have unused net operating loss carryforwards, on a
tax-effected basis, of $7.6 million and $11.0 million respectively, at November
30, 1998. The U.K. tax losses may be carried forward indefinitely. The French
unused net operating loss carryforwards may be carried forward as follows:
(in thousands) Year ended November 30,
================================================================================
Expires 1999 $ 1,995
2000 374
2003 1,058
2004 613
2005 545
Unlimited 2,965
- --------------------------------------------------------------------------------
$ 7,550
================================================================================
The Company also had, at November 30, 1998 approximately $0.4 million of net
operating loss carryforwards, on a tax-effected basis, in Brazil and $1.5
million of net operating loss carryforwards, on a tax-effected basis, in
Australia, both of which can also be carried forward indefinitely. There are net
operating loss carryforwards, on a tax-effected basis in Canada of $1.3 million
which expire through 2005.
<PAGE>
37 1998 ANNUAL REPORT [LOGO]
- --------------------------------------------------------------------------------
The income tax (provision) benefit at the Company's effective tax rate differs
from the income tax (provision) benefit at the statutory rate. Principal
reconciling items include the following:
<TABLE>
<CAPTION>
For the year ended November 30, 1998 (in thousands) U.S. Norway U.K. Other Total
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Pretax income $1,053 $27,242 $30,988 $12,502 $71,785
Utilization of prior year losses -- -- -- (7,350) (7,350)
Income in non-taxable areas -- -- -- (5,918) (5,918)
Losses for which no benefit is recognized 936 -- -- 8,811 9,747
- ----------------------------------------------------------------------------------------------------------------------
Taxable income 1,989 27,242 30,988 8,045 68,264
Statutory tax rate 34% 28% 31% 10% 28%
- ----------------------------------------------------------------------------------------------------------------------
Tax at statutory rate (676) (7,628) (9,606) (815) (18,725)
Non-deductible depreciation and amortization (28) (53) (98) (202) (381)
Non-taxable dividend income from joint ventures -- -- -- 1,734 1,734
Exchange gain -- -- -- 49 49
Other (657) 29 265 149 (214)
- ----------------------------------------------------------------------------------------------------------------------
Income tax (provision) benefit $(1,361) $(7,652) $(9,439) $ 915 $(17,537)
======================================================================================================================
<CAPTION>
For the year ended November 30, 1997 (in thousands) Norway U.K. Other Total
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pretax income $12,257 $22,226 $15,656 $ 50,139
Utilization of prior year losses -- -- (8,784) (8,784)
Income in non-taxable areas -- -- (5,777) (5,777)
Losses for which no benefit is recognized -- -- 4,816 4,816
- ----------------------------------------------------------------------------------------------------------------------
Taxable income 12,257 22,226 5,911 40,394
Statutory tax rate 28% 31% 20% 28%
- ----------------------------------------------------------------------------------------------------------------------
Tax at statutory rate (3,432) (6,890) (1,154) (11,476)
Non-deductible depreciation and amortization (53) (98) (202) (353)
Non-taxable dividend income from joint ventures -- -- 1,131 1,131
Changes in tax rates -- (918) -- (918)
Exchange gain -- -- 179 179
Other 174 (181) 306 299
- ----------------------------------------------------------------------------------------------------------------------
Income tax (provision) benefit $(3,311) $(8,087) $ 260 $(11,138)
======================================================================================================================
For the year ended November 30, 1996 (in thousands)
- ----------------------------------------------------------------------------------------------------------------------
Pretax loss $(1,640) $(8,090) $ (6,930) $(16,660)
Utilization of prior year losses -- -- (2,229) (2,229)
Losses for which no benefit is recognized -- 1,051 16,137 17,188
- ----------------------------------------------------------------------------------------------------------------------
Taxable (loss) income (1,640) (7,039) 6,978 (1,701)
Statutory tax rate 28% 33% 37% 13%
- ----------------------------------------------------------------------------------------------------------------------
Tax at statutory rate 459 2,323 (2,559) 223
Non-deductible depreciation and amortization (60) (25) (202) (287)
Exchange gain (85) -- 315 230
Non-taxable dividend income from joint ventures -- -- 1,554 1,554
Other (208) (583) 829 38
- ----------------------------------------------------------------------------------------------------------------------
Income tax benefit (provision) $ 106 $ 1,715 $ (63) $ 1,758
======================================================================================================================
</TABLE>
The reported utilization of prior year losses against current year profits
represents entities where deferred tax assets had not previously been recognized
for those losses.
The statutory tax rate for the "other" category represents a weighted average of
various local statutory tax rates including certain revenue taxes.
<PAGE>
38 STOLT COMEX SEAWAY [LOGO]
- -----------------------------------
Notes continued
- --------------------------------------------------------------------------------
10. PENSION COMMITMENTS
- -----------------------
The Company operates both defined contribution and defined benefit pension
plans, depending on location, covering certain qualifying employees.
Contributions under the defined contribution pension plans are determined as a
percentage of gross salary. The expense relative to these plans for the years
ended November 30, 1998, 1997 and 1996, was $0.5 million, $0.4 million and $nil
respectively. The benefits under the defined benefit pension plans are based on
years of service and salary levels. Plan assets primarily comprise marketable
securities. Net periodic pension cost for the defined benefit pension plan
comprise the following:
For the years ended November 30,
================================
(in thousands) 1998 1997 1996
--------------------------------
Service costs--
benefits earned
during the period $ 1,452 $ 1,617 $ 1,238
Interest cost on
benefit obligation 1,066 1,029 946
Actual return on plan assets(1,252) (1,211) (1,052)
Contribution by employees (217) (123) (132)
Net amortization and
deferral 105 143 213
--------------------------------
Net periodic pension cost $ 1,154 $ 1,455 $ 1,213
================================
The following table sets forth the funded status of the pension plans:
As of November 30,
======================
(in thousands) 1998 1997
----------------------
Actuarial present value of
benefit obligations:
Vested benefit obligation $14,231 $13,268
Accumulated benefit obligation 14,231 13,268
----------------------
Projected benefit obligation 17,363 16,479
Plan assets at fair value 17,416 17,214
----------------------
Projected benefit obligation
less than plan assets 53 735
Unrecognized net loss 3,522 3,080
----------------------
Prepaid pension asset $ 3,575 $ 3,815
======================
The weighted average assumptions used are as follows:
==================================
1998 1997 1996
----------------------------------
Discount rate 6.9% 7.5% 7.4%
Expected rate of return
on assets 7.5% 7.8% 7.4%
Assumed rate of increase
in compensation level 4.3% 4.5% 4.3%
==================================
In France and Asia Pacific, retirement indemnities, for which the Company has
accrued $0.3 million at November 30, 1998 and $0.3 million at November 30, 1997,
are paid as a lump sum upon retirement. They are primarily based upon the
employees' years of service and salary levels.
11. BANK OVERDRAFT AND LINES OF
CREDIT FACILITIES
- -------------------------------
The Company has external, third party bank overdraft and line of credit
facilities and short-term loan notes totalling $171.1 million (1997: $60.3
million). Amounts borrowed pursuant to these facilities bear interest at rates
ranging from 5.44% to 9.2% at November 30, 1998. As of November 30, 1998
short-term borrowings under these facilities totalled $17.6 million (1997: $13.4
million).
On December 19, 1997 the Company obtained a revolving credit facility led by
Midland Bank plc and Den norske Bank ASA, which provides for a five year
revolving credit line in the principal amount of $125.0 million, such principal
reducing to $100.0 million and $75.0 million in years four and five,
respectively. The facility is based on the ratio of the Company's debt to EBITDA
and will range from LIBOR + 0.40% to LIBOR + 0.80% per annum.
12. LONG-TERM DEBT AND
CAPITAL LEASE OBLIGATIONS
- -----------------------------
Long-term debt, excluding borrowings from SNSA, comprises the following:
As of November 30,
====================
(in thousands) 1998 1997
--------------------
Revolving credit agreement with
a weighted average interest rate of
5.94944%, due through 2002 $66,000 $ --
Other bank borrowings 1,463 2,538
--------------------
67,463 2,538
Less: Current portion 161 387
--------------------
Long-term debt $67,302 $2,151
====================
The net book value of assets collateralizing this debt was $118.5 million as of
November 30, 1998.
<PAGE>
39 1998 ANNUAL REPORT [LOGO]
- --------------------------------------------------------------------------------
At November 30, 1998, the Company has a revolving credit agreement with banks
aggregating $125.0 million ($66.0 million outstanding at November 30, 1998),
which is due to be repaid in 2002. Borrowings bear interest based on various
money market rates dependant on interest periods selected by the Company.
Commitment fees of 0.2% per annum are payable on the unused portion of the
credit lines.
Total debt outstanding at November 30, 1998 is repayable as $66.0 million in
U.S. dollars, $1.3 million in Norwegian kroner and $0.2 million in French
francs.
Scheduled annual principal repayments of debt for the fiscal years subsequent to
November 30, 1998 are as follows:
================================================================================
(in thousands)
- --------------------------------------------------------------------------------
1999 $ 161
2000 94
2001 94
2002 66,091
2003 73
Thereafter 950
- --------------------------------------------------------------------------------
$67,463
================================================================================
At November 30, 1998 property under capital leases, comprising operating and
other equipment, amounts to $5.3 million at cost. Accumulated amortization of
these leases is $0.5 million.
Minimum payments under capital leases at November 30, 1998, which are due
primarily in U.S. dollars, are as follows:
===============================================================================
(in thousands)
- -------------------------------------------------------------------------------
1999 $2,691
2000 770
2001 564
2002 38
2003 13
- -------------------------------------------------------------------------------
Total minimum lease payments 4,076
Less: Amount representing interest and
executory costs (291)
- -------------------------------------------------------------------------------
Present value of net minimum lease payments $3,785
================================================================================
The amount of interest and executory cost relating to current capital lease
obligations is $0.2 million.
13. ACCOUNTS PAYABLE AND
ACCRUED LIABILITIES
- ------------------------
Accounts payable and accrued liabilities comprise the following:
As of November 30,
=======================
(in thousands) 1998 1997
-----------------------
Invoice accruals $ 87,322 $24,530
Trade payables 63,894 30,360
Short-term payable due to SNSA 5,005 1,855
Trade notes payable 61 5
Other 2,092 596
-----------------------
$158,374 $57,346
=======================
14. RELATED PARTY TRANSACTIONS
- ------------------------------
Related party transactions consisted of the following:
For the years ended November 30,
==================================
(in thousands) 1998 1997 1996
----------------------------------
Interest charges $4,972 $3,829 $3,942
Guarantee fees $ -- $ 756 $ 764
Management services $1,600 $1,600 $1,601
==================================
The interest rate charged on the SNSA debt classified long-term was 9%. The
borrowings and interest are due for repayment by August 2000. Interest on
short-term debt was priced according to market rates at the time. Management
service charges represent charges for various management services including
legal, treasury and administrative services performed by SNSA on behalf of the
Company.
Amounts due to SNSA:
As of November 30,
=========================
(in thousands) 1998 1997
-------------------------
Short-term payable $ 5,005 $1,855
Long-term debt 150,000 --
-------------------------
$155,005 $1,855
=========================
The short-term payable to SNSA relates primarily to outstanding interest
charges.
<PAGE>
40 STOLT COMEX SEAWAY [LOGO]
- -----------------------------------
Notes continued
- --------------------------------------------------------------------------------
15. RESTRUCTURING AND
REORGANIZATION PROGRAM
- --------------------------
In 1996, a provision of approximately $2.2 million was made for a loss on the
disposal of the Company's French civil engineering business. This charge was
included in other expense. As of November 30, 1998 there was a remaining
liability of $0.8 million relating to non-recurring charges for the disposal of
the Company's French civil engineering business.
16. OPERATING LEASES
- --------------------
Total operating lease commitments as of November 30, 1998 amount to $58.7
million. Charter obligations towards certain construction support, diving
support, survey and inspection ships account for $52.1 million of the total
commitments. The remaining obligations relate to office facilities and
equipment.
Total minimum annual lease commitments which are payable are as follows:
================================================================================
(in thousands)
- --------------------------------------------------------------------------------
1999 $18,937
2000 13,435
2001 12,804
2002 11,571
2003 1,800
Thereafter 124
- --------------------------------------------------------------------------------
$58,671
================================================================================
================================================================================
(in thousands)
- --------------------------------------------------------------------------------
Belgian francs $27,051
Norwegian kroner 26,174
American dollars 3,042
Australian dollars 1,171
British pounds 1,084
Malaysian ringgits 85
Singapore dollars 38
Indonesian rupiah 26
- --------------------------------------------------------------------------------
$58,671
================================================================================
Total operating lease rentals charged as an expense for the year ended November
30, 1998 were $18.6 million (1997: $11.4 million and 1996: $10.9 million).
17. OPERATIONS BY GEOGRAPHICAL AREAS
AND BUSINESS SEGMENT
- ------------------------------------
The Company operates in one business segment. The following table presents
information by geographical areas:
================================================================================
For the year ended November 30, 1998
- --------------------------------------------------------------------------------
Net Net
Net operating operating
operating % of income margin
(in thousands) revenue total (loss) (%)
- --------------------------------------------------------------------------------
U.K $326,392 50% $ 39,136 12%
Norway 99,462 15 25,543 26
Other North Sea 6,689 1 (917) (14)
SEAME(a) 58,275 9 1,357 2
Asia Pacific 37,916 6 5,954 16
South America 58,523 9 442 1
Gulf of Mexico 62,507 10 6,208 10
- --------------------------------------------------------------------------------
Total $649,764 100% $ 77,723 12%
================================================================================
================================================================================
For the year ended November 30, 1997
- --------------------------------------------------------------------------------
Net Net
Net operating operating
operating % of income margin
(in thousands) revenue total (loss) (%)
- --------------------------------------------------------------------------------
U.K $153,019 36% $ 25,220 17%
Norway 90,146 21 11,932 13
Other North Sea 19,806 5 (41) 0
SEAME(a) 75,738 17 6,330 8
Asia Pacific 39,555 9 5,931 15
South America 43,699 10 5,001 11
Gulf of Mexico 9,163 2 114 1
- --------------------------------------------------------------------------------
Total $431,126 100% $ 54,487 13%
================================================================================
================================================================================
For the year ended November 30, 1996
- --------------------------------------------------------------------------------
Net Net
Net operating operating
operating % of income margin
(in thousands) revenue total (loss) (%)
- --------------------------------------------------------------------------------
U.K $ 90,805 29% $ 13,051 14%
Norway 111,619 36 (7,953) (7)
Other North Sea 4,678 1 469 10
SEAME(a) 44,612 14 (6,189) (14)
Asia Pacific 39,136 12 (1,724) (4)
South America 14,316 5 2,109 15
Gulf of Mexico 8,192 3 (3,200) (39)
- --------------------------------------------------------------------------------
Total $313,358 100% $ (3,437) (1)%
================================================================================
(a) Southern Europe, Africa and the Middle East.
The Company operates its property, plant, and equipment on a worldwide basis
without restriction to specific locations. Accordingly the allocation of capital
expenditures and identifiable assets to specific geographic areas is not
possible. Inter-regional revenue was not significant.
<PAGE>
41 1998 ANNUAL REPORT [LOGO]
- --------------------------------------------------------------------------------
The following unaudited table shows, on a proforma basis, the effect of the
change in accounting policy on net operating income as if the change in policy
had happened on December 1 of each year.
For the years ended November 30,
===============================================================================
(in thousands) 1998 1997 1996
- -------------------------------------------------------------------------------
U.K $ 39,136 $ 27,489 $ 11,101
Norway 25,543 11,148 (7,493)
Other North Sea (917) (41) 469
SEAME(a) 1,357 6,330 (6,189)
Asia Pacific 5,954 6,507 (1,318)
South America 442 5,001 2,109
Gulf of Mexico 6,208 114 (3,200)
- -------------------------------------------------------------------------------
Total $ 77,723 $ 56,548 $ (4,521)
===============================================================================
(a) Southern Europe, Africa and the Middle East.
18. COMMON SHARES, CLASS A SHARES
AND CLASS B SHARES
- ---------------------------------
The Company has authorized share capital consisting of 34,000,000 Common Shares,
par value $2.00 per share, 68,000,000 Class A Shares, par value $2.00 per share,
and 34,000,000 Class B Shares, par value $2.00 per share. Class A Shares have
substantially the same rights as the Company's Common Shares, except that the
Class A Shares are non-voting. Class B Shares are convertible into Common
Shares, on a two-for-one basis, at any time at the option of the Class B
shareholders.
On January 9, 1998 the Company completed a two-for-one stock split which was
effected by means of a stock dividend distribution. On June 25, 1998 the Company
issued a stock dividend in the form of one new Class A Share for each two Common
Shares. All share data has been restated to reflect this transaction.
On March 17, 1997 the Company completed a public offering of 8,050,000 Common
Shares. Concurrent with the offering, the Company exchanged 14,000,000 Class B
Shares for approximately $57.6 million of indebtedness owed to SNSA. On November
20, 1997 the Company completed a public offering of 8,000,000 Common Shares, of
which 4,000,000 were sold by the Company and 4,000,000 were sold by SNSA. The
shares sold by SNSA were initially converted to 4,000,000 Common Shares from
8,000,000 Class B Shares. All share data has been restated to reflect this
transaction.
At November 30, 1998, 22,365,477 Common Shares, 19,679,987 Class A Shares and
34,000,000 Class B Shares were outstanding. SNSA hold 43% of the Class A Shares
and 100% of the Class B Shares which represents an economic interest of 43% of
the Company and 60% of the voting rights.
Common and Class B Shares vote as a single class on all matters submitted to a
vote of shareholders, with each share entitled to one vote, with the exception
of a recapitalization, reclassification or similar transactions affecting the
relative rights, preferences and priorities of the Common Shares and Class B
Shares, which require an affirmative vote of the holders of a majority of the
outstanding Common Shares and Class B Shares each voting as a separate class.
With respect to liquidation and dividend rights, the Class B Shares receive
$0.005 per share for each $0.01 per Common Share.
Luxembourg law requires that 5% of the Company's unconsolidated net profits each
year be allocated to a legal reserve before declaration of dividends. This
requirement continues until the reserve is 10% of the stated capital of the
Company, as represented by Common Shares and Class B Shares, after which no
further allocations are required until further issuance of shares.
The legal reserve may also be satisfied by allocation of the required amount at
the issuance of shares or by a transfer from paid-in surplus. The legal reserve
is not available for dividends. The legal reserve for all outstanding Common
Shares and Class B Shares has been satisfied and appropriate allocations are
made to the legal reserve account at the time of each issuance of new shares.
Retained earnings that represent undistributed earnings of non-consolidated
joint ventures amounted to $8.9 million at November 30, 1998 (1997: $6.0
million).
19. STOCK OPTION PLAN
- ---------------------
On April 28, 1993 the Company adopted a stock option plan ("the Plan") under
which 3.3 million Common Shares and 1.6 million Class A Shares are reserved for
issuance.
The Company accounts for awards granted to directors and key employees under APB
Opinion No. 25, under which no compensation cost has been recognized. Had
compensation cost for all stock option grants in fiscal years 1998 and 1997 been
determined consistent with SFAS No. 123, the Company's net income and earnings
per share would have been decreased to the following proforma amounts:
<PAGE>
42 STOLT COMEX SEAWAY [LOGO]
- -----------------------------------
Notes continued
- --------------------------------------------------------------------------------
For the years ended
November 30,
=====================
(in thousands, except
per share data) 1998 1997
---------------------
Net income before cumulative effect
of change in accounting policy $54,248 $39,001
Cumulative effect of change in
accounting policy $ 3,060 $ -
Net income as reported $57,308 $39,001
Net income proforma $55,904 $38,560
Earnings per share before cumulative
effect of change in accounting policy:
Basic $ 0.92 $ 0.83
Diluted $ 0.91 $ 0.82
Earnings per share impact of cumulative
effect of change in accounting policy:
Basic $ 0.05 $ --
Diluted $ 0.05 $ --
Earnings per share as reported:
Basic $ 0.97 $ 0.83
Diluted $ 0.96 $ 0.82
Earnings per share proforma:
Basic $ 0.95 $ 0.82
Diluted $ 0.93 $ 0.81
=====================
Options may be granted under the Plan which are exercisable during periods of up
to ten years. The options granted under the Plan will be at an exercise price
not less than the fair market value per share at the time the option is granted.
The Plan is administered by a Compensation Committee appointed by the Company's
Board of Directors. Options are awarded at the discretion of the Company to
directors and key employees.
The following table reflects activity under the Plan for the two year period
ended November 30, 1998:
For the years ended November 30,
1998 1997
=====================================================
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
-----------------------------------------------------
Outstanding at
beginning
of year 758,106 $ 3.997 843,990 $ 3.043
Granted 1,325,909 11.3492 300,000 5.7917
Exercised (80,611) 2.8450 (351,864) 3.27
Cancelled (32,100) 6.7529 (34,020) 3.60
-----------------------------------------------------
Outstanding at
end of year 1,971,304 $ 8.9444 758,106 $ 3.997
-----------------------------------------------------
Exercisable at
end of year 462,587 $ 5.4878 208,677 $ 3.03
-----------------------------------------------------
Weighted average
fair value of
options
granted $ 6.8069 $10.1083
=====================================================
All share data and per share data have been restated to reflect the two-for-one
stock split completed on January 29, 1998 and the Class A share distribution on
June 25, 1998.
The fair price of each stock option grant is estimated as of the date of grant
using the Black Scholes option pricing model with the following weighted average
assumptions:
===================
1998 1997
-------------------
Risk free interest rates 6.25% 6.25%
Expected lives 10 years 10 years
Expected volatility 66.0% 50.8%
Expected dividend yields 0% 0%
===================
The following tables summarize information about stock options outstanding as of
November 30, 1998:
================================================================================
Options
Award Options currently Exercise Expiration
year outstanding exercisable Price Date
- --------------------------------------------------------------------------------
1993 17,370 17,370 $5.1667 May 2003
1994 44,625 44,625 $ 3.00 Apr 2004
1995 146,750 110,063 $2.7917 Jun 2005
1996 161,250 80,625 $2.7083 Mar 2006
1997 282,900 70,725 $5.7917 Mar 2007
1998 334,500 -- $16.583 Jun 2008
- --------------------------------------------------------------------------------
987,395 323,408
================================================================================
Options outstanding and options currently exercisable as of November 30, 1998
include 656,430 Common and 330,965 Class A Shares and 214,230 Common and 109,178
Class A Shares, respectively.
As part of the acquisition of the former Ceanic Corporation, holders of Ceanic
shares were entitled to exercise all vested and one-third of their unvested
Ceanic options, or to convert any portion thereof to vested SCS Common Shares.
<PAGE>
43 1998 ANNUAL REPORT [LOGO]
- --------------------------------------------------------------------------------
Their remaining two-thirds unvested Ceanic shares were automatically converted
to unvested SCS Common Shares at the date of acquisition. The following table
reflects this:
================================================================================
Options
Award Options currently Exercise Expiration
year outstanding exercisable Price Date
- --------------------------------------------------------------------------------
1994 3,838 3,838 $ 5.21 Jul 2004
1996 5,758 5,758 $ 5.82 Apr 2006
1997 197,665 -- $ 6.25 Apr 2007
1997 15,353 -- $ 7.47 Jun 2007
1997 7,676 7,676 $ 7.82 Jun 2007
1997 525,244 85,443 $10.81 Sep 2007
1997 9,596 -- $ 8.38 Dec 2007
1998 7,196 2,399 $ 7.82 Jul 2008
1998 7,677 -- $ 6.77 Feb 2008
1998 3,839 -- $ 7.12 Feb 2008
1998 3,839 -- $ 6.70 Feb 2008
1998 19,190 -- $ 7.38 Feb 2008
1998 1,919 -- $ 8.73 Mar 2008
1998 8,636 2,879 $ 8.42 Mar 2008
1998 7,676 -- $10.29 Mar 2008
1998 3,839 -- $10.03 Mar 2008
1998 17,274 9,596 $10.25 Apr 2008
1998 14,393 4,797 $11.20 May 2008
1998 54,213 5,278 $10.77 Mar 2008
1998 47,977 -- $11.03 May 2008
1998 5,757 -- $10.99 May 2008
1998 5,758 1,919 $10.33 May 2008
1998 9,596 9,596 $ 7.38 Nov 2008
- --------------------------------------------------------------------------------
983,909 139,179
================================================================================
Options outstanding and options currently exercisable as of November 30, 1998
include 983,909 Common and nil Class A Shares and 139,179 Common and nil Class A
Shares, respectively.
20. PROFIT SHARING PLAN
- -----------------------
During 1993 the Company adopted a profit sharing plan which distributes 10% of
the Company's net income after specified adjustments, to certain of its
employees world-wide. The determination of an employee's individual award will
be based on salary and overall contribution to the Company. This plan is
administered by the Compensation Committee appointed by the Company's Board of
Directors. For the year ended November 30, 1998 a charge of $5.7 million (1997:
$3.8 million and 1996: $nil) has been included in the income statement.
21. PURCHASE OF SHARES IN SUBSIDIARY
- ------------------------------------
On June 1, 1998 the Company acquired 20% of the shares in its subsidiary in
Brazil for a cash consideration of $0.4 million. This increased the Company's
shareholding to 100%. Concurrent with this transaction, the Company purchased a
loan note for $0.6 million. Accordingly, the minority interest in the subsidiary
amounted to $nil at November 30, 1998. (1997: $0.6 million).
22. COMMITMENTS AND CONTINGENCIES
- ---------------------------------
The Company has guaranteed long-term debt, short-term lines of credit and
performance bonds amounting to $192.4 million at November 30, 1998.
During 1998, the Company purchased fixed assets of $123.3 million with about
$44.3 million being committed with suppliers for 1999.
<PAGE>
44 STOLT COMEX SEAWAY [LOGO]
- -----------------------------------
Notes to Consolidated
Financial Statements
- --------------------------------------------------------------------------------
The Swiss Court of Insurance "Tribunal Federal des Assurances" entered a
judgement on April 29, 1992 against Sogexpat S.A. ("Sogexpat"), a subsidiary of
the Company, in litigation brought by a Swiss governmental entity claiming
payment of social security contributions in arrears. During the year ended
November 30, 1993, the Company wound up Sogexpat and transferred the employees
to other Group companies.
The French government has investigated Stolt Comex Seaway S.A. of France
alleging violations of French labor and social security legislation, which has
resulted during 1998 in a condemnation by the French Supreme Court of Stolt
Comex Seaway S.A. of France and two of its former directors. In addition, a
number of former and present employees have started civil proceedings against
certain subsidiaries of the Company alleging loss of employment and social
security benefits. Some of the proceedings have recently commenced while some
have already resulted in court decisions. One such decision has been appealed to
the French Supreme Court. While the Company believes that its subsidiaries have
meritorious defences in these cases, there can be no certainty as to the number
of claims which may be brought or the amount for which the Company may
eventually be liable with respect thereto. Comex S.A., a former shareholder of
Comex Services S.A. ("Comex"), in an agreement with SNSA executed on June 5,
1992 for the sale of Comex, agreed to indemnify the Company with respect to
certain aspects of the foregoing. There can be no assurance, however, as to the
amount which the Company may ultimately recover from Comex S.A. pursuant to such
indemnity.
Coflexip S.A. has commenced legal proceedings against three subsidiaries of the
Company claiming infringement of a certain patent relating to flexible flowline
laying technology in the U.K.
Judgement was given on January 22, 1999 and January 29, 1999. The disputed
patent was held valid. The Company has provided in the November 30, 1998
accompanying financial statements an amount to cover the estimated liability for
Coflexip S.A.'s legal costs in the litigation. No provision has been made for
damages. The extent of the liability for damages, if any, to Coflexip S.A. for
patent infringement in the U.K. is unkown at this stage.
In the ordinary course of business, various claims, suits and complaints have
been filed against the Company. In the opinion of management, all such matters
are adequately covered by indemnity agreements, recorded provisions in the
financial statements and insurance or, if not so covered, would not have a
material effect on the financial position, results of operations or cash flows
of the Company if resolved unfavourably.
23. FAIR VALUE OF FINANCIAL INSTRUMENTS
- ---------------------------------------
All of the Company's derivative activities are over the counter instruments
entered into with major financial credit institutions to hedge the Company's
committed exposures. All of the Company's derivative instruments are straight
forward foreign exchange forward contracts which subject the Company to a
minimum level of exposure risk. The Company does not consider it has a material
exposure to credit risk from third parties failing to perform according to the
terms of hedge instruments.
The following foreign exchange contracts, maturing between December 1, 1998 and
September 29, 1999 were outstanding as of November 30, 1998:
================================================================================
(in thousands) Purchase Sell
- --------------------------------------------------------------------------------
French francs 24,000 --
Belgian francs 191,091 --
Dutch guilders 51 --
British pounds - 3,000
Canadian dollars 800 --
Australian dollars 2,100 --
================================================================================
The U.S. dollar equivalent of the currencies which the Company had contracted to
purchase was $11.5 million and to sell was $5.0 million at November 30, 1998.
<PAGE>
45 1998 ANNUAL REPORT [LOGO]
- --------------------------------------------------------------------------------
The following estimated fair value amounts of the Company's financial
instruments have been determined by the Company, using appropriate market
information and valuation methodologies. Considerable judgement is required to
develop these estimates of fair values, thus the estimates provided herein are
not necessarily indicative of the amounts that could be realized in a current
market exchange:
As of November 30, 1998
================================================================================
(in millions) Carrying amount Fair value
- --------------------------------------------------------------------------------
Financial assets
Cash and cash equivalents $ 9.4 $ 9.4
Financial liabilities
Bank overdrafts 17.6 17.6
Long-term debt 217.5 217.5
Off balance sheet financial
instruments
Foreign exchange forward
contracts -- 0.3
================================================================================
The carrying amounts of cash and cash equivalents, bank overdrafts and all other
financial instruments approximate their fair value. The estimated value of the
Company's long-term debt is based on interest rates at November 30, 1998 using
debt instruments of similar risk. The fair values of the Company's foreign
exchange forward hedge contracts are based on their estimated termination values
at November 30, 1998.
24. SUBSEQUENT EVENTS
- ---------------------
On December 9, 1998, the Company acquired the Remotely Operated Vehicle business
of Dolphin Offshore AS for $16.9 million.
On January 14, 1999, the Company signed a letter of intent with J. Ray McDermott
pursuant to which the Company will acquire the Gulf of Mexico Diving Division of
J. Ray McDermott. The transaction is subject to certain conditions and is
expected to close in March 1999.
Subsequent to November 30, 1998, the Company reached agreement for a new credit
facility with Den norske Bank ASA, Bank of America NT & SA, Midland Bank plc,
and ASKL-CGER Bank nv/sa. This new facility is in the form of a five year
revolving credit line. The initial available amount is $150.0 million which will
be reduced by $12.5 million semi annually leaving $37.5 million due at maturity.
This facility will be used to repay SNSA.
<PAGE>
46 STOLT COMEX SEAWAY [LOGO]
Corporate Information
Stolt Comex Seaway Ltd.
Bucksburn House
Howes Road
Bucksburn
Aberdeen, AB21 9RQ Scotland
Tel: +44 (0) 1224 718200
Fax: +44 (0) 1224 715129
Stolt Comex Seaway A/S
Skogstostraen 37
P.O. Box 740
N-4001 Stavanger, Norway
Tel: +47 51 84 50 00
Fax: +47 51 83 59 00
Stolt Comex Seaway S.A.
B.P. 69
467 Chemin du Littoral
13321 Marseille Cedex 16, France
Tel: +33 (0) 4 91 09 68 01
Fax: +33 (0) 4 91 09 68 00
Stolt Comex Seaway Inc.
900 Town &Country Lane
Suite 400
Houston, TX 77024 U.S.
Tel: +1 713 430 1100
Fax: +1 713 461 0039
Stolt Comex Seaway Australia Pty Ltd.
Level 2
30 Hasler Road
Herdsman Business Park
Osborne Park, WA 6017 Australia
Tel: +61 (0) 8 9446 6700
Fax: +61 (0) 8 9446 4822
Stolt Comex Seaway Tecnologia
Submarina S.A.
Av. Prefeito Aristeu Ferreira da Silva
1661 Novo Cavaleiros - Macae - RJ
27930-070, Brazil
Tel: +55 (0) 24 773 3131
Fax: +55 (0) 24 773 4578
Seaway Heavy Lifting Engineering B.V.
2718 RR Zoetermeer, The Netherlands
Tel: +31 79 363 7700
Fax: +31 79 363 7799
Stock Trading History
Common Shares - Nasdaq
================================================================================
For the years ended November 30, Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4
- --------------------------------------------------------------------------------
1998
High $18 1/64 $24 27/64 $20 11/32 $13 1/2
Low $12 5/8 $14 27/64 $ 7 7/8 $ 8 1/8
- --------------------------------------------------------------------------------
1997
High $ 9 7/8 $11 19/32 $26 11/16 $33 3/16
Low $ 7 1/16 $ 8 13/16 $11 5/16 $24 9/16
- --------------------------------------------------------------------------------
1996
High $ 5 $ 7 11/16 $ 7 1/16 $ 9 3/8
Low $ 3 15/16 $ 4 1/16 $ 4 15/16 $ 5 7/16
- --------------------------------------------------------------------------------
Common Shares - Oslo Stock Exchange (Norwegian kroner)
================================================================================
For the years ended November 30, Qtr. 1 Qtr. 2 Qtr. 3 Qtr, 4
- --------------------------------------------------------------------------------
1998
High 134.73 178.09 154.00 101.00
Low 94.05 115.39 67.00 61.00
- --------------------------------------------------------------------------------
1997
High -- -- 190.00 272.50
Low -- -- 66.00 179.25
- --------------------------------------------------------------------------------
A Shares - Nasdaq
================================================================================
For the year ended November 30, Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4
- --------------------------------------------------------------------------------
1998
High -- -- $18 1/2 $11 15/16
Low -- -- $ 5 11/16 $ 6 1/2
- --------------------------------------------------------------------------------
A Shares - Oslo Stock Exchange (Norwegian kroner)
================================================================================
For the year ended November 30, Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4
- --------------------------------------------------------------------------------
1998
High -- -- 143.50 83.00
Low -- -- 45.00 45.30
- --------------------------------------------------------------------------------
<PAGE>
REVOLVING CREDIT FACILITY
UP TO
USD 125,000,000
SEAWAY (UK) LIMITED
AS BORROWER
STOLT COMEX SEAWAY S.A.
AS GUARANTOR
DEN NORSKE BANK ASA
AND
MIDLAND BANK PLC
AS BANKS
MIDLAND BANK PLC
AS FACILITY AGENT
DEN NORSKE BANK ASA
AS SECURITY AGENT
<PAGE>
- -----------------------------------------------
GREGUSSON HETTY
- -----------------------------------------------
ANS - Advokatfirma MNA
P.O.Box 1958 Vika, 0125 Oslo
Tel.: (+47) 22 01 94 00 Fax.: (+47) 22 01 94 10
1. FACILITY AND PURPOSE................................................6
2. DEFINITIONS.........................................................6
3. CONDITIONS PRECEDENT...............................................11
3.1 CONDITIONS..................................................11
3.2 CERTIFIED COPIES............................................12
3.3 NO EVENT OF DEFAULT.........................................13
3.4 WAIVERS.....................................................13
4. AVAILABILITY.......................................................13
4.1 NOTICE TO THE FACILITY AGENT................................13
4.2 MANNER OF PAYMENT...........................................13
4.3 INDEMNITY...................................................13
4.4 SEVERALITY OF OBLIGATIONS...................................13
5. REPRESENTATION AND WARRANTIES......................................14
6. SECURITY - NEGATIVE PLEDGE.........................................15
6.1 SECURITY....................................................15
6.2 SET-OFF.....................................................15
6.3 NEGATIVE PLEDGE.............................................15
7. CURRENCIES.........................................................15
7.1 NOMINATION OF CURRENCY......................................15
7.2 CALCULATION OF CURRENCY AMOUNT..............................16
7.3 RENEWALS....................................................16
7.4 UNAVAILABILITY OF CURRENCY..................................16
7.5 EXTRA COST..................................................16
8. INTEREST...........................................................17
8.1 INTEREST RATE...............................................17
8.2 INTEREST PERIOD.............................................17
8.2.1 ABSENCE OF NOMINATION...........................17
<PAGE>
8.2.2 INSTALMENTS.....................................17
8.2.3 BANKING DAY.....................................17
8.2.4 ONE MONTH INTEREST PERIODS......................17
8.2.5 NUMBER OF ADVANCES..............................17
8.3 INTEREST CALCULATION........................................17
8.4 DEFAULT INTEREST............................................18
8.5 NO LIBOR QUOTATION..........................................18
9. COMMITMENT REDUCTION/PREPAYMENT/
CANCELLATION.......................................................18
9.1 REDUCTION...................................................18
9.2 CANCELLATION................................................18
9.3 REBORROWING.................................................18
9.4 PREPAYMENT UPON TOTAL LOSS..................................18
10. COVENANTS..........................................................19
10.1 GENERAL COVENANTS...........................................19
10.1.1 INFORMATION.....................................19
10.1.2 FINANCIAL INFORMATION...........................19
10.1.3 INSURANCES......................................20
10.1.4 MORTGAGEE INTEREST..............................20
10.1.5 CERTIFICATE OF INSURANCES.......................20
10.1.6 NOTIFICATION....................................20
10.1.7 CLASS...........................................20
10.1.8 REPAIRS AND ALTERATION OF THE VESSELS...........21
10.1.9 FLAG............................................21
10.1.10 MANAGEMENT......................................21
10.1.11 SALE OF VESSEL..................................21
10.1.12 EMPLOYMENT OF VESSELS...........................21
10.1.13 BANK ACCOUNTS...................................21
10.1.14 NO FURTHER ENCUMBRANCES.........................21
10.1.15 MERGER OR DEMERGER..............................21
10.1.16 CORPORATE DOCUMENTS.............................21
10.1.17 LAWFUL CONDUCT..................................21
10.1.18 PUBLIC LISTING..................................21
10.2 FINANCIAL COVENANTS ........................................22
10.2.1 CERTIFICATE OF COMPLIANCE.......................22
10.2.2 CONSOLIDATED TANGIBLE NET WORTH.................22
10.2.3 CONSOLIDATED DEBT TO CONSOLIDATED TANGIBLE
NET WORTH RATIO.................................22
10.2.4 CONSOLIDATED DEBT TO EBITDA RATIO...............22
10.3 BANKS APPROVAL..............................................22
11. MINIMUM VALUE......................................................22
11.1 VALUATION...................................................22
11.2 MINIMUM VALUE REQUIREMENT...................................22
11.3 PREPAYMENT..................................................22
11.4 RELEASE OF ADDITIONAL SECURITY..............................22
12. EVENTS OF DEFAULT..................................................23
12.1 EVENTS......................................................23
12.1.1 OVERDUE PAYMENT.................................23
12.1.2 DEFAULT UNDER OTHER PROVISIONS..................23
12.1.3 INFORMATION FROM BORROWER.......................23
12.1.4 CROSS DEFAULT...................................23
12.1.5 LIENS AND MATERIAL LITIGATION...................23
12.1.6 LOSS OF PROPERTY................................24
12.1.7 LIQUIDATION.....................................24
<PAGE>
12.1.8 ADMITTANCE OF NON-PAYMENT.......................24
12.1.9 TERMINATION OF BUSINESS.........................24
12.1.10 PERMITS.........................................24
12.1.11 OWNERSHIP OF THE BORROWER.......................24
12.2 LOAN ACCELERATION...........................................24
12.3 IMPOSSIBILITY OR ILLEGALITY.................................24
13. DEFAULT INDEMNITY..................................................25
13.1 DEFAULT INTEREST............................................25
13.2 INDEMNITY BY BORROWER.......................................25
13.3 INDEMNITY AMOUNT CERTIFICATE................................25
14. CHANGES IN CIRCUMSTANCES...........................................25
14.1 INCREASED COSTS.............................................25
14.2 ILLEGALITY..................................................26
14.3 UNAVAILABILITY OF FUNDS.....................................26
14.4 ALTERNATIVE FUNDING.........................................26
14.5 PREPAYMENT..................................................26
15. FEES, COSTS AND EXPENSES...........................................27
15.1 COMMITMENT COMMISSION.......................................27
15.2 UNDERWRITING FEE............................................27
15.3 COSTS.......................................................27
16. PAYMENTS...........................................................27
16.1 TAXES.......................................................27
16.2 GENERAL PREPAYMENT PROVISIONS...............................27
16.3 REFUND OBLIGATION...........................................28
17. AGENCY.............................................................28
17.1 AGENT'S AUTHORITY...........................................28
17.2 APPLICATION OF FUNDS........................................28
17.3 SHARING OF PAYMENT..........................................28
17.4 INFORMATION TO BANKS........................................29
17.5 INDEMNIFICATION OF AGENTS...................................29
17.6 DISCLAIMER OF LIABILITY.....................................29
17.7 INDIVIDUAL CREDIT RISK ASSESSMENT...........................29
17.8 AGENTS' OTHER BUSINESS WITH BORROWER........................29
18. ASSIGNMENT.........................................................29
18.1 PARENT & BORROWER...........................................29
18.2 BANK TO AFFILIATE...........................................29
18.3 BANK TO OTHER FINANCIAL INSTITUTIONS........................30
18.4 SUBSEQUENT PAYMENTS.........................................30
19. NOTICES AND CORRESPONDENCE.........................................30
20. CURRENCY INDEMNITY.................................................31
21. MISCELLANEOUS......................................................31
21.1 SEVERALITY OF PROVISIONS....................................31
21.2 CLAUSE HEADINGS.............................................31
22. GOVERNING LAW AND JURISDICTION.....................................31
SCHEDULE NO. Page
- ------------ ----
<PAGE>
1 LIST OF BANKS AND PARTICIPATIONS 34
2 DRAWDOWN NOTICE.. 35
3 NOMINATION NOTICE 36
4 FORM OF SHIP MORTGAGES 37
5 FORM OF INSURANCE ASSIGNMENT 102
6 FORM OF PARENT GUARANTEE/INTER COMPANY
GUARANTEE 106
7 SECURITY IN THE EARNINGS OF VESSELS 108
8 FORM OF CERTIFICATE OF COMPLIANCE 114
9 ASSOCIATED COST RATE 116
10 TECHNICAL MANAGEMENT AGREEMENT 118
11 CONTRACT INFORMATION
This Agreement is entered into on this 19th day of December 1997
BETWEEN:-
(1) SEAWAY (UK) LIMITED c/o STOLT COMEX SEAWAY M.S. LTD, Bucksburn House,
Howes Road, Bucksburn, UK - Aberdeen AB 2 9RQ, Scotland (the "BORROWER"),
a limited liability company incorporated under the laws of England.
(2) STOLT COMEX SEAWAY S.A., a limited liability company incorporated under
the laws of The Grand Duchy of Luxembourg, with the registered address 11
Rue Aldringen, RC Luxembourg B 43172 (the "PARENT") in its capacity as
Guarantor.
(3) THE BANKS AND FINANCIAL INSTITUTIONS whose names, addresses and
participations in the Loan are listed in Schedule 1 hereto (the "BANKS").
(4) MIDLAND BANK PLC 27 - 32 Poultry, London EC2P 2BX, England (the "FACILITY
AGENT").
and
(5) DEN NORSKE BANK ASA, P.O.Box 1171 Sentrum, N-0107 Oslo, Norway (the
"SECURITY AGENT")
WHEREAS:-
<PAGE>
(A) The Borrower is a wholly owned indirect subsidiary of the Parent.
(B) The Borrower's sole purpose is borrowing money to finance the operation of
the SCS Group (as herein defined) or any member of the SCS Group and to
act as the founder for a pension fund.
(C) The Borrower on behalf of the SCS Group wishes to obtain from the Banks
financing assistance for the operations of the SCS Group as specified in
this Agreement.
(D) The Banks have agreed, pursuant to the terms and conditions set out
herein, to assist in the financing of the SCS Group's general corporate
purpose and operations including without limitation working capital and
capital expenditures.
NOW IT IS HEREBY AGREED as follows:-
1. FACILITY AND PURPOSE
This Agreement sets out the terms and conditions upon which the Banks will
severally, in proportions as set out in Schedule 1 hereto, make available to the
Borrower a revolving multicurrency credit (the "FACILITY") in the amount of up
to USD 125,000,000 with the purpose of financing capital expenditures and
general corporate purposes of the SCS Group (as herein defined).
2. DEFINITIONS
In this Agreement the following terms and expressions shall have the meaning set
out below, always provided that where the context of this Agreement so allows
words importing the singular include the plural and vice versa:
"ACCOUNTS RECEIVABLE" means the aggregate amount due at any time to the SCS
Group.
"ADVANCE" means any amount advanced to the Borrower under the Facility.
"AGENT" means either of the Facility Agent and the Security Agent.
"APPLICABLE MARGIN" means a variable margin calculated by the Facility Agent
based upon the Parent's Consolidated Debt to EBITDA ratio ("D/EBITDA") as an
average of the immediately preceding four fiscal (4) quarters as follows:
<PAGE>
D/EBITDA: APPLICABLE MARGIN PER ANNUM:
- --------- ----------------------------
3 or greater 0,80%
2 or greater but less than 3 0,60%
1 or greater but less than 2 0,50%
less than 1 0,40%
The Applicable Margin shall be calculated by the Facility Agent on 28 February,
31 May, 31 August and 30 November each year (each a "MARGIN REVIEW DATE") for
the succeeding fiscal quarter and shall be the average of four consecutive
fiscal quarters, the most recent of which shall have ended on the previous
Margin Review Date.
The margin calculated as aforesaid shall be increased by 50% upon occurrence of
Change of Control, unless such Change of Control is certified by the Agents to
be acceptable to the Majority Banks in their sole discretion.
"ARTICLES OF ASSOCIATION" means in respect of a company the Articles of
Association, by- laws, Articles of Incorporation, Statutes, Certificate of Good
Standing and any other similar documents relevant to such body corporate under
the laws of the relevant country of incorporation.
"ASSIGNMENT ACCOUNTS" any account with the Facility Agent established pursuant
to the Assignment of Earnings in order to receive the assigned earnings of the
Vessels.
"ASSIGNMENT OF EARNINGS" means an assignment of the earnings of each of the
Vessels issued by the relevant Shipowning Company to the Security Agent in the
form set out in Schedule 7.
"ASSOCIATED COSTS RATE" means, in relation to any Advance or unpaid sum
denominated in GBP, the rate determined in accordance with Schedule 9.
"BANK ACCOUNTS" means the accounts referred to in Clause 10.1.13.
"BANKING DAY" means a day upon which banks and foreign exchange markets are open
for business in London, Oslo, New York and such other places contemplated for
the transactions required by this Agreement.
"CERTIFICATE OF COMPLIANCE" has the meaning ascribed thereto in Clause 10.2.1
and being in the form set out in Schedule 8.
"CHANGE OF CONTROL" means that Stolt-Nielsen S.A. of Luxembourg ("SNSA") shall
cease, for any reason whatsoever, to own or control directly or indirectly,
shares of the Parent representing at least 30% of all votes capable of being
represented in any shareholders
<PAGE>
meeting of the Parent or if any shareholder or group of shareholders acting in
concert outside SNSA at any time own or control, directly or indirectly, more of
the issued voting shares determined on a per vote basis of the Parent than those
being owned or controlled by SNSA.
"CONSOLIDATED TANGIBLE NET WORTH" means for the Parent and its Subsidiaries (on
a consolidated basis) at any time (a) the sum, to the extent shown on the
Parent's consolidated balance sheet, of (i) the amount of issued and outstanding
share capital, but less the cost of treasury shares, plus (ii) the amount of
surplus and retained earnings, less (b) intangible assets as determined in
accordance with US GAAP.
"CONSOLIDATED DEBT" ("DEBT") means for the Parent and its Subsidiaries (on a
consolidated basis) at any time, the aggregate value of (i) notes payable
(whether promissory notes or otherwise), plus (ii) long term debt (including
current portion of long term debt), plus (iii) capitalised lease obligations on
behalf of third parties and all contingent liabilities related to debt and
capital lease obligations which, according to US GAAP, are considered probable
and estimable, plus (iv) subordinated debt less (v) amount of debt for which
there is a restricted cash deposit which will repay all or part of such
financial debt obligation.
"DRAWDOWN DATE" means a date a portion of the Loan Commitment is made available
to the Borrower hereunder, such date always being a Banking Day, not to occur
later than the date falling one month prior to the Final Repayment Date.
"DRAWDOWN NOTICE" means a notice in the form set out in Schedule 1 hereto.
"DEED OF COVENANT" means a Deed of Covenant executed by the Borrower
substantially in the form set out in Schedule 4 hereto
"EARNINGS" means all freight, hire (including, but not limited to all payments
from any charterparty), compensation payable to the Borrower in the event of
requisition of any Vessel, remuneration for salvage and other services,
demurrage, retention moneys and all other moneys whatsoever due or to become due
to the Borrower in respect of the Vessels or otherwise.
"EBITDA" means the consolidated Earnings Before Interest, Taxes, Depreciation
and Amortization, at any time during the Facility Period as determined in
accordance with US GAAP.
"EUROCURRENCY" means each of the lawful currencies of the United States of
America ("USD"), United Kingdom ("GBP"), Norway ("NOK") and any other currency
always provided that such currency is generally available in the eurocurrency
market and in relation to other currencies than USD, freely convertible into
USD.
"EVENT OF DEFAULT" means each of the events and circumstances specified in
Clause 12.1
<PAGE>
(Events of Default) below.
"FACILITY PERIOD" means the period from the date of this Agreement until all
amounts outstanding from the Borrower to the Agents and the Banks hereunder,
whether actual or contingent, have been repaid in full and the Banks are under
no further obligation to make Advances available under this Agreement.
"FINAL REPAYMENT DATE" means 28 February 2003.
"INTER COMPANY GUARANTEE" means an on demand guarantee for the full amount of
the facility substantially in the form as set out in Schedule 6 or an indemnity
being in form and substance satisfactory to the Agents, made by each of the
Shipowning Companies in favour of the Security Agent on behalf of the Banks.
"INTEREST PAYMENT DATE" means the last day of each Interest Period, and in
respect of any Interest Period exceeding 6 months, the date falling 6 months
after the commencement thereof and each date falling with six-monthly intervals
thereafter.
"INTEREST PERIOD" means a period, the duration of which is calculated in
accordance with the provisions of Clause 8 (Interest) hereof.
"LIBOR" means, in relation to any Advance or unpaid sum, the rate per annum
determined by the Facility Agent to be (i) the Screen Rate for the specified
period or (ii) (in the event that LIBOR cannot be determined by reference to the
Screen Rate) the rate per annum determined by the Facility Agent to be equal to
the arithmetic mean (rounded upwards, if not already such a multiple, to the
nearest whole multiple of the one-sixteenth of one per cent.) of the rates (as
notified to the Facility Agent) at which each of the Banks was offering to prime
banks in the London Interbank Market, deposits in the currency in which such
Advance or unpaid sum is denominated and for the specified period at or about
11.00 a.m. London time two Banking Days prior to the commencement of the
relevant Interest Period therefor and, for the purpose of this definition,
"SPECIFIED period" means the Interest Period of such Advance or, as the case may
be, the relevant period in respect of which LIBOR shall be determined in
relation to such unpaid sum.
"LOAN" means the aggregate principal amount outstanding hereunder at any time.
"LOAN COMMITMENT" means the maximum sum of USD 125,000,000.
"MAJORITY BANKS" means Banks accounting for more than 66% of the Loan
Commitment, or as the case may be, the Loan at any time.
"MANAGER" means the Technical Manager.
<PAGE>
"MANAGEMENT AGREEMENT" means the Technical Management Agreement.
"MARKET VALUE" means the arithmetic means of valuations, made by two independent
ship brokers approved by the Agents, on the basis of a voluntary cash sale of
the Vessels between willing buyer and willing seller on "as is - where is"
terms, free of any employment obligations.
"MORTGAGE" means a first priority Ship Mortgage of USD 125,000,000 (together
with, in respect of M.V. SEAWAY OSPREY, M.V. SEAWAY HARRIER and M.V. SEAWAY
EAGLE, an additional amount of USD 12,500,000) registered on each Vessel in the
ships registry applicable to the relevant Vessel, and in respect of M.V. "SEAWAY
CONDOR" together with a Deed of Covenant, being substantially in the forms set
out in Schedule 4 hereto.
"NOMINATED CURRENCY" means USD or the Eurocurrency in which the Loan will be
made available to the Borrower pursuant to Clause 7 (Currencies) hereof, at any
time during the Facility Period.
"NOMINATION NOTICE" means a notice in the form set out in Schedule 3 hereto.
"OUTSTANDING INDEBTEDNESS" means all and any amount outstanding from the
Borrower to the Banks pursuant to this Agreement or any of the Security
Documents.
"PARENT GUARANTEE" means the guarantee substantially as set out in Schedule 6
hereto.
"PLAN" means the Norwegian Marine Insurance Plan of 1964.
"PRINCIPAL SUBSIDIARIES" means any member of the SCS Group having total assets
exceeding 10% of the consolidated assets of the SCS Group and/or having during
the last four quarters accounted for more than 10% of the consolidated turnover
of the SCS Group.
"REDUCTION DATES" means the date falling 36 months after the signing of this
Agreement and each of the dates falling at 6 months intervals thereafter up to
and including the Final Repayment Date.
"SCS GROUP" means the Parent and all Subsidiaries.
"SCREEN RATE" means the offered quotation appearing on page 3740 or 3750 of the
Telerate Screen (or such other page or service as may replace such pages on such
system for this purpose) which displays British Bankers Association Interest
Settlement Rates for deposits in the currency in which the relevant Advance or
unpaid sum is to be denominated at or about 11.00 a.m. London time two Banking
Days prior to the commencement of the relevant Interest Period therefor.
<PAGE>
"SECURITY DOCUMENTS" means all or any documents and/or arrangements as may be
entered into from time to time pursuant to Clause 6 (Security) hereof, as
security for all or any of the obligations of the Borrower hereunder.
"SHIPOWNING COMPANIES" means SCS SHIPPING LIMITED an Isle of Man company (owning
M.V. "SEAWAY CONDOR", M.V. "SEAWAY OSPREY", M.V., "SEAWAY HARRIER" M.V. "SEAWAY
HAWK") and SCS SHIPPING CORPORATION, a Liberian corporation (owning M.V. "SEAWAY
EAGLE").
"SUBSIDIARY" means each corporate body and/or company within the definition of
ss. 2 - 1 of the Norwegian Companies Act or corresponding definition in any
other applicable company law in relation to the Parent or any other subsidiary.
"TAX" means any and all taxes, levies, imposts, duties, charges, fees,
deductions, and withholdings levied or imposed by any national or local
governmental or public body or authority.
"TECHNICAL MANAGER" means Stolt Comex Seaway AS.
"TECHNICAL MANAGEMENT AGREEMENT" means any one of the agreements between each
Shipowning Company and the Technical Manager dated 1 April 1993, 9 May 1997 and
1 December 1996 respectively in relation to the technical management of the
Vessels (Schedule 10).
"TOTAL LOSS" means any event which will entitle the respective Shipowning
Company to claim payment of the total insured value of each Vessel under such
Vessel's Hull and Machinery or War Risk insurance policies.
"US GAAP" means generally accepted accounting principles in The United States of
America, from time to time in effect, subject to any changes in the rules of US
GAAP, consistently applied always provided that if the Parent wishes to change
accounting principles within the applicable rules of US GAAP the Borrower shall
notify the Facility Agent of the intention together with an explanation of the
effects on the financial covenants in this Agreement. Should the Banks, and or
the Parent, find that such change will impact upon the result of the calculation
of the financial covenants herein, the Banks will, following consultation with
SCS, stipulate amendments to the financial covenants so that the ratio of SCS
Group's performance in respect of the covenant reflects the position which would
have been the case had no changes to SCS's accounting principles taken place.
"VESSEL" means each of M.V. "SEAWAY CONDOR" (Isle of Man), M.V. "SEAWAY HARRIER"
(Liberia), M.V. "SEAWAY OSPREY" (Liberia), M.V. "SEAWAY EAGLE" (Liberia) and
M.V. "SEAWAY HAWK" (Panama).
<PAGE>
3. CONDITIONS PRECEDENT
3.1 CONDITIONS. The obligations of the Banks to make any portion of the Loan
Commitment available are conditional upon the Facility Agent having
received the following documents in form and substance satisfactory to
the Facility Agent, no later than 3 Banking Days prior to the first
Drawdown Date:
3.1.1 In respect of the Parent:
a. Articles of Association.
b. transcript of company register.
c. latest available audited accounts and unaudited
periodical report.
d. board resolution appointing an attorney to sign this
Agreement on behalf of the Parent in its capacity as
guarantor and the Parent Guarantee.
3.1.2 In respect of the Borrower:
a. Articles of Association.
b. company certificate.
c. latest available accounts and unaudited periodical
report.
d. board resolution authorising the Borrower's execution
of this Agreement and the Security Documents.
3.1.3 In respect of each Shipowning Company:
a. Articles of Association.
b. company certificate.
c. latest available accounts.
d. board resolution and to the extent applicable under the
relevant jurisdiction, shareholders approval, resolving
to execute and deliver the Inter Company Guarantee and
the relevant Mortgage, Assignment of Insurances and the
Security Documents set out in Schedule 7.
e. receipt by the Security Agent of the Security Documents
referred to in sub-clause d, as duly recorded,
perfected to the satisfaction of the Security Agent.
3.1.4 In respect of each Vessel:
a. the relevant Charterparty at any time in existence.
b. the Management Agreement.
c. Certificate confirming insurance taken out pursuant to
Clauses 10.1.3 and 10.1.4.
d. Classification Certificates as specified in Clause
10.1.7 (Class).
e. a Certificate of Ownership and Encumbrances from the
relevant Ships Registry.
<PAGE>
3.1.5 Evidence that all of the Security Documents including, but not
limited to the Mortgages having been arranged in a manner
satisfactory to the Security Agent, including, by way of
written confirmation from the relevant Ships Registry, that
the relevant Mortgage has been registered first priority and
that the relevant Vessel is free of other encumbrances.
3.1.6 Legal opinions by the Agents' and the Banks' legal advisers in
all jurisdictions affected by the transactions envisaged by
this Agreement, including, but not limited to, the legal,
valid, binding and enforceable execution of this Agreement and
each Security Document and perfection of all security
arrangements.
3.2 CERTIFIED COPIES. Each of the documents specified in Clause 3.1 shall
either be an original or a copy certified to be true and up-to-date by a
lawyer licensed to practice law in the relevant jurisdiction (or in
respect of Liberia, experienced in Liberian law) and where relevant, the
company secretary shall confirm in writing that the documents are correct
and up to date and that no subsequent changes have been made, approved or
is pending.
3.3 NO EVENT OF DEFAULT. The obligations of the Banks hereunder are subject
to the further general preconditions that at the time of request for and
at the time of making available an Advance no Event of Default and no
event which with the giving of notice or lapse of time, determination and
materiality or other condition may constitute such an Event of Default,
shall have occurred or be continuing or in the reasonable opinion of the
Facility Agent, will probably result from the making of such Advance.
3.4 WAIVERS. The Agents may, at their discretion, extend the period for
delivery of any of the documents referred to above on such conditions as
the Agents deem appropriate.
4. AVAILABILITY
4.1 NOTICE TO THE FACILITY AGENT. Each Advance shall be made available in
minimum amounts of USD 2 Mill. or the equivalent in any other
eurocurrency to the Borrower in one amount on a Drawdown Date, subject to
the Facility Agent having received the relevant Drawdown Notice, before
1100 hours London time not less than 3 Banking Days prior thereto.
4.2 MANNER OF PAYMENT. Each Advance under the Loan Commitment shall be made
available solely for the purposes referred to under Clause 1 (Facilities
and Purpose) above in a manner to be agreed between the Borrower and the
Facility Agent prior to the
<PAGE>
Drawdown Date.
4.3 INDEMNITY. The Borrower shall indemnify each Bank against any loss or
expense which such Bank may sustain or incur as a consequence of any
portion of the Loan Commitment not being drawn or utilised after the
Drawdown Notice, has been served, including but not limited to any loss
or expenses incurred to fund the relevant portion of the Loan Commitment.
4.4 SEVERALITY OF OBLIGATIONS. The obligations of each Bank under this
Agreement are several, the failure of any Bank to perform any such
obligations shall not relieve the other Banks, the Agents or the Borrower
of any of their respective obligations or liabilities under this
Agreement, nor shall the Agents or any of the Banks be responsible for
the obligations of any other Bank under this Agreement.
5. REPRESENTATION AND WARRANTIES
5.1 Each of the Borrower and the Parent hereby represents and warrants
towards the Agents and the Banks jointly and severally that:
5.1.1 The Parent is a company duly organised and validly standing
under the laws of Luxembourg and has full power to enter into
and perform its obligations under this Agreement and the Parent
Guarantee.
5.1.2 The Borrower is a company duly organised and validly standing
under the laws of England and has full power to enter into and
perform its obligations under this Agreement.
5.1.3 This Agreement and the Parent Guarantee are binding on and is
enforceable against the Parent and the Borrower, respectively,
and will not be in breach of the Articles of Association,
agreements or other obligations of the Parent and the Borrower
or any other member of the SCS Group.
5.1.4 The Shipowning Companies are fully authorised to issue the Inter
Company Guarantee, the Assignment of Earnings, the Mortgage and
the Assignment of Insurances and these documents will be binding
and enforceable against the respective Shipowning Company.
None of the documents referred to above is in violation of any
Articles of Association, agreements or any other obligation of
the relevant Shipowning
<PAGE>
Company.
5.1.5 Neither the Borrower, the Parent, nor any of the Shipowning
Company is entitled to immunity on the grounds of sovereignty or
otherwise from any legal action or proceedings except for
limitations imposed by laws affecting creditors' rights
generally.
5.1.6 All consent, necessary authorisation or declaration to or
registration with any governmental or public bodies or courts in
order for the Parent, the Borrower and/or the Shipowning
Companies to perform its obligations hereunder have been
obtained and are in full force and effect.
5.1.7 No circumstances exist which may make the obligations of the
Parent, the Borrower and/or the Shipowning Companies pursuant to
this Agreement and documents to issued pursuant to this
Agreement invalid.
5.1.8 Any financial information given by the Borrower, the Shipowning
Companies, Stolt Comex Seaway MS Ltd and the Guarantor in
writing to the Agents and the Banks in connection with this
transaction are true and correct.
6. SECURITY - NEGATIVE PLEDGE
6.1 SECURITY. The Loan together with all unpaid interest, default interest,
commissions, charges, expenses and any derived liability whatsoever of
the Borrower towards the Banks and the Agents in connection therewith
shall be secured by:
a. the Mortgage on each Vessel together with a Deed of
Covenant (as applicable).
b. the first priority insurance assignment pertaining to
the insurances as detailed in Clauses 10.1.3
(Insurances) in respect of each Vessel, which are
hereby assigned to the Banks and the Security Agent.
c. the Parent Guarantee.
d. the Inter Company Guarantees.
e. the Assignment of Earnings.
6.2 SET-OFF. In the event of non-payment of any amount hereunder when due,
the Facility Agent, the Security Agent and each of the Banks individually
shall have a separate right of set-off in respect of any credit balance,
in any currency, on any account the Borrower or the Parent might have
with the Agents or any of the Banks (branches included) from time to
time, towards satisfaction of any sum due to it, to the Agents or any of
the other Banks hereunder.
6.3 NEGATIVE PLEDGE. The Borrower and the Parent hereby covenant and agree
that the
<PAGE>
Borrower, the Parent or any member of the SCS Group in the Facility
Period, will not create or permit to arise or subsist any mortgage, lien,
charge, royalty, right of set-off or other encumbrance of whatever nature
upon any of the Accounts Receivable except as exist on the date hereof.
7. CURRENCIES
7.1 NOMINATION OF CURRENCY. Any Advance may be made in USD or any other
Eurocurrency, including but not limited to FRF, NOK, GBP, available to
the Banks always provided that
(i) the Borrower shall in the Drawdown Notice in relation to an
Advance to be made specify the currency in which such Advance
is to be made available (the "Nominated Currency");
(ii) the Facility Agent shall after consultation with the Banks
have confirmed to the Borrower that the requested currency and
Interest Period are available to all the Banks for lending to
the Borrower not later than two Banking Days before drawdown;
(iii) the Loan shall not be nominated in more than five currencies
at any time.
7.2 CALCULATION OF CURRENCY AMOUNT. The amount of an Advance in any Nominated
Currency shall be equal to the USD amount of the Advance at the spot rate
of exchange quoted by the Facility Agent to be ruling in the London
Interbank Currency Exchange Market for the buying of USD with the
Nominated Currency at or about 1000 hours London time two Banking Days
before the day on which the Advance is to be made available to the
Borrower.
7.3 RENEWALS. Subject to Clause 7.4 below any renewals of the Loan or any
part thereof shall be made in the Nominated Currency or Nominated
Currencies in the same amount as is outstanding at the date of renewal.
In the event that at the date of renewal or if earlier 6 months after the
last renewal the USD amount of the Advance exceeds the amount of the
Advance outstanding in another Nominated Currency or Currencies,
calculated as provided for in Clause 7.2, the Facility Agent shall notify
the Borrower in writing specifying the amount of the shortfall, which
shall be forthwith paid by the Borrower to the Facility Agent on behalf
of the Banks.
7.4 UNAVAILABILITY OF CURRENCY. If the Facility Agent shall certify after
consultation with the Banks that the currency or currencies requested are
available the Facility Agent shall comply with such request and as soon
as practicable notify the Borrower of the sum in the Nominated Currency
which will represent the Advance during the relevant Interest
<PAGE>
Period following the date of such Advance or, as the case may be, the
Interest Payment Date to which the request relate, but, to the extent not
so requested or if the Facility Agent shall not so certify or if the
Facility Agent shall certify that adequate and reasonable means do not
exist for determining the interest rate which should apply to the loans
under Clause 7.1, then the Advance shall be made available or (as the
case may be) continued in USD and the Borrower shall be so notified by
the Facility Agent. If any Advance is to be renewed in USD as aforesaid
the USD amount of the Advance shall be equal to the amount of the said
Advance in the Nominated Currency at the spot rate of exchange quoted by
the Facility Agent to be ruling in the London Interbank Currency Exchange
market for the buying of USD with the said Nominated Currency at or about
1100 hours London time two Banking Days before the relevant Interest
Payment Date.
7.5 EXTRA COST. If any Advance is nominated in any currency other than USD
the Banks shall be reimbursed for any extra cost (including indirect
costs in respect of reserve requirement) due to such nomination as
conclusively determined by the Facility Agent. If an Advance is nominated
in GBP such extra costs shall be equal to the Associated Costs Rate.
8. INTEREST
8.1 INTEREST RATE. The Borrower shall pay interest on the Loan in respect of
each Interest Period in arrears on each Interest Payment Date at a rate
equivalent to the aggregate of LIBOR and the Applicable Margin.
8.2 INTEREST PERIOD. The Borrower shall be entitled to nominate in the
Nomination (Drawdown) Notice not later than 1100 hours Oslo time 3
Banking Days prior to the commencement of each Interest Period, whether
the length of the ensuing Interest Period for the relevant Advance shall
be one, three or six months or such other Interest Period as shall from
time to time be agreed in writing between the Borrower and the Facility
Agent (subject to availability to all the Banks), always provided that:-
8.2.1 ABSENCE OF NOMINATION. In the absence of any such nomination
by the Borrower, or if the Facility Agent after consultation
with the Banks shall certify to the Borrower that the funds
requested by the Borrower are not available to all the Banks,
the length of such Interest Period shall be three months.
8.2.2 INSTALMENTS. If any Reduction Date will occur during an
Interest Period to be nominated, a separate Interest Period
ending on such Reduction Date shall be nominated for an amount
equal to the amount by which the Loan would otherwise exceed
the amount of the Loan Commitment following the
<PAGE>
Reduction Date.
8.2.3 BANKING DAY. If any Interest Period would end on a day which
is not a Banking Day such Interest Period shall end on the
next succeeding Banking Day in the same calendar month or, if
none, the preceding Banking Day.
8.2.4 ONE MONTH INTEREST PERIODS. The Borrower shall not be entitled
to nominate an Interest Period of one month's duration on more
than three occasions during each calendar year.
8.2.5 NUMBER OF ADVANCES. The Loan shall not be divided into more
than 10 Advances at any time.
8.3 INTEREST CALCULATION. Interest shall accrue from day to day and be
calculated on the actual number of days elapsed and on the basis of a
360-day year, but in the case of GBP on the basis of a 365-day year.
8.4 DEFAULT INTEREST. In the event of any payments hereunder not being
received on the due date therefore, interest will be charged by the
Facility Agent from the due date until the date that payment is received,
at a rate corresponding to the aggregate of LIBOR (for such periods as
the Facility Agent in its sole discretion shall decide), the Applicable
Margin and 1% p.a. (one per cent per annum). Interest charged under this
Clause 8.4 shall be added to the defaulted amount on each respective
Interest Payment Date until the defaulted amount has been repaid in full.
8.5 NO LIBOR QUOTATION. If for any reason the Facility Agent shall be unable
to establish LIBOR for the relevant Interest Period, the Borrower shall
pay interest on the Loan at a rate which equals the cost for each Bank of
making, funding and maintaining its participation in the Loan plus the
Applicable Margin.
9. LOAN COMMITMENT REDUCTION/PREPAYMENT/CANCELLATION
9.1 REDUCTION. On each Reduction Date the Loan Commitment shall be reduced by
USD 12,500,000. The Loan Commitment shall be reduced to nil on the Final
Repayment Date.
9.2 CANCELLATION. The Borrower shall be entitled to cancel the Loan
Commitment in whole or in part being at least USD 5,000,000 or any whole
multiple thereof upon giving the Facility Agent at least 5 Banking Days
prior written notice.
In case such cancellation entails to that the maximum amount of the Loan
Commitment is less than the Loan, the Borrower shall prepay an amount
necessary to reduce the Loan
<PAGE>
to such maximum amount at the same day as the cancellation notice takes
effect. Clause 16.2 shall apply.
9.3 REBORROWING. Any amount prepaid pursuant to Clause 9.2 above shall not be
available for reborrowing.
9.4 PREPAYMENT UPON TOTAL LOSS. In the event that a Vessel suffers a Total
Loss (a "TOTAL LOSS VESSEL"), the amount of the Loan Commitment (as
previously modified from time to time in accordance with this Article 9)
shall be reduced by an amount equal to the product of (x) the amount of
the Loan Commitment immediately prior to the Total Loss and (y) a
fraction (the "TOTAL LOSS FRACTION") whose numerator is the total loss
insurance (including Hull and Machinery, Hull Interest and Freight
Interest) on the Total Loss Vessel and whose denominator is the total
loss insurance on all of the Vessels including the Total Loss Vessel. If,
as a result of this reduction, the Loan becomes greater than the Loan
Commitment, the Borrower shall repay the difference within 90 days of the
Total Loss, such amount to be applied towards cancellation/prepayment
pursuant to Clause 9.2 above. The amount of any subsequent reductions to
be effected in accordance with Clause 9.1 shall be reduced by an amount
equal to the product of the reduction as set forth therein and the Total
Loss Fraction. Notwithstanding the foregoing, upon occurrence of any
Event of Default the full amount of Total Loss Insurance shall be paid to
the Banks and applied as aforesaid.
10. COVENANTS
10.1 GENERAL COVENANTS. Each of the Borrower and the Parent undertakes with
the Agents and the Banks and each of them severally that, unless the
Agents has given their prior written consent to the contrary, it will and
procure that each Shipowning Company will to the extent applicable, in
the Facility Period:-
10.1.1 INFORMATION. Promptly inform each Agent about any event which
constitutes or may constitute (by giving of notice, lapse of
time and/or the making of any determination hereunder) an
Event of Default, or which will adversely affect the
Borrower's ability fully to perform its obligations under this
Agreement or any of the Guarantor, Shipowning Companies or
Principal Subsidiaries' ability fully to perform its
obligations under any of the Security Documents to which it is
respectively a party or which may adversely affect the
Parent's ability fully to perform its obligations hereunder or
under the Parent Guarantee.
10.1.2 FINANCIAL INFORMATION. Deliver to the Facility Agent for
distribution to the Banks as many copies (in English) as the
Facility Agent may reasonably require of (a) on a consolidated
basis its and the Parents and (if reasonably required by the
Facility Agent and the company in question is obliged by law
<PAGE>
or other regulations to prepare accounts) on a
non-consolidated basis each of the Shipowning Companies and
Principal Subsidiaries' annual audited accounts as soon as
practicable after the same have been issued and in any event
not later than 180 days after the end of the relevant
financial year, (b) on a consolidated basis the SCS Group's
unaudited quarterly financial statements (including cash-flow
analysis) not later than 90 days after the end of the relevant
fiscal quarter (c) its, the Parent's and the SCS Group's
budgets, (d) any financial information delivered by the Parent
to its Shareholders, (e) statement of Accounts Receivable at
least once annually (f) such other information about its
business and financial conditions as the Majority Banks may
reasonably require and (g) a cash flow projection for the
following five years to be provided semi-annually (h) list and
broad description of all contracts with a value in excess of
USD 2 million to be performed by any company in the Stolt
Comex Seaway Group to be provided semi-annually such
information to be in a format as exemplified in Schedule 11.
10.1.3 INSURANCES. Procure that each Vessel is kept fully insured
against such risks, in such amounts, on such terms and with
such underwriters as the Agents may reasonably require
including, but not limited to
a. Hull and Machinery plus Hull Interest and Freight
Interest insurance covering the Market Value of the
Vessels (or in aggregate 120% of the Loan if higher),
b. Protection and Indemnity insurances,
c. War Risk insurances covering the Market Value of the
Vessels (or in aggregate 120% of the Loan, if
higher),
The Borrower shall register and maintain the registration of
the Security Agent (on its own behalf and on behalf of the
Banks) as mortgagee in all insurance policies in accordance
with the provisions of Chapter 8 of the Plan.
10.1.4 MORTGAGEE INTEREST. Let the Security Agent order (at the
Borrower's expense), a Mortgagee Interest Insurance in form
and substance satisfactory to the Agents in favour of the
Security Agent (on its own behalf and on behalf of the Banks),
or, if so directed by the Security Agent, arrange for such
insurance cover to be established in accordance with
instructions from the Security Agent.
10.1.5 CERTIFICATE OF INSURANCES. Procure an annual certificate to
the Security Agent from each Vessel's underwriters evidencing
that all insurances referred to in Clause 10.1.3 (Insurances)
and , if relevant 10.1.4 (Mortgagee Interest), have been taken
out and are in full force and effect.
10.1.6 NOTIFICATION. Immediately notify the Agents of:-
<PAGE>
a. any accident to a Vessel involving repairs the cost
of which is likely to exceed USD 2,500,000.
b. any occurrence in consequence whereof a Vessel has
become or is likely to become a Total Loss.
c. any arrest of a Vessel or the exercise or purported
exercise of any lien on a Vessel or her Earnings.
10.1.7 CLASS. Have each Vessel classified and maintained in the
highest class with Det Norske Veritas, Lloyds or another
classification society acceptable to the Agents, and shall not
change class. Further the Vessels shall from 1 July 1998
comply with the International Ship Management Code always
provided that this requirement shall not apply to Seaway
Osprey and Seaway Harrier until 1 July 2002.
10.1.8 REPAIRS AND ALTERATION OF THE VESSELS. Not bring any Vessel to
any yard for repairs the costs of which is likely to exceed
USD 2.5 million or, save for what is necessary in the course
of the normal operation of a Vessel without adversely changing
its class or trading capabilities, permit any major change or
structural alteration to be made to a Vessel.
10.1.9 FLAG. Not change the flag of any Vessel.
10.1.10 MANAGEMENT. Not terminate or amend the Management Agreement in
a manner which may be detrimental to the interest of the Banks
and the Agents.
10.1.11 SALE OF VESSEL. Not sell a Vessel (or a Shipowning Company).
10.1.12 EMPLOYMENT OF VESSELS. Not charter out any of the Vessels on
(i) bareboat terms or (ii) in any other way for more than 12
months. Committing the use of a Vessel with respect to any
service shall not be regarded as a charter unless such Vessel
is committed for a consecutive period of not less than 12
months.
10.1.13 BANK ACCOUNTS. Maintain the Assignment Accounts with the
Facility Agent.
10.1.14 NO FURTHER ENCUMBRANCES. Not secure any debt or guarantee
obligation on any Vessel or on any other asset constituting
security pursuant to Clause 6 (Security), or on any Earnings
other than as contemplated in this Agreement.
10.1.15 MERGER OR DEMERGER. Not merge or otherwise permit any
amalgamation unless the Parent, the Borrower and each
Shipowning Company remains the surviving entity following such
merger or amalgamation and not demerge or otherwise divest any
part of its assets or operations.
<PAGE>
10.1.16 CORPORATE DOCUMENTS. Procure that its Articles of Association
nor any of its corporate documents are not varied in any way
adverse to the interests of the Banks.
10.1.17 LAWFUL CONDUCT. At all times manage its business and the
Vessels in compliance with all relevant applicable laws and
regulations and immediately notify the Agents of any
significant breach thereof.
10.1.18 PUBLIC LISTING. Procure that the Parent shall be publicly
listed unless owned by, in the Banks' discretion, significant
and recognized bodies corporate in the sub-sea industry, being
of an investment grade of at least BBB as defined by Standard
& Poor or any other similar investment grade.
10.2 FINANCIAL COVENANTS
10.2.1 CERTIFICATE OF COMPLIANCE. The Borrower and the Parent shall
send to the Facility Agent on behalf of the Banks within 90
days after the end of each fiscal quarter, respectively, a
completed and signed Certificate of Compliance, confirming
that the requirements of this Clause 10.2 have been fulfilled.
10.2.2 CONSOLIDATED TANGIBLE NET WORTH. Maintain a Consolidated
Tangible Net Worth of the Parent of minimum USD 250,000,000 at
all times during the Facility Period.
10.2.3 CONSOLIDATED DEBT TO CONSOLIDATED TANGIBLE NET WORTH RATIO.
Maintain a Consolidated Debt to Consolidated Tangible Net
Worth ratio of maximum 1:1 as calculated semiannually, per 31
May and 30 November of each year.
10.2.4 CONSOLIDATED DEBT TO EBITDA RATIO. Maintain on a rolling four
fiscal quarters basis a D/EBITDA ratio of maximum 4:1.
10.3 BANK'S APPROVAL. A waiver by the Agents of the Borrower's compliance with
the provisions set out in Clause 10.1.2 (Financial Information), 10.1.4
(Mortgage Interest), 10.1.8 (Repairs and Alteration of Vessel), 10.1.9
(Flag), 10.1.10 (Management), 10.1.11 (Sale of Vessel), 10.1.12
(Employment of Vessels), 10.1.13 (Bank Accounts) and 10.1.17 (Class),
shall require the prior approval of the Majority Banks, and a waiver of
any other provision in Clause 10.1 shall require the prior approval of
all of the Banks.
11. MINIMUM VALUE
<PAGE>
11.1 VALUATION. The Borrower shall at least once annually and at the
reasonable request by the Facility Agent, at any time during the Facility
Period, arrange for the Market Value of any Vessel to be determined at
the Borrower's expense.
11.2 MINIMUM VALUE REQUIREMENT. The aggregate Market Value of the Vessels
shall not be less than 120 % of the Loan at any time during the Facility
Period.
11.3 PREPAYMENT. If the aggregate Market Value of the Vessels is less than
required in Clause 11.2 (Minimum Value), the Borrower shall, if so
instructed by the Majority Banks, prepay such amount of the Loan as is
necessary to comply with Clause 11.2 (Minimum Value), or provide
additional security in form and substance acceptable to all of the Banks
(in their absolute discretion).
11.4 RELEASE OF ADDITIONAL SECURITY. If after having provided further security
pursuant to Clause 11.3 two consecutive valuations of the Vessels with at
least 6 months intervals results in that the aggregate Market Value
exceeds 120% of the Loan the additional security shall be released or the
Loan Commitment, be available for redrawing.
12. EVENTS OF DEFAULT
12.1 EVENTS. Each of the following events shall constitute an Event of
Default:-
12.1.1 OVERDUE PAYMENT. The Borrower fails to pay any amount payable
by it pursuant to the provisions of this Agreement when due.
12.1.2 DEFAULT UNDER OTHER PROVISIONS. The Borrower or the Parent
defaults under any of the covenants or the other provisions of
this Agreement (other than as referred to in 12.1.1 (Overdue
Payment)) or under the Security Documents, which (if such
default, in the reasonable opinion of the Majority Banks, is
capable of being remedied) is not remedied within 14 days
after notice has been given to the Borrower (such period of
remedy in any event not being applicable in the event of a
default by the Borrower under the provisions of Clause 10.1.3
(Insurances), 10.1.4 (Mortgagee Interest) or 10.1.7 (Class)
above).
12.1.3 INFORMATION FROM BORROWER. Any information given in writing by
the Borrower or the Parent in or in connection with this
Agreement or the Security Documents, proves to be materially
incorrect, misleading or inaccurate when made.
12.1.4 CROSS DEFAULT. Any other loan, guarantee, lease and charter
obligation or other indebtedness of the Borrower, the Parent
or any Principal Subsidiary is
<PAGE>
declared, or is capable of being declared due prematurely by
reason of default, or the Borrower, the Parent any Shipowning
Companies or Principal Subsidiaries fails to make payment in
respect thereof on the due date for such payment, or security
for any such other loan, guarantee or indebtedness becomes
enforceable save for amounts less than USD 2,500,000 and
claims contested in good faith.
12.1.5 LIENS AND MATERIAL LITIGATION. Except for permitted liens, a
maritime or other lien, arrest, distress or similar charge is
levied upon, or against a Vessel or any substantial part of
the assets of the Parent (on a consolidated basis) and such is
not discharged within 14 Banking Days after the Borrower, the
Parent or (as the case may be) the relevant Shipowning
Company, has become aware of the same.
A final judgement involving amount in excess of USD 10,000,000
is rendered towards any company within the SCS Group in
respect of amounts including any tax claims and which remains
unsettled after 14 days.
12.1.6 LOSS OF PROPERTY. A substantial part of the SCS Group's
business or assets are destroyed, abandoned, seized,
appropriated or forfeited for any reason, except in the case
of Total Loss of a Vessel.
12.1.7 LIQUIDATION. An order of a competent court or an event
analogous thereto shall be made or any effective resolution
passed with a view to the bankruptcy, composition proceedings,
debt negotiations, liquidation, winding-up or similar event of
the Borrower, the Parent, any Shipowning Company or Principal
Subsidiary.
12.1.8 ADMITTANCE OF NON-PAYMENT. The Borrower, the Parent, any
Shipowning Company or Principal Subsidiary is unable or admits
in writing its inability to pay any lawful debts as they
mature.
12.1.9 TERMINATION OF BUSINESS. The Borrower, the Parent, any
Shipowning Company or Principal Subsidiary without the prior
written consent of the Agents, ceases or threatens to cease to
carry on its business or disposes or threatens to dispose of a
substantial part of its business or assets.
12.1.10 PERMITS. Any license, consent, permission or approval required
in connection with the implementation, maintenance and
performance of this Agreement and/or the Security Documents is
revoked, terminated or modified in a manner unacceptable to
the Majority Banks.
12.1.11 OWNERSHIP OF THE BORROWER. The Borrower shall cease to be 100%
directly or
<PAGE>
indirectly owned by the Guarantor
12.2 LOAN ACCELERATION. Upon the occurrence of any Event of Default, the
Facility Agent may, and, upon instruction from the Majority Banks, shall,
forthwith notify the Borrower in writing whereupon the Outstanding
Indebtedness shall become immediately due and payable and the Banks shall
be under no further obligation to advance funds to the Borrower
hereunder.
12.3 IMPOSSIBILITY OR ILLEGALITY. If it becomes impossible or unlawful for the
Borrower, the Parent, any Shipowning Company or Principal Subsidiary to
fulfil any of the terms of this Agreement and/or the Security Documents
or for the Security Agent, the Facility Agent or for the Banks to
exercise any right or power vested in them under this Agreement and/or
the Security Documents, or the security created by any of the Security
Documents is imperilled the Borrower shall prepay the Loan within 7 days,
always provided that if such illegality or impossibility only apply to
parts of the Security Documents such payment shall made to the extent, in
the opinion of the Security Agent, necessary to secure any shortfall in
amount of security provided by the Borrower.
13. DEFAULT INDEMNITY
13.1 DEFAULT INTEREST. Without prejudice to the provisions of Clause 12
(Events of Default), if the Borrower fails to pay when due any sum
payable hereunder the Borrower shall, from the date when such sum falls
due, pay interest on the unpaid sum in the relevant Nominated Currency or
Currencies up to the date of payment at the rate, which is 1% p.a. (one
per cent per annum) above the rate per annum determined by the Facility
Agent as the rate per annum at which it was offered deposits in the
relevant Nominated Currency in an amount comparable to such unpaid sum
and for such period not exceeding three months as it may select, in the
London Interbank Eurocurrency Market at 1100 hours London time on the
Banking Day succeeding that on which it became aware of the default for
value two Banking Days later, provided that if for any such period the
Facility Agent was not offered by prime banks deposits in the relevant
Nominated Currency in the required amount and for the required period,
the rate of interest applicable to the unpaid sum shall be determined by
reference to the cost to the Banks of obtaining such deposits from such
sources as they may select. Such interest shall be payable at the end of
each such period selected as aforesaid and so long as the sum remains
unpaid, such rate shall re recalculated on the same basis at the end of
each period for which an interest rate is determined as aforesaid.
13.2 INDEMNITY BY BORROWER. Without prejudice to the foregoing the Borrower
will indemnify each Bank against any loss or expense incurred by such
Bank which is attributable to the default by the Borrower in the payment
of any sum due from the
<PAGE>
Borrower hereunder, including, but not limited to, funds borrowed or
taken by any Bank in order to cover the amount of any sums paid to the
Beneficiary.
13.3 INDEMNITY AMOUNT CERTIFICATE. A certificate by the Issuing Bank or the
Facility Agent as to the amount payable by the Borrower to the Issuing
Bank or other Bank under Clause 13.2 shall , in the absence of manifest
error, be conclusive.
14. CHANGES IN CIRCUMSTANCES
14.1 INCREASED COSTS. If by any reason of: (i) any changes in any existing
law, rule or regulation, or (ii) the adoption of any new law, rule or
regulation, or (iii) any change in the interpretation or administration
of (i) or (ii) above by any governmental authority, or (iv) compliance
with any directive or request from any governmental authority (whether or
not having the force of law):
a) a Bank incurs a cost as a result of having entered into this
Agreement and/or as a result of performing its obligations
hereunder, or
b) there is an increase in the cost to a Bank of funding or
maintaining its participation in the Loan Commitment/Loan, or
c) a Bank becomes liable for any new Taxes (other than on net income)
calculated by reference to its participation in the Loan
Commitment/Loan, or
d) a Bank becomes subject to capital adequacy or similar requirements
not known to or reasonably anticipated by such Bank at the date
hereof which will have the effect of increasing the amount of
capital required or expected to be maintained by such Bank based
on such Bank's participation in the Loan Commitment/Loan,
then any such cost, liability or reduced return shall be payable by the
Borrower upon request by the Facility Agent (on behalf of the Bank
affected) from the date such request was received by the Borrower either
in the form of an increased margin or in the form of an indemnification
in the amount conclusively (save in the case of manifest error)
determined in the Facility Agent's request.
14.2 ILLEGALITY. In the event that it shall be unlawful for any Bank to make
or maintain such Bank's participation in the Loan Commitment/Loan, the
Facility Agent shall, upon request from such Bank, serve notice of such
illegality on the Borrower.
14.3 UNAVAILABILITY OF FUNDS. In the event that any Bank is unable to obtain
deposits in USD in the London Interbank Eurocurrency Market, the Facility
Agent shall, upon
<PAGE>
request from such Bank, serve notice of such inability on the Borrower.
14.4 ALTERNATIVE FUNDING. If so requested by the Borrower, the Facility Agent
and the Banks shall use reasonable efforts to make the participation in
the Loan Commitment/Loan of the Bank affected by the circumstances
contemplated in Clause 14.1 (Increased costs), 14.2 (Illegality) or 14.3
(Unavailability of funds), available from alternative sources.
14.5 PREPAYMENT. Upon occurrence of circumstances set out in Clause 14.2
(Illegality) or 14.3 (Unavailability of funds) the Borrower shall, unless
alternative funding/Issuing Bank has been or will be arranged within a
period acceptable to the Bank affected, prepay the affected Bank's
participation in the Loan pursuant to the provisions of Clause 16.2
(General prepayment provisions) on the first occurring Interest Payment
Date (and the Loan Commitment shall be reduced accordingly).
15. FEES, COSTS AND EXPENSES
The Borrower shall pay to the Facility Agent for distribution between the Banks
and the Agents pursuant to separate agreements:
15.1 COMMITMENT COMMISSION. A commitment commission equal to 50% p.a. (fifty
per cent per annum) of the Applicable Margin calculated on the from time
to time unutilised (and uncancelled) portion of the Loan Commitment (on a
day to day basis and calculated according to a 360 day year) from the
date of this Agreement until the Final Repayment Date and payable in
arrear on the last day of each successive period of three months and on
the Final Repayment Date.
15.2 FEES. Participation Fee and Agency Fee pursuant to a letter of even date
herewith.
15.3 COSTS. Upon demand, whether or not the Loan Commitment or any part
thereof is ever advanced to the Borrower hereunder, all reasonable costs,
charges and expenses (including external and internal legal fees)
incurred by the Agents and the Banks in connection with the syndication,
negotiation, preparation and execution of, and all costs, charges and
expenses of the Agents and the Banks in connection with the enforcement
and preservation of the Agents' and the Banks' rights under this
Agreement and under the Security Documents or otherwise in connection
with the Facility.
16. PAYMENTS
16.1 TAXES. All payments to be made by the Borrower under this Agreement shall
be made
<PAGE>
in USD or such other Eurocurrency in which the relevant Advance is then
outstanding to the Facility Agent as directed by the Facility Agent and
shall be made without set-off or counterclaim or any deductions for, and
free and clear of any Taxes. In the event that the Borrower is required
by law or regulation to deduct or withhold any such Taxes the sums to be
paid shall be increased by such amount as shall be necessary to ensure
that the amount received by the Facility Agent and/or the Banks after
such deduction or withholding, is equal to the amount which would have
been received under this Agreement had no such deduction or withholding
been required.
The Banks undertake at the cost of the Borrower to render the Borrower
all reasonable assistance to obtain necessary clearances from relevant
tax authorities in order for the Borrower to be able to make payments of
interest without making withholdings of any Taxes.
16.2 GENERAL PREPAYMENT PROVISIONS. If the Loan, or any part thereof, for any
reason whatsoever, is prepaid or repaid on a day other than the relevant
Interest Payment Date, the Borrower shall, simultaneously with such
prepayment, pay to the Facility Agent, for the account of the affected
Banks, accrued interest on such prepaid amount to the date of actual
payment and all other sums payable by the Borrower to such Banks, and the
Agents pursuant to this Agreement, together with such additional amounts
as may be specified by such Banks in an explanatory certificate (which in
the absence of manifest error shall be conclusive) to be necessary to
compensate such Banks for any loss, premium or penalties incurred or to
be incurred by such Banks in liquidating deposits or redeploying funds
taken or borrowed to fund or maintain such Banks' participation in the
Facility for the remainder of the then current Interest Period.
16.3 REFUND OBLIGATION. If an Agent or any Bank pays any amount to the
Borrower, which should not have been paid to the Borrower, the Borrower
shall forthwith on demand refund such amount to such Agent or such Bank.
The Borrower shall also on demand pay interest equal to LIBOR on the
relevant sum for each day from the date such amount was so made available
by the relevant Agent or Bank until the date such amount is repaid to
such Agent or Bank.
17. AGENCY
17.1 AGENTS' AUTHORITY. Each Bank irrevocably authorises each Agent to take
such action on its behalf and to exercise such powers as are specifically
delegated to it by the terms of this Agreement and the Security Documents
together with all such powers as are reasonably incidental thereto. The
relationship between the Agents and the Banks is that of agent and
principal only, nothing herein shall (nor shall it be construed so as to)
constitute the Agents as trustees for the Banks or impose on either Agent
or any of the Banks any duties or obligations other than those for which
express provision is made in
<PAGE>
this Agreement or under the Security Documents.
17.2 APPLICATION OF FUNDS. Any amounts received by the Agents hereunder shall
promptly be distributed and applied firstly against costs and expenses
incurred by the Agents hereunder, secondly against amounts due to the
Agents and the Banks hereunder other than interest and principal, thirdly
against interest due hereunder and fourthly against principal due
hereunder.
17.3 SHARING OF PAYMENT. If any Bank at any time receives or recovers by
set-off or otherwise any amount due to it hereunder (otherwise than
amounts specifically payable to that Bank under the terms of this
Agreement), then such Bank shall share such amount rateably with the
Agent and the other Banks pursuant to the principles of Clause 17.2
(Application of funds). Amounts received hereunder shall be subject to
adjustment if the Bank having shared a recovered amount, becomes obliged
to repay any such amount to the Borrower or any third party.
17.4 INFORMATION TO BANKS. Each Agent shall promptly advise the other Agent
and the Banks of each notice received by it from the Borrower hereunder.
The relevant Agent shall not be under any obligation towards the Banks to
ascertain or enquire as to the performance or observance of any of the
terms or conditions hereof, other than a failure to make payment of sums
due.
17.5 INDEMNIFICATION OF AGENTS. Each Bank shall, rateably in accordance with
its respective participation in the Loan, indemnify and hold the Agents
harmless against any loss or liability, which either Agent may suffer or
incur by reason of an action taken or omitted by it as Agent hereunder or
under the Security Documents (except in the event of gross negligence or
wilful misconduct) to the extent that such Agent shall not have been
reimbursed therefore by the Borrower.
17.6 DISCLAIMER OF LIABILITY. The Agents take no responsibility for the truth
of any covenants, representations or undertakings given or made herein or
in the Security Documents nor the validity, effectiveness, adequacy or
enforceability of this Agreement or the Security Documents and neither
Agent (except in the case of gross negligence or wilful misconduct) nor
any of their directors, officers or employees shall be liable for any
action taken or omitted by it or any of them.
17.7 INDIVIDUAL CREDIT RISK ASSESSMENT. Each Bank shall be responsible for
making its own independent investigation of the financial condition and
affairs of the Borrower in connection with the making and continuance of
the Facility or the relevant part thereof, and has made its own appraisal
of the creditworthiness of the Borrower and (on a consolidated basis) the
Parent.
17.8 AGENTS' OTHER BUSINESS WITH BORROWER. Each Agent may, without liability
to
<PAGE>
account, accept deposits from, lend money to and generally engage in any
kind of banking or trust business with the Borrower, the Parent and any
member of the SCS Group.
18. ASSIGNMENT
18.1 PARENT & BORROWER. The Borrower, the Parent and the Shipowning Companies
may not assign any of its rights or obligations hereunder or under the
Security Documents to others.
18.2 BANK TO AFFILIATE. Each Bank may, by giving prior written notice to the
Facility Agent and the Borrower, assign all or a part of its rights
hereunder to an "Affiliate", and "Affiliate" shall for this purpose mean
the ownership (whether directly or indirectly) of 50 % or more of the
equity share capital (or similar right of ownership) of the relevant
institution or vice versa.
18.3 BANK TO OTHER FINANCIAL INSTITUTIONS. Each Bank may furthermore, subject
to the prior written approval of the Agents and the Borrower (such
approval not to be unreasonably withheld) assign all or a part of its
rights hereunder to any other bank or financial institution.
18.4 SUBSEQUENT PAYMENTS. In the event of a transfer of all or part of a
Bank's rights hereunder, the Borrower shall subsequently make all
payments under this Agreement for the rateable account of the relevant
Bank and/or its assignee.
19. NOTICES AND CORRESPONDENCE
19.1 Every notice or demand under this Agreement shall be in writing, but may
be given or made by telefax which shall be sent to the relevant Agent and
the Borrower at their respective addresses, being in respect of the
Agents at:
THE FACILITY AGENT:
MIDLAND BANK PLC
27 - 32 Poultry
LONDON EC2P 2BX
ENGLAND
Att.: Mr. Mark Heptinstall, Shipping and Aviation
Telefax No.: 00 44 171 260 4381
<PAGE>
THE SECURITY AGENT:
DEN NORSKE BANK ASA
P.O.Box 1171 - Sentrum
N-0107 OSLO
NORWAY
Att.: Credit Administration Shipping
Telefax No.: 22 48 28 94
and in respect of the BORROWER at:
SEAWAY (UK) LIMITED
c/o STOLT COMEX SEAWAY M.S. LTD
Bucksburn House
Howes Road, Bucksburn
UK - ABERDEEN AB 2 9RQ
SCOTLAND
Att.: Paul Frikstad
Telefax No.: 00 44 1224 715 129
or to such other address or telefax number as may from time to time be
notified by the relevant party. In the case of notices from the Borrower,
all telefax messages shall be confirmed by letter posted as soon as
practicable thereafter if so requested by the relevant Agent or Agents.
20. CURRENCY INDEMNITY
No payment to the Banks hereunder pursuant to any judgement or order of any
court or otherwise shall operate to discharge the obligations of the Borrower or
(as the case may be) the Parent in respect of which it was made unless and until
payment in full shall have been received by the Agent and the Banks in the
Nominated Currency. To the extent that the amount of any such payment shall on
actual conversion into the Nominated Currency fall short of the amount of the
relevant obligation expressed in the Nominated Currency, the Agent or such Bank
shall have a further and separate cause of action against the Borrower for the
recovery of such sum as shall, after conversion into the Nominated Currency, be
equal to the amount of the shortfall.
<PAGE>
21. MISCELLANEOUS
21.1 SEVERALITY OF PROVISIONS. This Agreement and the Security Documents shall
constitute one Agreement, but in the event of any conflict between the
provisions of this Agreement and any of the Security Documents, the
provisions on this Agreement shall prevail unless thereby rendering the
Security Documents or any of them, or any part thereof void, invalid or
unenforceable.
21.2 CLAUSE HEADINGS. Clause headings are for convenience of reference only
and shall in no way affect the interpretation of this Agreement.
22. GOVERNING LAW AND JURISDICTION
This Agreement shall be governed by and construed in accordance with Norwegian
law, and the Borrower hereby irrevocably submits to the non-exclusive
jurisdiction of the Norwegian courts, the venue to be Oslo City Court. IN
WITNESS WHEREOF each of the parties hereto have caused this Agreement to be
signed by their duly authorised officers on the date and year first above
written.
for and on behalf of for and on behalf of
SEAWAY (UK) LIMITED STOLT COMEX SEAWAY S.A.
(as Borrower) (as Guarantor)
By: _________________________ By: _________________________
Name: Name:
for and on behalf of for and on behalf of
DEN NORSKE BANK ASA MIDLAND BANK PLC
By: _________________________ By: _________________________
Name: Name:
<PAGE>
for and on behalf of for and on behalf of
MIDLAND BANK PLC DEN NORSKE BANK ASA
(as Facility Agent) (as Security Agent)
By: _________________________ By: _________________________
Name: Name:
For the purpose of Article 1 of the Protocol annexed to the Convention on
jurisdiction and the enforcement of judgements in civil and commercial matters
signed at Lugano on September 16, 1988 the following party expressly and
specifically agrees in the terms of Clause 22.
for and on behalf of
STOLT COMEX SEAWAY S.A.
_____________________
<PAGE>
SCHEDULE 1
LIST OF BANKS AND PARTICIPATIONS
As of the 19th of December 1997 the following banks and financial institutions
(the "Banks") participate as lenders/participants in the floating rate loan
granted to the Borrower according to the terms set forth in the Facility
Agreement dated 19th of December, 1997 (the "Agreement")
<TABLE>
<CAPTION>
NAME: PARTICIPATION:
- ----- --------------
USD 1000
<S> <C>
MIDLAND BANK plc, 27 - 32 Poultry, London EC2P 2BY 62,500
DEN NORSKE BANK ASA, P.O.Box 1171 Sentrum, N-0107 OSLO 62,500
</TABLE>
<PAGE>
Exhibit 2.6
DATED 1999
----------------------
ADVIESBURO ENERGIETECHNIEK VAN DE POL B.V.
(ALSO REFERRED TO AS AND TRADING UNDER THE NAME OF
STOLT COMEX SEAWAY FINANCE)
(AS BORROWER)
- AND -
STOLT COMEX SEAWAY S.A.
(AS GUARANTOR)
- AND -
DEN NORSKE BANK ASA
AND OTHERS
(AS BANKS)
- AND -
DEN NORSKE BANK ASA
(AS FACILITY AGENT AND SECURITY TRUSTEE)
- AND -
DEN NORSKE BANK ASA
AND OTHERS
(AS ARRANGERS)
- AND -
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
(AS SYNDICATION AGENT)
-----------------------------------------
US$150,000,000 SECURED
MULTI-CURRENCY REVOLVING LOAN
FACILITY AGREEMENT
-----------------------------------------
<PAGE>
CONTENTS
PAGE
1 Definitions and Interpretation..............................................2
2 The Facility and its Purpose...............................................22
3 Conditions Precedent and Subsequent........................................25
4 Representations and Warranties.............................................31
5 Currency...................................................................34
6 Repayment and Prepayment...................................................35
7 Interest...................................................................37
8 Guarantee and Indemnity....................................................38
9 Fees.......................................................................43
10 Security Documents.........................................................44
11 Agency and Trust...........................................................45
12 Covenants..................................................................55
13 Earnings...................................................................66
14 Events Of Default..........................................................66
15 Set-Off and Lien...........................................................71
16 Assignment and Sub-Participation...........................................72
17 Payments, Mandatory Prepayment, Reserve Requirements and Illegality........75
18 Communications.............................................................80
19 General Indemnities........................................................81
20 Miscellaneous..............................................................83
21 Law and Jurisdiction.......................................................88
<PAGE>
SCHEDULE 1....................................................................90
The Banks, the Commitments and the Proportionate Shares...........90
SCHEDULE 2....................................................................92
Lead Arrangers....................................................92
SCHEDULE 3....................................................................93
The Shipowning Guarantors and the Vessels.........................93
SCHEDULE 4....................................................................98
SCHEDULE 5...................................................................100
Form of Transfer Certificate.....................................100
APPENDIX A...................................................................107
APPENDIX B...................................................................108
APPENDIX C...................................................................109
APPENDIX D...................................................................110
APPENDIX E...................................................................111
<PAGE>
LOAN FACILITY AGREEMENT
DATED: 1999
BETWEEN:-
(1) ADVIESBURO ENERGIETECHNIEK VAN DE POL B.V. (ALSO REFERRED TO AS AND
TRADING UNDER THE NAME OF STOLT COMEX SEAWAY FINANCE) which is a
company incorporated according to the law of The Netherlands with its
registered office at Arent Janszoon Ernststraat 595H, 1082 LD
Amersterdam (PO Box 7827, 1008 AA Amsterdam), The Netherlands (the
"BORROWER"); and
(2) STOLT COMEX SEAWAY S.A. which is a company incorporated according to
the law of Luxembourg with its registered office at 11 Rue Aldringen
L-118 Luxembourg (the "GUARANTOR"); and
(3) the banks listed in Schedule 1, each acting through its office at the
address indicated against its name in Schedule 1 (together "THE BANKS"
and each a "BANK"); and
(4) DEN NORSKE BANK ASA, acting as facility agent and security trustee
through its office at 200 Park Avenue, New York, New York 10166-0396,
United States of America (in that capacity "THE AGENT"); and
(5) the banks and financial institutions listed in Schedule 2, each acting
as a lead arranger through its office at the address indicated against
its name in Schedule 2 (together in that capacity "THE Arrangers" and
each an "ARRANGER"); and
(6) BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION acting as
syndication agent through its office at 3 Allen Center, 333 Clay
Street, Suite 4550, Houston, Texas 77002, United States of America (in
that capacity "THE SYNDICATION AGENT").
<PAGE>
WHEREAS:-
(A) Each of the Vessels is registered in the ownership of her Owner under
the flag of the country as indicated in Schedule 3 and each of the ROVs
is owned by the Shipowning Guarantor indicated in Schedule 3.
(B) Each of the Banks has agreed to advance to the Borrower its respective
Commitment of an aggregate principal amount not exceeding one hundred
and fifty million Dollars ($150,000,000) or the Equivalent Amount in a
Permitted Currency or Permitted Currencies (as appropriate) in order to
assist the Borrower in providing for the re-financing of the Existing
Loan in full and with working capital for the Borrower and its
affiliates. It is specifically agreed that at least the lower of fifty
million Dollars ($50,000,000) and one third (1/3) of the Facility
Outstandings at any time during the Facility Period shall be lent by
the Borrower to its parent company, Stolt Comex Seaway A/S.
IT IS AGREED as follows:-
1 DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this Agreement:-
1.1.1 "THE ADDRESS FOR SERVICE" means c/o Stolt-Nielsen
Limited, Aldwych House, 71-91 Aldwych, London WC2B
4HN, England or, in relation to any of the Security
Parties, such other address in England and Wales as
that Security Party may from time to time designate
by no fewer than ten Business Days' written notice to
the Agent.
1.1.2 "THE ADDITIONAL RATE" means the cost imputed to the
Banks of compliance with:
(a) the mandatory liquid asset requirements of
the Bank of England and/or the banking
supervision or other costs imposed by the
2
<PAGE>
Financial Services Authority, as determined
in accordance with Appendix E; and
(b) any other applicable regulatory or central
bank requirement (including any requirement
of the European Central Bank) relating to
any amount advanced under this Agreement by
a Bank through a branch in a state being one
of the participating countries which at the
relevant time shall have entered into
economic and monetary union (as a result of
the legislative measures contemplated by the
Treaty of Rome of 25 March 1957, as amended
from time to time).
1.1.3 "THE ADMINISTRATION" has the meaning given to it in
paragraph 1.1.3 of the ISM Code.
1.1.4 the "ADVANCE DATE", in relation to any Drawing, means
the date on which that Drawing is advanced by the
Banks to the Borrower pursuant to Clause 2.
1.1.5 "THE ASSIGNMENTS" means the deeds of assignment of
the Insurances, Earnings and Requisition Compensation
in respect of each Vessel referred to in Clause 10.2
(each an "ASSIGNMENT").
1.1.6 "THE BORROWER'S OBLIGATIONS" means all of the
liabilities and obligations of the Borrower to the
Finance Parties under or pursuant to the Borrower's
Security Documents, whether actual or contingent,
present or future, and whether incurred alone or
jointly or jointly and severally with any other and
in whatever currency, including (without limitation)
interest, commission and all other charges and
expenses.
1.1.7 "THE BORROWER'S SECURITY DOCUMENTS" means those of
the Security Documents to which the Borrower is or is
to be a party.
3
<PAGE>
1.1.8 "BREAK COSTS" means all documented costs, losses,
premiums or penalties incurred by any of the Finance
Parties in the circumstances contemplated by Clause
19.4 or as a result of any of them receiving any
prepayment of all or any part of the Facility
(whether pursuant to Clause 6.2 or otherwise) or any
other payment under or in relation to the Security
Documents on a day other than the due date for
payment of the sum in question, and includes (without
limitation) any losses or costs incurred in
liquidating or re-employing deposits from third
parties acquired to effect or maintain the Facility,
and any liabilities, expenses or losses incurred by
any of the Finance Parties in terminating or
reversing, or otherwise in connection with, any
interest rate and/or currency swap, transaction or
arrangement entered into by any of the Finance
Parties to hedge any exposure arising under this
Agreement, or in terminating or reversing, or
otherwise in connection with, any open position
arising under this Agreement.
1.1.9 "BUSINESS DAY" means (a) a day on which banks are
open for the transaction of business of the nature
contemplated by this Agreement (and not authorised by
law to close) in New York City, United States of
America; London, England; Oslo, Norway, Brussels,
Belgium; and (b) in relation to the determination of
interest rates for euros only, a day on which the
Trans-European Automated Real Time Gross Settlement
Express System (TARGET) is operating.
1.1.10 "CERTIFICATE OF COMPLIANCE" means a certificate
materially in the form set forth in Schedule 4,
signed by the finance director or similar officer of
the Guarantor.
1.1.11 "CHANGE OF CONTROL" means that SNSA shall cease, for
any reason whatsoever, to own or control directly or
indirectly, shares of the Guarantor representing at
least 30% of all votes capable of being represented
in any shareholders' meeting of the Guarantor or if
any shareholder or group of shareholders acting in
concert outside SNSA at any time own or control,
directly or indirectly, more of the issued voting
4
<PAGE>
shares determined, on a per vote basis, of the
Guarantor than those owned by SNSA.
1.1.12 "COMMITMENT" means, in relation to each Bank, the
amount of the Facility which that Bank agrees to
advance to the Borrower as its several liability as
indicated against the name of that Bank in Schedule
1, as reduced from time to time in accordance with
Clause 2.4.5, or, where the context permits, the
amount of the Facility advanced by that Bank and
remaining outstanding.
1.1.13 "COMMITMENT COMMISSION" means the commitment
commission to be paid by the Borrower to the Agent
pursuant to Clause 9.2.
1.1.14 a "COMMUNICATION" means any notice, approval, demand,
request or other communication from one party to this
Agreement to any other party to this Agreement.
1.1.15 "THE COMMUNICATIONS ADDRESS" means c/o Stolt Comex
Seaway M.S. Limited, Bucksburn House, Howes Road,
Bucksburn, Aberdeen, AB21 9RQ, Scotland, United
Kingdom fax no: +(44) 1224 712 658 marked for the
attention of Paul Frikstad.
1.1.16 "THE COMPANY" means, in relation to any Vessel and
at any given time, the company responsible for the
Vessel's compliance with the ISM Code pursuant to
paragraph 1.1.2 of the ISM Code.
1.1.17 "CONSOLIDATED DEBT" means for the Guarantor and its
Subsidiaries (on a consolidated basis) at any time,
the aggregate value of (i) notes payable (whether
promissory notes or otherwise), plus (ii) long-term
debt (including current portion of long-term debt),
plus (iii) capitalised lease obligations on behalf of
third parties and all contingent liabilities related
to debt and capital lease obligations which,
according to US GAAP, are considered probable and
estimable, plus (iv) subordinated debt, less (v)
5
<PAGE>
the amount of debt for which there is a restricted
cash deposit which will repay all or part of such
financial debt obligation.
1.1.18 "CONSOLIDATED TANGIBLE NET WORTH" means for the
Guarantor and its Subsidiaries (on a consolidated
basis) at any time (a) the sum, to the extent shown
on the Guarantor's consolidated balance sheet, of (i)
the amount of issued and outstanding share capital,
less the cost of treasury shares, plus (ii) the
amount of surplus and retained earnings, less (b)
intangible assets as determined in accordance with US
GAAP.
1.1.19 "CONVERTED" means actually or notionally (as the case
may require) converted by the Agent, at the rate at
which the Agent, in accordance with its usual
practice, is able in the London Interbank market to
purchase the Permitted Currency in which the Facility
or part thereof is then denominated with the
Permitted Currency in which the Facility or part
thereof is to be denominated, on the second Business
Day before the value date for that conversion
pursuant to Clause 5, and the words "CONVERT" and
"CONVERSION" shall be interpreted accordingly.
1.1.20 "CURRENCY OF ACCOUNT" means, in relation to any
payment to be made to a Finance Party pursuant to any
of the Security Documents, the currency in which that
payment is required to be made by the terms of the
relevant Security Document.
1.1.21 "THE DEED OF COVENANTS" means the deed of covenants
referred to in Clause 10.1.
1.1.22 "DEFAULT RATE" means the rate which is the aggregate
of (i) one per centum (1%) per annum and (ii) the
applicable Margin, above LIBOR.
1.1.23 "DOC" means a valid Document of Compliance issued
for the Company by the Administration pursuant to
paragraph 13.2 of the ISM Code.
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1.1.24 "DOLLARS" and "$" each means available and freely
transferable and convertible funds in lawful currency
of the United States of America.
1.1.25 "DRAWDOWN NOTICE" means a notice complying with
Clause 2.3.
1.1.26 "DRAWING" means a part (or, if requested and
available, all) of the Facility advanced by the Banks
to the Borrower in accordance with Clause 2.
1.1.27 "EARNINGS", in relation to a Vessel and each ROV,
means all hires, freights, pool income and other sums
payable to or for the account of the Owner in respect
of that Vessel or ROV including (without limitation)
all remuneration for salvage and towage services,
demurrage and detention moneys, contributions in
general average, compensation in respect of any
requisition for hire and damages and other payments
(whether awarded by any court or arbitral tribunal or
by agreement or otherwise) for breach, termination or
variation of any contract for the operation,
employment or use of the Vessel or ROV.
1.1.28 "EBITDA" means the consolidated Earnings of the
Guarantor and its Subsidiaries before interest,
Taxes, depreciation and amortisation, at any time
during the Facility Period as determined in
accordance with US GAAP, calculated on a pro forma
basis to include acquisitions.
1.1.29 "ENCUMBRANCE" means any mortgage, charge, pledge,
lien, assignment, hypothecation, preferential right,
option, title retention or trust arrangement or any
other agreement or arrangement which has the effect
of creating security.
1.1.30 "EQUIVALENT AMOUNT" means the amount of any Permitted
Currency converted from the relevant amount of
Dollars.
1.1.31 "EURO" means the currency of participating Member
States of the European Monetary Union, pursuant to
Council Regulation (EC) 974/98
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of 3 May 1998, (as changed from time to time by the
European Communities).
1.1.32 "EVENT OF DEFAULT" means any of the events set out in
Clause 14.2.
1.1.33 "EXECUTION DATE" means the date on which this
Agreement is executed by each of the parties thereto.
1.1.34 "THE EXISTING LOAN" means the inter-company debt due
from an indirect parent of the Borrower to Stolt
Nielsen Transportation Group Limited (formerly Stolt
Parcel Tankers Inc.), a subsidiary of SNSA pursuant
to a loan agreement dated 10 August 1998.
1.1.35 "FACILITY" means the multi-currency revolving credit
facility made available by the Banks to the Borrower
pursuant to this Agreement.
1.1.36 "THE FACILITY OUTSTANDINGS" at any time means the
total of all Drawings made at that time, to the
extent not reduced by repayments, prepayments and
voluntary reductions.
1.1.37 "THE FACILITY PERIOD" means the period beginning on
the Execution Date and ending on the date when the
whole of the Indebtedness has been repaid in full and
the Borrower has ceased to be under any further
actual or contingent liability to the Finance Parties
under or in connection with the Security Documents.
1.1.38 "FACTORING AGREEMENT" means the factoring agreement
in relation to the assignment of earnings contained
in the Assignment over mv "SEAWAY FALCON" to be made
between the Agent and Stolt Comex Seaway A/S referred
to in Clause 10.6.
1.1.39 "THE FEE LETTERS" means the letters from the Agent as
agreed and accepted by the Borrower and the Guarantor
setting out certain fees,
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commissions and other sums payable by the Borrower to
the Agent in connection with the Facility.
1.1.40 "THE FINANCE PARTIES" means the Banks, the Agent, the
Arrangers and the Syndication Agent.
1.1.41 "FIRST REDUCTION DATE" means the date falling six (6)
months after the Execution Date.
1.1.42 "GENERAL SECURITY AGREEMENTS" means (i) the bond and
floating charge and assignation of insurances in
relation to the ROVs owned by Stolt Comex Seaway
Limited (ii) the deed of charge and assignment over
the ROVs owned by SCS Shipping Limited and (iii) the
grant of security interest and assignment of
Earnings, Insurances and Requisition Compensation in
relation to the ROVs owned by SCS Shipping
Corporation and owned or to be owned by Stolt Comex
Seaway Inc. referred to in Clause 10.5 (each a
"GENERAL SECURITY AGREEMENT").
1.1.43 "THE GUARANTEE" means the guarantee and indemnity of
the Guarantor contained in Clause 8.
1.1.44 "GUARANTOR'S CAPITAL MARKETS ISSUE" means any capital
markets issue by the SCS Group or any part thereof
not specifically taken up for an acquisition.
1.1.45 "THE GUARANTOR'S LIABILITIES" means all of the
liabilities and obligations of the Guarantor to the
Finance Parties under or pursuant to the Guarantee
whether actual or contingent, including (without
limitation) Interest.
1.1.46 "THE INDEBTEDNESS" means the Facility Outstandings;
all other sums of any nature including costs
(together with all interest on any of those sums)
which from time to time may be payable by the
Borrower to the Finance Parties pursuant to the
Security Documents;
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any damages payable as a result of any breach by the
Borrower of any of the Security Documents; and any
damages or other sums payable as a result of any of
the obligations of the Borrower under or pursuant to
any of the Security Documents being disclaimed by a
liquidator or any other person, or, where the context
permits, the amount thereof for the time being
outstanding.
1.1.47 an "INSTRUCTING GROUP" means any one or more Banks
whose combined Proportionate Shares exceed sixty six
per centum (66%).
1.1.48 "INSURANCES", in relation to a Vessel and each ROV,
means all policies and contracts of insurance
(including all entries in protection and indemnity or
war risks associations) which are from time to time
taken out or entered into in respect of or in
connection with that Vessel or that ROV or her
increased value and (where the context permits) all
benefits thereof, including all claims of any nature
and returns of premium.
1.1.49 "INTER-COMPANY INDEBTEDNESS" means a note documenting
any inter-company debt due from SNSA or any of its
subsidiaries, other than a member of the SCS Group,
to any member(s) of the SCS Group, on a consolidated
basis, which exceeds twenty five million Dollars
($25,000,000) in principal or its equivalent in
another currency and is not repayable by its terms
within a period of three (3) months.
1.1.50 "INTER-COMPANY INDEBTEDNESS ASSIGNMENTS" means any
deeds of assignment of Inter-Company Indebtedness
referred to in Clause 10.4 (each "AN INTER-COMPANY
INDEBTEDNESS ASSIGNMENT").
1.1.51 "INTEREST" means interest at the Default Rate.
1.1.52 "INTEREST PAYMENT DATE" means each date for the
payment of interest in accordance with Clause 7.
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1.1.53 "INTEREST PERIOD" means each interest period selected
by the Borrower or agreed by the Agent pursuant to
Clause 7.
1.1.54 "THE ISM CODE" means the International Management
Code for the Safe Management of Ships and for
Pollution Prevention, as adopted by the Assembly of
the International Maritime Organisation on 4 November
1993 by resolution A.741 (18) and incorporated on 19
May 1994 as chapter IX of the Safety of Life at Sea
Convention 1974.
1.1.55 "LAW" means any law, statute, treaty, convention,
regulation, instrument or other subordinate
legislation or other legislative or quasi-legislative
rule or measure, or any order or decree of any
government, judicial or public or other body or
authority, or any directive, code of practice,
circular, guidance note or other direction issued by
any competent authority or agency (whether or not
having the force of law).
1.1.56 "LIBOR" means the rate, rounded to the nearest four
decimal places downwards (if the digit displayed in
the fifth decimal place is 1,2,3 or 4) or upwards (if
the digit displayed in the fifth decimal place is 5,
6,7,8 or 9) displayed on the telerate page 3750 or,
as the case may be, 3740 (or such other page or pages
which replace(s) either such page for the purposes of
display offered rates of leading banks, for deposits
in the Currency of Account of amounts equal to the
amount of the relevant Drawing for a period equal in
length to the relevant Interest Period or if there is
no such display rate then available for the Permitted
Currency for an amount comparable to the Drawing, the
arithmetic mean (rounded upwards, if necessary, to
the nearest whole multiple of one-sixteenth per
centum (1/16%)) of the respective rates notified to
the Agent by each of the Reference Banks as the rate
at which it is offered deposits in the Currency of
Account and for the required period by prime banks in
the London Interbank Market.
1.1.57 "THE MANAGERS" means Stolt Comex Seaway Inc. or Stolt
Comex Seaway A/S, or such other commercial and/or
technical managers of the
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Vessels and any ROVs which are leased to a party
outside the SCS Group nominated by the Owners as the
Agent may in its discretion approve.
1.1.58 "MANAGEMENT AGREEMENT" means, in relation to any
Vessel or ROV which is leased to a party outside the
SCS Group, the Management Agreement made between the
Managers and the relevant Owner.
1.1.59 "MARGIN" based on the ratio of Consolidated Debt to
EBITDA for the preceding four fiscal quarters
("D/EBITDA") means:-
(a) for the first three (3) years of the
Facility Period:-
(i) 0.85% where D/EBITDA is less than
1;
(ii) 0.95% where D/EBITDA is equal to or
greater than 1 but less than 2;
(iii) 1.10% where D/EBITDA is equal to
or greater than 2 but less than 3;
and
(iv) 1.25% where D/EBITDA is equal to
or greater than 3; and
(b) for the fourth year of the Facility Period
until the end of the Facility Period:-
(i) 1% where D/EBITDA is less than 1;
(ii) 1.10% where D/EBITDA is equal to or
greater than 1 but less than 2;
(iii) 1.25% where D/EBITDA is equal to or
greater than 2 but less than 3; and
(iv) 1.40% where D/EBITDA is equal to or
greater than 3,
Provided however that each applicable Margin shall
automatically increase by fifty per cent (50%) in the
event of a Change of Control, unless such Change of
Control is acceptable to all the Banks. The Margin
shall be calculated by the Agent as of 28 February,
31 May, 31 August and 30 November each year (each a
"MARGIN REVIEW DATE")
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commencing 28 February 1999 for the succeeding
fiscal quarter and shall be calculated based on the
Consolidated Debt at the end of the relevant fiscal
quarter over EBITDA for the preceding four fiscal
quarters, the most recent of which shall have ended
on the previous Margin Review Date (which in the
case of the calculations made as of 28 February 1999
shall be 30 November 1998).
1.1.60 "MATERIAL VESSEL" means mv "SEAWAY FALCON".
1.1.61 "THE MAXIMUM FACILITY AMOUNT" means the amount of the
aggregate Commitments subject to any reductions
effected in accordance with Clauses 2.4, 6.6 and
17.8.
1.1.62 "MILLENNIUM COMPLIANT" means, in relation to each of
the Security Parties and in relation to each Vessel
and each ROV, that the Systems of that Security
Party, of that Vessel and of that ROV will be able to
recognise and properly to perform, in all material
respects, date sensitive functions involving dates on
or after 31 December 1999, will not be materially
adversely affected by the change of date to 1 January
2000 or any other change of date, and will comply in
all material aspects with all applicable date
recognition and similar requirements of all relevant
laws and of the Insurances.
1.1.63 "THE MORTGAGEES' INSURANCES" means all policies and
contracts of mortgagees' interest insurance and any
other insurance from time to time taken out by the
Agent on behalf of the Banks in relation to the
Vessels and the ROVs pursuant to this Agreement.
1.1.64 "THE MORTGAGES" means the first preferred and/or
priority mortgages referred to in Clause 10.1 (each a
"MORTGAGE").
1.1.65 "NON CLASSIFIED VESSELS" means mv "AMERICAN PATRIOT",
mv "AMERICAN CONSTITUTION", mv "AMERICAN EAGLE", mv
"AMERICAN INDEPENDENCE", mv "AMERICAN
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RECOVERY" mv "AMERICAN TRIUMPH" and mv "AMERICAN
VICTORY".
1.1.66 "ORIGINAL DOLLAR AMOUNT" means, at any relevant time,
the amount of the Facility which would then have been
outstanding had the Facility at all times been
denominated, drawn and repaid wholly in Dollars in
accordance with Clause 6.
1.1.67 "OWNER" means, in relation to a Vessel or an ROV, the
Shipowning Guarantor against whose name the name of
that Vessel or the description of that ROV appears in
Schedule 3.
1.1.68 "PERMITTED CURRENCY" means Dollars, the euro, each of
the lawful currencies of France (namely French
Francs), Norway (namely Norwegian Kroner), the United
Kingdom (namely Pounds Sterling) and any other
eurocurrency provided that each such currency
selected by the Borrower is acceptable to the Banks
and is freely convertible, transferable and available
to the Banks in the London Interbank market and in
respect of which the Agent is at all material times
able to ascertain LIBOR.
1.1.69 "PERMITTED LIENS" means (i) assignments of earnings
derived from specified fixed assets (which assets
shall not include those assets which are the subject
of a security document or which may become the
subject of a security document at any time during the
facility period) ancillary to the granting of a
security interest in those fixed assets as part of an
asset based financing, (ii) liens for salvage and any
encumbrance which has the prior written approval of
the agent acting upon the instructions of all the
banks, or (iii) any encumbrance arising either by
operation of law or in the ordinary course of the
business of the relevant security party which is
discharged in the ordinary course of business but in
any event does not exist for more than sixty (60)
days.
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1.1.70 "POTENTIAL EVENT OF DEFAULT" means any event which,
with the giving of notice and/or the passage of time
and/or the satisfaction of any materiality test,
would constitute an Event of Default.
1.1.71 "POUNDS STERLING" means pounds sterling being the
available and freely transferable and convertible
funds in the lawful currency of the United Kingdom.
1.1.72 "PRINCIPAL SUBSIDIARY" means any member of the SCS
Group having total assets exceeding ten per cent
(10%) of the consolidated assets of the SCS Group
and/or having during the last four fiscal quarters
accounted for more than ten per cent (10%) of the
consolidated turnover of the SCS Group.
1.1.73 "PROCEEDINGS" means any suit, action or proceedings
begun by any of the Finance Parties arising out of or
in connection with the Security Documents.
1.1.74 "PROPORTIONATE SHARE" means, for each Bank, the
percentage indicated against the name of that Bank in
Schedule 1.
1.1.75 "PRO RATA INSURANCE PROCEEDS AMOUNT" means, in
respect of each Vessel (other than the Material
Vessel), any insurance proceeds payable in respect of
such Vessel in the event of a Total Loss divided by
the aggregate market value of all the Vessels other
than the Material Vessel, whereby the product of such
fraction is multiplied by the Maximum Facility
Amount.
1.1.76 "REDUCTION DATE" means each date falling at
consecutive six monthly intervals after the First
Reduction Date up to the Termination Date.
1.1.77 "REFERENCE BANKS" means the Agent, Midland Bank Plc
and Bank of America National Trust And Savings
Association.
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1.1.78 "REQUISITION COMPENSATION", in relation to a Vessel,
means all compensation or other money which may from
time to time be payable to the Owner as a result of
the Vessel being requisitioned for title or in any
other way compulsorily acquired (other than by way of
requisition for hire).
1.1.79 "ROVS" means the ROVs listed in Schedule 3 and
everything now or in the future belonging to them on
board and ashore.
1.1.80 "SCS GROUP" means the Guarantor and its Subsidiaries.
1.1.81 "THE SECURITY DOCUMENTS" means this Agreement, the
Mortgages, the Deed of Covenants, the Assignments,
the Factoring Agreement, the General Security
Agreements, the Inter-Company Indebtedness
Assignments, the Shipowners' Guarantee, or (where the
context permits) any one or more of them, and any
other agreement or document which may at any time be
executed by a member of the SCS Group as security for
the payment of all or any part of the Indebtedness.
1.1.82 "SECURITY PARTIES" means the Borrower, the Guarantor,
the Shipowning Guarantors and any other member of the
SCS Group who may at any time during the Facility
Period be liable for, or provide security for, all or
any part of the Indebtedness, and "SECURITY PARTY"
means any one of them.
1.1.83 "THE SHIPOWNERS' GUARANTEE" means the joint and
several guarantee and indemnity of the Shipowning
Guarantors referred to in Clause 10.3.
1.1.84 "THE SHIPOWNING GUARANTORS" means the companies
listed in Schedule 3, each of which is a company
incorporated according to the law of the country
indicated against its name in Schedule 3 with its
registered office and/or principal place of business
at the address indicated against its name in Schedule
3 (each "A SHIPOWNING GUARANTOR").
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1.1.85 "SMC" in relation to any Vessel, means a valid
safety management certificate issued for the Vessel
by or on behalf of the Administration pursuant to
paragraph 13.4 of the ISM Code.
1.1.86 "SMS" in relation to any Vessel, means a safety
management system for the Vessel developed and
implemented in accordance with the ISM Code and
including the functional requirements, duties and
obligations required by the ISM Code.
1.1.87 "SNSA" means Stolt-Nielsen S.A. a company
incorporated according to the law of Luxembourg with
its registered office at 23 Avenue Monterey, L-2086
Luxembourg.
1.1.88 "SUBSIDIARY" means a subsidiary undertaking, as
defined in section 258 Companies Act 1985 or any
analogous definition under any other relevant system
of law.
1.1.89 "SURETY" means any person (other than the Borrower
or the Guarantor) who has given or who may in the
future give to the Finance Parties or any of them
any security, guarantee or indemnity for or in
relation to the Borrower's Obligations.
1.1.90 "SYSTEMS" means, in relation to any Security Party,
the computer applications and other electronic
equipment and related software used by that Security
Party in connection with its business, and, in
relation to each Vessel and each ROV, the computer
applications and other electronic equipment and
related software installed from time to time on
board that Vessel or ROV (as the case may be).
1.1.91 "TAXES" means all taxes, levies, imposts, duties,
charges, fees, deductions and withholdings (including
any related interest and penalties) and any
restrictions or conditions resulting in any charge,
other than taxes on the overall net income of a
Finance Party or branch thereof, and "TAX" and
"TAXATION" shall be interpreted accordingly.
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1.1.92 "THE TERMINATION DATE" means the date falling five
(5) years after the Execution Date.
1.1.93 "TOTAL LOSS", in relation to a Vessel, or an ROV
means:-
(a) an actual, constructive, arranged, agreed
or compromised total loss of that Vessel or
ROV; or
(b) the requisition for title or compulsory
acquisition of that Vessel or ROV by or on
behalf of any government or other authority
(other than by way of requisition for hire);
or
(c) the capture, seizure, arrest, detention or
confiscation of that Vessel or ROV, unless
the Vessel or ROV (as the case may be) is
released and returned to the possession of
the Owner within two months after the
capture, seizure, arrest, detention or
confiscation in question.
1.1.94 "TRANSFER CERTIFICATE" means a certificate materially
in the form set forth in Schedule 5 signed by a Bank
and a Transferee whereby:
(a) such Bank seeks to procure the transfer to
such Transferee of all or a part of such
Bank's rights and obligations under this
Agreement upon and subject to the terms and
conditions set out in Clause 16; and
(b) such Transferee undertakes to perform the
obligations it will assume as a result of
delivery of such certificate to the Agent as
is contemplated in Clause 16.
1.1.95 "TRANSFER DATE" means, in relation to any Transfer
Certificate, the date for the making of the transfer
specified in the schedule to such Transfer
Certificate.
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1.1.96 "TRANSFEREE" means a bank or other financial
institution to which a Bank seeks to transfer all or
part of such Bank's rights and obligations under this
Agreement.
1.1.97 "THE TRUST PROPERTY" means:-
(a) the benefit of the covenant contained in
Clause 10; and
(b) all benefits arising under (including,
without limitation, all proceeds of the
enforcement of) each of the Security
Documents (other than this Agreement), with
the exception of any benefits arising solely
for the benefit of the Agent).
1.1.98 "US COAST GUARD INSPECTED VESSELS" means mv "AMERICAN
INDEPENDENCE", "AMERICAN RECOVERY", "AMERICAN
TRIUMPH" AND "AMERICAN VICTORY".
1.1.99 "US GAAP" means the generally accepted accounting
principles in the United States of America, from time
to time in effect, subject to any changes in the
rules of US GAAP, consistently applied always
provided that if the Guarantor wishes to change
accounting principles within the applicable rules of
US GAAP, the Borrower shall notify the Agent of the
intention together with an explanation of the effects
on the financial covenants contained in this
Agreement. Should the Banks, and/or the Guarantor,
find that such change will impact upon the result of
the calculation of the financial covenants contained
in this Agreement, the Banks will, following
consultation with the Guarantor, stipulate amendments
to the financial covenants so that the ratio of SCS
Group's performance in respect of the covenants
reflects the position which would have been the case
had no changes to the Guarantor's accounting
principles taken place.
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1.1.100 "VALUATION" means in relation to a Vessel and an ROV,
the arithmetic mean of the written valuations of that
Vessel or ROV (as the case may be), expressed in
Dollars prepared by two firms of reputable
independent shipbrokers, one appointed by the Agent
and the other appointed by the Borrower, unless
either the Agent or the Borrower disagrees with such
arithmetic average, in which event the two
shipbrokers shall appoint a third firm of reputable
independent shipbrokers and the valuation of the
Vessel or ROV (as the case may be) shall be the
arithmetic mean of all three such valuations. Such
valuations shall be prepared at the Borrower's
expense, without a physical inspection, on the basis
of a sale for prompt delivery for cash at arm's
length between a willing buyer and a willing seller
without the benefit of any charterparty or other
engagement.
1.1.101 "THE VESSELS" means the vessels listed in Schedule
3 and everything now or in the future belonging to
them on board and ashore (each a "VESSEL").
1.2 INTERPRETATION
In this Agreement:-
1.2.1 words denoting the plural number include the singular
and vice versa;
1.2.2 words denoting persons include corporations,
partnerships, associations of persons (whether
incorporated or not) or governmental or
quasi-governmental bodies or authorities and vice
versa;
1.2.3 references to Recitals, Clauses, Schedules and
Appendices are references to recitals and clauses of,
and schedules and appendices to, this Agreement;
1.2.4 references to this Agreement include the Recitals,
the Schedules and the Appendices;
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1.2.5 the headings and contents page(s) are for the purpose
of reference only, have no legal or other
significance, and shall be ignored in the
interpretation of this Agreement;
1.2.6 references to any document (including, without
limitation, to all or any of the Security Documents)
are, unless the context otherwise requires,
references to that document as amended, supplemented,
novated or replaced from time to time;
1.2.7 references to statutes or provisions of statutes are
references to those statutes, or those provisions, as
from time to time amended, replaced or re-enacted;
1.2.8 references to any of the Finance Parties include
its successors, Transferees and assignees; and
1.2.9 references to times of day are to New York time.
1.3 JOINT AND SEVERAL LIABILITY
1.3.1 All obligations, covenants, representations,
warranties and undertakings in or pursuant to the
Security Documents assumed, given, made or entered
into by the Borrower and the Guarantor shall, unless
otherwise expressly provided, be assumed, given, made
or entered into by the Borrower and the Guarantor
jointly and severally.
1.3.2 Each of the Borrower and the Guarantor agrees that
any rights which it may have at any time during the
Facility Period by reason of the performance of its
obligations under the Security Documents to be
indemnified by the other or by any Surety and/or to
take the benefit of any security taken by the Finance
Parties pursuant to the Security Documents shall be
exercised in such manner and on such terms as the
Agent may require. Each of the Borrower and the
Guarantor agrees to
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hold any sums received by it as a result of its
having exercised any such right on trust for the
Agent (as agent for the Banks) absolutely.
1.3.3 Each of the Borrower and the Guarantor agrees that it
will not at any time during the Facility Period claim
any set-off or counterclaim against the other or
against any Surety in respect of any liability owed
to it by the other or by any Surety under or in
connection with the Security Documents, nor prove in
competition with any Finance Party in any liquidation
of (or analogous proceeding in respect of) the other
or of any Surety in respect of any payment made under
the Security Documents or in respect of any sum which
includes the proceeds of realisation of any security
held by any of the Finance Parties for the repayment
of the Indebtedness.
2 THE FACILITY AND ITS PURPOSE
2.1 AGREEMENT TO LEND Subject to the terms and conditions of this
Agreement, and in reliance on each of the representations and
warranties made or to be made in or in accordance with each of
the Security Documents, each of the Banks agrees to advance to
the Borrower its Commitment of an aggregate principal amount
not exceeding the Maximum Facility Amount to be used by the
Borrower for the purposes referred to in Recital (B).
2.2 DRAWINGS Subject to satisfaction by the Borrower of the
conditions set out in Clause 3.1 (in respect of the first
Drawing), Clause 3.3 (in respect of all subsequent Drawings),
and subject to Clause 2.3, and provided that the maximum
aggregate amount of the Facility Outstandings at any given
time during the Facility Period shall not exceed the Maximum
Facility Amount, each Drawing shall be advanced to the
Borrower, in each case by the Agent transferring the amount of
the Drawing to such account of the Borrower as the Borrower
shall notify to the Agent in the relevant Drawdown Notice by
such same day method of funds transfer as the Agent shall
select.
2.3 ADVANCE OF DRAWINGS Each Drawing shall be advanced in Dollars,
or in any other Permitted Currency selected in accordance with
Clause 5.1. Each
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Drawing shall be advanced on a Business Day,
provided that the Borrower shall have given to the Agent not
more than ten and not fewer than four Business Days' notice in
writing materially in the form set out in Appendix A of the
required Advance Date of the Drawing in question. Each
Drawdown Notice once given shall be irrevocable and shall
constitute a warranty by the Borrower that:-
2.3.1 all conditions precedent to the advance of the
Drawing requested in that Drawdown Notice will have
been satisfied on or before the Advance Date
requested;
2.3.2 no Event of Default or Potential Event of Default has
occurred or will then have occurred; and
2.3.3 no Event of Default or Potential Event of Default
will result from the advance of the Drawing in
question.
The Agent shall promptly notify each Bank of the receipt of
each Drawdown Notice, following which each Bank will make its
Proportionate Share of the amount of the requested Drawing
available to the Borrower through the Agent on the Advance
Date requested.
2.4 FACILITY REDUCTION
2.4.1 The amount of the Facility available to the Borrower
for drawing under this Agreement shall be one hundred
and fifty million Dollars ($150,000,000) or the
Equivalent Amount in any other Permitted Currency
during the period from the Execution Date until the
First Reduction Date. On the First Reduction Date and
on each subsequent Reduction Date until the
Termination Date, the amount of the Facility
available for drawing shall decrease by twelve
million five hundred thousand Dollars ($12,500,000).
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On the Termination Date the Facility available shall
be reduced to zero. The mandatory decreases in the
amount of the Facility available for drawing required
pursuant to this Clause will be made in the amounts
and at the times specified whether or not the
Borrower voluntarily reduces the Maximum Facility
Amount pursuant to Clause 2.4.2, or the Maximum
Facility Amount is reduced pursuant to Clause 2.4.3,
Clause 6.6 or Clause 17.8.
2.4.2 The Borrower may voluntarily reduce the Maximum
Facility Amount in whole or in part in multiples of
two million Dollars ($2,000,000), where applicable
provided that it has first given to the Agent not
fewer than fourteen (14) days' prior written notice
expiring on a Business Day of its desire to reduce
the Maximum Facility Amount. Any such reduction in
the Maximum Facility Amount shall not be reversed.
2.4.3 Upon receipt by the Guarantor of the net proceeds
from any Guarantor's Capital Markets Issue, the
Maximum Facility Amount shall immediately reduce by
the amount of fifty per cent (50%) of such net
proceeds (the "NET PROCEEDS AMOUNT"). Any such
reduction in the Maximum Facility Amount shall not be
reversed. If as a result of such reduction the
Original Dollar Amount exceeds the Maximum Facility
Amount then available, the Guarantor will ensure that
such amount as is necessary of the Net Proceeds
Amount shall be used to prepay the Facility
Outstandings so that the Original Dollar Amount is
not greater than the Maximum Facility Amount. Any
such prepayment shall be applied in inverse order of
maturity and otherwise in accordance with Clauses
6.3, 6.4 and 6.5.
2.4.4 To the extent that repayments or prepayments made by
the Borrower to the Agent in accordance with this
Agreement reduce the Facility Outstandings to less
than the Maximum Facility Amount, the Borrower shall
again be entitled to make Drawings in accordance with
and subject to the terms of this Agreement.
2.4.5 Simultaneously with each reduction of the Maximum
Facility Amount in accordance with Clause 2.4.1,
Clause 2.4.2 or Clause 2.4.3 (as the case may be),
the Commitment of each Bank will reduce so that the
Commitments of the Banks in respect of the reduced
Maximum
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Facility Amount remain in accordance with
their respective Proportionate Shares.
2.5 RESTRICTIONS ON DRAWINGS The Borrower shall not be entitled to
make more than three Drawings on any Business Day and no more
than ten (10) Drawings may be outstanding at any one time
during the Facility Period. Each Drawing shall be of an amount
of not less than five million Dollars ($5,000,000) or the
Equivalent Amount in any other Permitted Currency. If at any
time during the Facility Period the Original Dollar Amount
exceeds the Maximum Facility Amount then available or if a
proposed Drawing when added to the Original Dollar Amount
would result in the Maximum Facility Amount being exceeded
then the Borrower shall immediately pay to the Agent on behalf
of the Banks such amount as will ensure that the Original
Dollar Amount is equal to or less than the Maximum Facility
Amount then available.
2.6 TERMINATION DATE No Bank shall be under any obligation to
advance all or any part of its Commitment after the
Termination Date.
2.7 SEVERAL OBLIGATIONS The obligations of the Banks under this
Agreement are several. The failure of a Bank to perform its
obligations under this Agreement shall not affect the
obligations of the Borrower to any Finance Party nor shall any
Finance Party be liable for the failure of another Bank to
perform any of its obligations under or in connection with
this Agreement.
2.8 APPLICATION OF FACILITY Without prejudice to the obligations
of the Borrower under this Agreement, no Finance Party shall
be obliged to concern itself with the application of the
Facility by the Borrower.
2.9 LOAN FACILITY AND CONTROL ACCOUNTS The Agent will open and
maintain such loan facility account or such other control
accounts as the Agent shall in its discretion consider
necessary or desirable in connection with the Facility.
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3 CONDITIONS PRECEDENT AND SUBSEQUENT
3.1 CONDITIONS PRECEDENT - FIRST DRAWING Before any Bank shall
have any obligation to advance the first Drawing under the
Facility, the Borrower shall pay to the Agent the relevant
fees referred to in Clause 9.3 and deliver or cause to be
delivered to or to the order of the Agent the following
documents and evidence:-
3.1.1 EVIDENCE OF INCORPORATION Such evidence as the Agent
may reasonably require that each Security Party was
duly incorporated in its country of incorporation and
remains in existence and, where appropriate, in good
standing, with power to enter into, and perform its
obligations under, those of the Security Documents to
which it is, or is intended to be, a party, including
(without limitation) a copy, certified by a director
or an officer of the Security Party in question as
true, complete, accurate and unamended, of all
documents establishing or limiting the constitution
of each Security Party.
3.1.2 CORPORATE AUTHORITIES A copy, certified by a director
or the secretary of the Security Party in question as
true, complete, accurate and neither amended nor
revoked, of a resolution of the directors and (other
than the Guarantor) a resolution of the shareholders
of each Security Party (together, where appropriate,
with signed waivers of notice of any directors' or
shareholders' meetings) approving, and authorising or
ratifying the execution of, those of the Security
Documents and each Drawdown Notice to which that
Security Party is or is intended to be a party and
all matters incidental thereto.
3.1.3 OFFICER'S CERTIFICATE A certificate (i) signed by a
duly authorised officer of each of the Security
Parties setting out the names of the directors,
officers and (other than the Guarantor) shareholders
of that Security Party and (ii) issued by each
Security Party's company registry confirming due
incorporation and valid existence and (when such
information is maintained by the registry) the names
of its directors and shareholders.
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3.1.4 POWER OF ATTORNEY The power of attorney (notarially
attested and legalised, if necessary, for
registration purposes) of each of the Security
Parties under which any documents are to be executed
or transactions undertaken by that Security Party.
3.1.5 VESSEL DOCUMENTS Photocopies, certified as true,
accurate and complete by a director or the secretary
of the Owner of (in respect of each Vessel):-
(a) any time charterparty or bareboat
charterparty of that Vessel which will be in
force on the first Advance Date and which
exceeds twelve (12) months duration;
(b) the Management Agreement relating to that
Vessel; and
(c) that Vessel's current Safety Construction,
Safety Equipment, Safety Radio and
Load Line Certificates;
(d) if required by law and that Vessel is
operating in the waters of the United States
of America, that Vessel's current
Certificate of Financial Responsibility
issued pursuant to the United States Oil
Pollution Act 1990;
(e) where applicable, that Vessel's current SMC;
and
(f) where applicable, each Company's current DOC
in each case together with all addenda, amendments or
supplements.
3.1.6 EVIDENCE OF OWNERSHIP In respect of (i) each Vessel,
certificate(s) of ownership and encumbrance (or
equivalent) issued by the Registrar of Ships (or
equivalent official) at the Vessel's port of registry
confirming that such Vessel is on the first Advance
Date owned by her Owner and
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free of registered Encumbrances and (ii) each ROV,
such evidence as the Agent may require that such ROV
is on the first Advance Date owned by her Owner and
is free of Encumbrances.
3.1.7 EVIDENCE OF INSURANCE Evidence that each Vessel and
each ROV is insured in the manner required by the
Security Documents and that letters of undertaking
will be issued in the manner required by the Security
Documents, together with (if required by the Agent)
the written approval of the Insurances by an
insurance adviser appointed by the Agent.
3.1.8 CONFIRMATION OF CLASS A Certificate of Confirmation
of Class for hull and machinery (dated not more than
seven days before the first Advance Date) confirming
that each Vessel other than the Non Classified
Vessels is classed with the highest applicable class
necessary to properly operate such Vessel of Lloyd's
Register of Shipping, Det norske Veritas, the
American Bureau of Shipping or such other
classification society as may be acceptable to the
Agent.
3.1.9 VALUATIONS A valuation of each Vessel and each ROV
addressed to the Agent.
3.1.10 THE SECURITY DOCUMENTS The Security Documents,
together with all notices and other documents
required by any of them, duly executed and, in the
case of the Mortgages, registered with first priority
through the Registrar of Ships (or equivalent
official) at the port of registry of the Vessel
concerned.
3.1.11 DRAWDOWN NOTICE A Drawdown Notice.
3.1.12 PROCESS AGENT A letter from Stolt-Nielsen Limited
accepting their appointment by each of the Security
Parties as agent for service of Proceedings pursuant
to the Security Documents.
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3.1.13 MANAGERS' CONFIRMATION The written confirmation of
the Managers that they will remain the commercial and
technical managers of the Vessels throughout the
Facility Period and will manage the Vessels in
accordance with good standard ship management
practice.
3.1.14 THE FEE LETTERS The Fee Letters countersigned on
behalf of the Borrower and the Guarantor by way of
acceptance of their terms.
3.1.15 LEGAL OPINIONS Confirmation satisfactory to the Agent
that all legal opinions required by the Agent on
behalf of the Banks will be given substantially in
the form required by the Agent on behalf of the
Banks.
3.1.16 ACCOUNTS The consolidated audited accounts of the
Guarantor for its financial year just ended,
certified, by a director or the chief financial
officer of Stolt Comex Seaway M.S. Limited as agent
for the Guarantor, as fair and accurate.
3.1.17 US COAST GUARD CERTIFICATION A certified copy of the
currently valid US Coast Guard's certificate of
inspection in respect of the US Coast Guard Certified
Vessels.
3.2 CONDITIONS SUBSEQUENT The Borrower undertakes to deliver or to
cause to be delivered to the Agent on, or as soon as
practicable after, the first Advance Date, the following
additional documents and evidence:-
3.2.1 EVIDENCE OF REGISTRATION Evidence of registration of
the Mortgages, in each case with first priority with
the Registrar of Ships (or equivalent official) at
the port of registry of the Vessel concerned.
3.2.2 LETTERS OF UNDERTAKING Letters of undertaking as
required by the Security Documents in form and
substance acceptable to the Agent.
3.2.3 LEGAL OPINIONS Such legal opinions as the Agent on
behalf of the Banks shall require pursuant to Clause
3.1.15.
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3.2.4 COMPANIES ACT REGISTRATIONS Evidence that the
prescribed particulars of the Security Documents have
been delivered to the Registrar of Companies of (i)
England and Wales, (ii) Scotland and (iii) the Isle
of Man within the statutory time limit.
3.2.5 UCC FINANCING STATEMENTS Evidence that the Uniform
Commercial Code Financing Statements on Form UCC-1
have been filed against each relevant Security Party,
as debtors, under the laws of the United States of
America within any applicable time limit imposed by
law.
3.2.6 MASTER'S RECEIPTS The master's receipt for each of
the relevant Mortgages.
3.3 CONDITIONS PRECEDENT - SUBSEQUENT DRAWINGS Before any Bank
shall have any obligation to advance any subsequent Drawings
under the Facility, the Borrower shall deliver or cause to be
delivered to the order of the Agent, a Drawdown Notice, in
addition to the documents and evidence referred to in Clause
3.1 where such documents and evidence have not already been
delivered to and received by the Agent.
3.4 NO WAIVER If the Banks in their sole discretion agree to
advance any part of the Facility to the Borrower before all of
the documents and evidence required by Clause 3.1 or Clause
3.3 (as the case may be) have been delivered to or to the
order of the Agent, the Borrower undertakes to deliver all
outstanding documents and evidence to or to the order of the
Agent no later than the date specified by the Agent, and the
advance of any part of the Facility shall not be taken as a
waiver of the Agent's right to require production of all the
documents and evidence required by Clause 3.1 or Clause 3.3
(as the case may be).
3.5 FORM AND CONTENT All documents and evidence delivered to
the Agent pursuant to this Clause shall:-
3.5.1 be in form and substance acceptable to the Agent;
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3.5.2 be accompanied, if required by the Agent, by
translations into the English language, certified in
a manner acceptable to the Agent;
3.5.3 if required for registration purposes, be certified,
notarised, legalised or attested in a manner
acceptable to the Agent.
3.6 EVENT OF DEFAULT No Bank shall be under any obligation to
advance any part of its Commitment nor to act on any Drawdown
Notice if, at the date of the Drawdown Notice or at the date
on which the advance of a Drawing is requested in the Drawdown
Notice, an Event of Default or Potential Event of Default
shall have occurred, or if an Event of Default or Potential
Event of Default would result from the advance of the Drawing
in question.
4 REPRESENTATIONS AND WARRANTIES
Each of the Borrower and the Guarantor represents and warrants to each
of the Finance Parties at the date of this Agreement and (by reference
to the facts and circumstances then pertaining) at the date of each
Drawdown Notice, at each Advance Date and at each Interest Payment Date
as follows (except that the representation and warranty contained at
Clause 4.6 and Clause 4.14 shall only be made on the first Advance
Date):-
4.1 INCORPORATION AND CAPACITY Each of the Security Parties is a
body corporate duly constituted, organised and validly
existing and (where applicable) in good standing under the law
of its country of incorporation, in each case with perpetual
corporate existence and the power to sue and be sued, to own
its assets and to carry on its business, and all of the
corporate shareholders (if any) of each Security Party (other
than the Guarantor) are duly constituted and existing under
the laws of their countries of incorporation with perpetual
corporate existence and the power to sue and be sued, to own
their assets and to carry on their business.
4.2 SOLVENCY None of the Security Parties is insolvent or in
liquidation or administration or subject to any other
insolvency procedure, and no receiver, administrative
receiver, administrator, liquidator, trustee or analogous
officer
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has been appointed in respect of any of the Security Parties
or all or any part of their assets.
4.3 BINDING OBLIGATIONS The Security Documents when duly executed
and delivered will constitute the legal, valid and binding
obligations of the Security Parties enforceable in accordance
with their respective terms subject to applicable laws
regarding creditors' rights in general.
4.4 SATISFACTION OF CONDITIONS All acts, conditions and things
required to be done and satisfied and to have happened prior
to the execution and delivery of the Security Documents in
order to constitute the Security Documents the legal, valid
and binding obligations of the Security Parties in accordance
with their respective terms have been done, satisfied and have
happened in compliance with all applicable laws.
4.5 REGISTRATIONS AND CONSENTS With the exception only of the
registrations referred to in Clause 3.2, all (if any)
consents, licences, approvals and authorisations of, or
registrations with or declarations to, any governmental
authority, bureau or agency which may be required in
connection with the execution, delivery, performance, validity
or enforceability of the Security Documents have been obtained
or made and remain in full force and effect and neither the
Borrower nor the Guarantor is aware of any event or
circumstance which could reasonably be expected adversely to
affect the right of any of the Security Parties (as the case
may be) to hold and/or obtain renewal of any such consents,
licences, approvals or authorisations; provided that if any
Security Party changes its chief executive office or its
principal place of business in the United States of America or
changes the location of any ROV, additional filings may be
necessary.
4.6 DISCLOSURE OF MATERIAL FACTS Neither the Borrower nor the
Guarantor is aware of any material facts or circumstances
which have not been disclosed to the Agent and which might, if
disclosed, have reasonably been expected to adversely affect
the decision of a person considering whether or not to make
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loan facilities of the nature contemplated by this Agreement
available to the Borrower.
4.7 NO MATERIAL LITIGATION Except for those matters disclosed in
writing to the Agent, there is no action, suit, arbitration or
administrative proceeding nor any contemplated action, suit,
arbitration or administrative proceeding pending or to its
knowledge about to be pursued before any court, tribunal or
governmental or other authority which would, or would be
likely to, have a materially adverse effect on the business,
assets, financial condition or creditworthiness of the SCS
Group.
4.8 NO BREACH OF LAW OR CONTRACT The execution, delivery and
performance of the Security Documents will not contravene any
contractual restriction or any law binding on any of the
Security Parties or on any shareholder (whether legal or
beneficial) of any of the Security Parties (other than the
Guarantor), or the constitutional documents of any of the
Security Parties, nor result in the creation of, nor oblige
any of the Security Parties to create, any Encumbrance over
all or any of its assets, with the exception of the
Encumbrances created by or pursuant to the Security Documents.
4.9 NO DEDUCTIONS Except as disclosed to the Agent in writing,
that to the best of their knowledge belief and without undue
enquiry, none of the Security Parties is required to make any
deduction or withholding from any payment which it may be
obliged to make to any of the Finance Parties under or
pursuant to the Security Documents.
4.10 NO ESTABLISHED PLACE OF BUSINESS IN THE UNITED KINGDOM OR
UNITED STATES Save in respect of the Borrower, and the Owners
referred to in Schedule 3 whose registered office or principal
place of business is in the United Kingdom or the United
States of America, none of the Security Parties has, at the
date of this Agreement, an established place of business in
the United Kingdom or the United States of America. The
addresses of the relevant Owner's principal place of business
specified in Schedule 3 are correct as at the date of this
Agreement.
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4.11 USE OF FACILITY The Facility will be used for the purposes
specified in Recital (B).
4.12 MILLENNIUM COMPLIANCE To the best of the Borrower's and the
Guarantor's knowledge, all of the Systems of each of the
Security Parties, of each Vessel and of each ROV are, or will
in a timely manner be, Millennium Compliant.
4.13 SUBSIDIARIES Save as a result of any merger or amalgamation
effected pursuant to Clause 12.1.4, each of the Shipowning
Guarantors is and will remain throughout the Facility Period
a directly or indirectly wholly owned subsidiary of SCS.
4.14 NON-RESIDENT STATUS SCS Shipping Limited is and will
throughout the Facility Period continue to be a non-resident
company within the meaning of the Non-Resident Company Duty
Act 1986 as amended or substituted and each of the Security
Parties are and will remain throughout the Facility Period
non-resident in the Isle of Man for tax purposes.
4.15 MATERIAL ADVERSE CHANGE There has been no material adverse
change in the financial condition of the Borrower or the
Guarantor since delivery to the Agent of the Guarantor's
consolidated audited accounts referred to in Clause 3.1.16.
4.16 FINANCE COMPANY STATUS That the to the extent applicable
complies with and shall throughout the Facility Period
continue to comply, with the regulations of the Netherlands
Ministry of Finance dated 4 February 1993 with respect to
finance companies and that all notice requirements to the
Dutch central bank pursuant to the Foreign Financial Relations
Act ("Wet Financiele Betrekkingen Buitenland") 1994 have been
complied with and shall throughout the Facility Period
continue to be complied with.
5 CURRENCY
5.1 SELECTION OF PERMITTED CURRENCY The Borrower may from time to
time in accordance with this Clause select the Permitted
Currency in which it wishes a
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Drawing to be denominated. Any such selection made by the
Borrower shall be contained in the Drawdown Notice relating to
the Drawing in question. Once a Permitted Currency in respect
of a Drawing is selected such Drawing shall remain denominated
in such Permitted Currency until its repayment in accordance
with this Agreement.
5.2 CONDITIONS PRECEDENT TO DENOMINATION IN A PERMITTED CURRENCY
The denomination of a Drawing in a Permitted Currency pursuant
to this Clause shall be subject to the following:-
5.2.1 no Drawing may at any time during the Facility Period
be denominated in more than one Permitted Currency
and any notice requesting denomination of the Drawing
in more than one Permitted Currency shall be of no
effect; and
5.2.2 denomination of a Drawing in the Permitted Currency
selected by the Borrower shall not be effected if the
Agent certifies by notice in writing to the Borrower,
which notice shall be final and conclusive, that
deposits in the Permitted Currency selected for the
amount of the relevant Drawing and for the Interest
Period selected are not available to the Banks in the
normal course of business in the London Interbank
market on the relevant date.
5.3 NON-AVAILABILITY OF PERMITTED CURRENCY If, in any Permitted
Currency selected, deposits of the specified amount and for
the specified Interest Period are not available to any of the
Banks in the normal course of business in the London Interbank
market on the relevant date, or if the Borrower fails to
specify a Permitted Currency for a Drawing, that Drawing shall
be denominated in Dollars for the duration of the relevant
Interest Period.
5.4 REPAYMENT During each Interest Period in which a Drawing is
denominated in a Permitted Currency other than Dollars, the
obligation of the Borrower to repay the Drawing and to pay
interest shall be an obligation to repay that Drawing and to
pay interest on that Drawing in the Permitted Currency in
which
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the Drawing is then denominated, whether or not the
Facility Outstandings or any part thereof shall have become
repayable by acceleration.
5.5 FURTHER ASSURANCE The Borrower shall execute or procure the
execution of such further documents as the Agent may
reasonably require from time to time in order to preserve and
maintain the validity of the Security Documents as full
security for the repayment of the Indebtedness.
6 REPAYMENT AND PREPAYMENT
6.1 REPAYMENT Each Drawing shall be repaid by the Borrower to the
Agent on behalf of the Banks on the last day of its Interest
Period unless the Borrower selects a further Interest Period
for that Drawing in accordance with Clause 7, provided that
the Borrower shall not be permitted to select such further
Interest Period if an Event of Default or Potential Event of
Default has occurred and shall then be obliged to repay such
Drawing on the last day of its then current Interest Period.
In addition, the Borrower shall from time to time repay to the
Agent as agent for the Banks such amounts of the Facility
Outstandings as will ensure that the Original Dollar Amount
does not exceed the Maximum Facility Amount then available.
The Borrower shall on the Termination Date repay to the Agent
as agent for the Banks all Facility Outstandings.
6.2 PREPAYMENT The Borrower may prepay the Facility Outstandings
in whole or in part in multiples of two million Dollars
($2,000,000), or its Equivalent Amount in a Permitted Currency
where applicable, (or as otherwise may be agreed by the Agent)
provided that it has first given to the Agent not fewer than
fourteen (14) days' prior written notice expiring on a
Business Day of its intention to do so. Any notice pursuant to
this Clause 6.2 once given shall be irrevocable and shall
oblige the Borrower to make the prepayment referred to in the
notice on the Business Day specified in the notice, together
with all interest accrued on the amount prepaid up to and
including that Business Day.
6.3 PREPAYMENT INDEMNITY If the Borrower shall, subject always to
Clause 6.2, make a prepayment on a Business Day other than the
last day of an Interest Period, it shall pay to the Agent on
behalf of the Banks any amount which is
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necessary to compensate the Banks for any Break Costs incurred
by the Agent or any of the Banks as a result of the prepayment
in question.
6.4 APPLICATION OF PREPAYMENTS Any prepayment in an amount less
than the Indebtedness shall be applied in satisfaction or
reduction first of any costs and other moneys outstanding;
secondly of all interest outstanding with respect to the
currency in which the prepayment is to be made; thirdly of the
outstanding Drawings in the currency in which the prepayment
is to be made in inverse order of maturity, fourthly of all
other interest outstanding; and fifthly of all other
outstanding Drawings in inverse order of maturity.
6.5 REBORROWING OF PREPAYMENTS Any amount prepaid pursuant to this
Agreement may be reborrowed in accordance with Clause 2.4.3
and subject to compliance with Clause 12.2.2.
6.6 TOTAL LOSS In the event that the Material Vessel becomes a
Total Loss, on the date of such Total Loss occurring, the
Maximum Facility Amount shall reduce by the amount of the
insurance proceeds payable in respect of such Total Loss. In
the event that any Vessel (other than the Material Vessel)
becomes a Total Loss, on the date of such Total Loss
occurring, the Maximum Facility Amount shall reduce by the Pro
Rata Insurance Proceeds Amount in respect of such Vessel. Any
such reductions in the Maximum Facility Amount shall not be
reversed. If as a result of any reduction in the Maximum
Facility Amount pursuant to this Clause the Original Dollar
Amount exceeds the Maximum Facility Amount, the Borrower
shall, on the earlier to occur of (a) the one hundred and
eightieth day after the date of such Total Loss occurring and
(b) the date on which the Owner receives the proceeds of such
Total Loss, prepay such amount of the Original Dollar Amount
as will ensure that the Original Dollar Amount is not greater
than the Maximum Facility Amount. Any such prepayment shall
not be reborrowed, and Clause 6.3 shall apply to any such
prepayment.
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7 INTEREST
7.1 INTEREST PERIODS The period during which any Drawing shall be
outstanding pursuant to this Agreement shall be divided into
consecutive Interest Periods of one, three or six months'
duration, as selected by the Borrower by written notice to the
Agent not later than 11.00 a.m. on the fourth Business Day
before the beginning of the Interest Period in question, or
such other duration as may be agreed by the Banks in their
discretion. No more than three one (1) month Interest Periods
may be selected by the Borrower in each calendar year during
the Facility Period.
7.2 BEGINNING AND END OF INTEREST PERIODS The first Interest
Period in respect of each Drawing shall begin on the Advance
Date of that Drawing and shall end on the last day of the
Interest Period selected in accordance with Clause 7.1. Any
subsequent Interest Period selected in respect of each Drawing
shall commence on the day following the last day of its
previous Interest Period and shall end on the last day of its
current Interest Period selected in accordance with Clause
7.1. However, in respect of any Drawings outstanding on the
Termination Date, the Interest Period applicable to such
Drawings shall end on the Termination Date.
7.3 INTEREST RATE During each Interest Period interest shall
accrue on each Drawing at the rate determined by the Agent to
be the aggregate of (a) the applicable Margin, (b) LIBOR and,
if applicable, (c) the Additional Rate, determined in each
case, at or about 11.00 a.m. on the second Business Day prior
to the beginning of the Interest Period relating to that
Drawing.
7.4 ACCRUAL AND PAYMENT OF INTEREST Interest shall accrue from day
to day, shall be calculated on the basis of a 360 day year and
the actual number of days elapsed (or, in any circumstance
where market practice differs, in accordance with the
prevailing market practice) and shall be paid by the Borrower
to the Agent on behalf of the Banks on the last day of each
Interest Period and additionally, during any Interest Period
exceeding three months, on the last day of each successive
three month period after the beginning of that Interest
Period.
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7.5 ENDING OF INTEREST PERIODS If any Interest Period would end on
a day which is not a Business Day, that Interest Period shall
end on the next succeeding Business Day (unless the next
succeeding Business Day falls in the next calendar month, in
which event the Interest Period in question shall end on the
next preceding Business Day).
7.6 DEFAULT RATE If an Event of Default shall occur, the whole of
the Indebtedness shall, from the date of the occurrence of
the Event of Default, bear interest up to the date of actual
payment (both before and after judgment) at the Default Rate,
compounded at such intervals as the Agent shall in its
discretion determine, which interest shall be payable from
time to time by the Borrower to the Agent on behalf of the
Banks on demand.
7.7 DETERMINATIONS CONCLUSIVE Each determination of an interest
rate made by the Agent in accordance with Clause 7 shall (save
in the case of manifest error or on any question of law) be
final and conclusive.
8 GUARANTEE AND INDEMNITY
8.1 THE BORROWER'S OBLIGATIONS
In consideration of the agreement of the Banks to make the
Facility available to the Borrower, the Guarantor:-
8.1.1 irrevocably and unconditionally guarantees to
discharge on demand the Borrower's Obligations,
including Interest from the date of demand until the
date of payment, both before and after judgement; and
8.1.2 agrees, as a separate and independent obligation,
that, if any of the Borrower's Obligations are not
recoverable from the Guarantor under Clause 8.1.1 for
any reason, the Guarantor will be liable to the
Finance Parties as a principal debtor by way of
indemnity for the same amount as that for which the
Guarantor would have been liable had those Borrower's
Obligations been recoverable and agrees to discharge
its liability under this Clause 8.1.2 on demand
together with Interest from
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the date of demand until the date of payment, both
before and after judgement.
8.2 CONTINUING SECURITY
The Guarantee is a continuing security for the full amount of
the Borrower's Obligations from time to time and shall remain
in force notwithstanding the liquidation of the Borrower or
any change in the constitution of the Borrower or of any
Finance Party or the absorption of or amalgamation by any
Finance Party in or with any other entity or the acquisition
of all or any part of the assets or undertaking of any Finance
Party by any other entity.
8.3 PRESERVATION OF GUARANTOR'S LIABILITY
8.3.1 The Banks may without the Guarantor's consent and
without notice to the Guarantor and without in any
way releasing or reducing the Guarantor's
Liabilities:-
(a) amend, novate, supplement or replace all
or any of the Borrower's Security
Documents;
(b) increase or reduce the amount of the
Facility or vary the terms and conditions
for its repayment or prepayment (including,
without limitation, the rate and/or method
of calculation of interest payable on the
Facility);
(c) allow to the Borrower or to any other person
any time or other indulgence;
(d) renew, vary, release or refrain from
enforcing any of the Borrower's Security
Documents or any other security, guarantee
or indemnity which the Agent may now or in
the future hold from the Borrower or from
any other person;
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(e) compound with the Borrower or any other
person;
(f) enter into, renew, vary or terminate any
other agreement or arrangement with the
Borrower or any other person; or
(g) make any concession to the Borrower or do or
omit or neglect to do anything which might,
but for this provision, operate to release
or reduce the liability of the Guarantor
under the Guarantee.
8.3.2 The liability of the Guarantor under the Guarantee
shall not be affected by:-
(a) the absence of or any defective, excessive
or irregular exercise of any of the
powers of the Borrower or of any Surety;
(b) any security given or payment made to the
Finance Parties or any of them by the
Borrower or any other person being avoided
or reduced under any law (whether English or
foreign) relating to bankruptcy or
insolvency or analogous circumstance in
force from time to time;
(c) the liquidation, administration,
receivership or insolvency of the Guarantor;
(d) any other security, guarantee or indemnity
now or in the future held by the Finance
Parties or any of them being defective, void
or unenforceable, or the failure of the any
Finance Party to take any security,
guarantee or indemnity;
(e) any compromise or arrangement under Part I
or Part VII of the Insolvency Act 1986 or
section 425 of the Companies Act 1985 (or
any statutory modification or re-enactment
of either of them for the time being in
force) or under any analogous provision of
any foreign law;
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(f) the novation of any of the Borrower's
Obligations;
(g) anything which would not have released or
reduced the liability of the Guarantor to
the Finance Parties had the liability of the
Guarantor under Clause 8.1.1 been as a
principal debtor of the Finance Parties and
not as a guarantor.
8.4 PRESERVATION OF BANKS' RIGHTS
8.4.1 The Guarantee is in addition to any other security,
guarantee or indemnity now or in the future held by
the Finance Parties in respect of the Borrower's
Obligations, whether from the Borrower, the Guarantor
or any other person, and shall not merge with,
prejudice or be prejudiced by any such security,
guarantee or indemnity or any contractual or legal
right of each Finance Party.
8.4.2 Any release, settlement, discharge or arrangement
relating to the liabilities of the Guarantor under
the Guarantee shall be conditional on no payment,
assurance or security received by the Finance Parties
in respect of the Borrower's Obligations being
avoided or reduced under any law (whether English or
foreign) in force from time to time relating to
bankruptcy, insolvency or any (in the opinion of the
Agent) analogous circumstance and after any such
avoidance or reduction the Finance Parties shall be
entitled to exercise all of their rights, powers,
discretions and remedies under or pursuant to the
Guarantee and/or any other rights, powers,
discretions or remedies which they would otherwise
have been entitled to exercise, as if no release,
settlement, discharge or arrangement had taken place.
8.4.3 Following the discharge of the Borrower's
Obligations, the Finance Parties shall be entitled to
retain any security which they may hold for the
liabilities of the Guarantor under the Guarantee
until the Finance Parties are satisfied in their
discretion that they will not have to make any
payment under any law referred to in Clause 8.4.2.
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8.4.4 Until all claims of the Finance Parties in respect of
the Borrower's Obligations have been discharged in
full:-
(a) the Guarantor shall not be entitled to
participate in any security held or sums
received by any Finance Party in respect of
all or any part of the Borrower's
Obligations;
(b) the Guarantor shall not stand in the place
of, or be subrogated for, any of the Finance
Parties in respect of any security nor take
any step to enforce any claim against the
Borrower or any Surety (or the estate or
effects of any such person) nor claim or
exercise any right of set off or
counterclaim against the Borrower or any
Surety nor make any claim in the bankruptcy
or liquidation of the Borrower or any Surety
in respect of any sums paid by the Guarantor
to the Finance Parties or any of them or in
respect of any sum which includes the
proceeds of realisation of any security at
any time held by the Finance Parties or any
of them in respect of all or any part of the
Guarantor's Liabilities; and
(c) the Guarantor shall not take any steps to
enforce any claim which it may have against
the Borrower or any Security Party without
the prior written consent of the Agent, and
then only on such terms and subject to such
conditions as the Agent may impose.
8.4.5 The Guarantor's Liabilities shall be continuing for
all purposes (including Interest) and every sum of
money which may now or in the future be or become due
or owing to the Finance Parties by the Borrower under
the Security Documents to which the Borrower is a
party (or which would have become due or owing had it
not been for the bankruptcy, liquidation or
insolvency of the Borrower) shall be deemed to
continue due and owing to the Finance Parties by the
Borrower until such sum is actually repaid to the
Finance Parties, notwithstanding the bankruptcy,
liquidation or insolvency of the Borrower.
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8.4.6 The Finance Parties may, but shall not be obliged to,
resort for their own benefit to any other means of
payment at any time and in any order they think fit
without releasing or reducing the Guarantor's
Liabilities.
8.4.7 The Finance Parties may enforce the Guarantee either
before or after resorting to any other means of
payment and, in the latter case, without entitling
the Guarantor to any benefit from or share in any
such other means of payment for so long as the
Borrower's Obligations have not been discharged in
full.
8.5 OTHER SECURITY
The Guarantor confirms that it has not taken and will not take
without the prior written consent of the Agent (and then only
on such terms and subject to such conditions as the Agent may
impose) any security from the Borrower or from any Surety in
connection with the Guarantee and any security taken by the
Guarantor in connection with the Guarantee notwithstanding
this Clause shall be held by the Guarantor in trust for the
Agent on behalf of the Finance Parties absolutely as a
continuing security for the Guarantor's Liabilities.
9 FEES
9.1 The Borrower shall pay to or to the order of the Agent the
fees, commissions and other sums referred to in the Fee
Letters in the amounts and on the dates set out in the Fee
Letters.
9.2 The Borrower shall pay to the Agent Commitment Commission at
the rate of one half of the applicable Margin per annum on any
undrawn part of the Facility after the Execution Date. The
Commitment Commission will accrue from day to day on the basis
of a 360 day year and the actual number of days elapsed and
shall be paid quarterly in arrears from the Execution Date
until the Termination Date based upon the Margin in effect for
the previous quarter.
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9.3 The Borrower shall on the Execution Date pay to the Agent on
behalf of each Bank which is a party to this Agreement on the
Execution Date, a 0.25% flat fee on the amount of each such
Bank's Commitment.
10 SECURITY DOCUMENTS
As security for the repayment of the Indebtedness, the Borrower shall
execute and deliver to the Agent or cause to be executed and delivered
to the Agent, on or before the first Advance Date, the following
Security Documents in such forms and containing such terms and
conditions as the Agent shall require:-
10.1 THE MORTGAGES AND DEED OF COVENANTS a first preferred and/or
priority mortgage together, where applicable, with collateral
deed of covenants over each Vessel;
10.2 THE ASSIGNMENTS a deed of assignment of the Insurances,
Earnings and Requisition Compensation of each Vessel;
10.3 THE SHIPOWNERS' GUARANTEE the joint and several guarantee
and indemnity of the Shipowning Guarantors;
10.4 ANY INTER-COMPANY INDEBTEDNESS ASSIGNMENTS if applicable, a
deed of assignment of any Inter-Company Indebtedness
materially in the form set forth in Appendix B;
10.5 THE GENERAL SECURITY AGREEMENTS (i) a bond and floating charge
and assignation of insurances (ii) an assignment and charge,
or (iii) a security interest and assignment over each ROV, its
Earnings, Insurances and Requisition Compensation; and
10.6 THE FACTORING AGREEMENT a factoring agreement in relation to
the assignment of Earnings contained in the Assignment over mv
"SEAWAY FALCON" to be made between Stolt Comex Seaway A/S and
the Agent.
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11 AGENCY AND TRUST
11.1 APPOINTMENT Each of the Banks and the Arrangers appoints the
Agent its agent for the purpose of administering the Facility
and the Security Documents and authorises the Agent and its
directors, officers, employees and agents acting on the
instructions from time to time of an Instructing Group, and
subject to Clauses 11.4 and 11.19, to execute the Security
Documents on its behalf and to exercise all rights, powers,
discretions and remedies vested in the Banks under or pursuant
to the Security Documents, together with all powers reasonably
incidental to them.
11.2 AUTHORITY Each of the Banks and the Arrangers irrevocably
authorises the Agent, acting on the instructions from time to
time of an Instructing Group:-
11.2.1 to give or withhold any consents or approvals; and
11.2.2 to exercise, or refrain from exercising, any
discretions; and
11.2.3 to collect, receive, release or pay any money;
under or pursuant to any of the Security Documents. In
addition the Agent may waive compliance by any Security Party
with Clauses 12.1.2, 12.1.3, 12.2.3, 12.2.9, 13.1 and 19.2.3
with the prior written consent of an Instructing Group. The
Agent shall have no duties or responsibilities as agent or as
security trustee other than those expressly conferred on it
by the Security Documents and shall not be obliged to act on
any instructions if to do so would, in the opinion of the
Agent, be contrary to any provision of the Security Documents
or to any law, or would expose the Agent to any actual or
potential liability to any third party.
11.3 TRUST The Agent agrees and declares, and each of the Banks
acknowledges, that, subject to the terms and conditions of
this Clause, the Agent holds the Trust Property on trust for
the Banks, in accordance with their respective Proportionate
Shares, absolutely. Each of the Banks agrees that the
obligations, rights and benefits vested in the Agent in its
capacity as security trustee shall be performed and exercised
in accordance with this Clause. The Agent in its
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capacity as security trustee shall have the benefit of all of
the provisions of this Agreement benefitting it in its
capacity as agent for the Banks, and all the powers and
discretions conferred on trustees by the Trustee Act 1925 (to
the extent not inconsistent with this Agreement). In
addition:-
11.3.1 the Agent (and any attorney, agent or delegate of the
Agent) may indemnify itself or himself out of the
Trust Property against all liabilities, costs, fees,
damages, charges, losses and expenses sustained or
incurred by it or him in relation to the taking or
holding of any of the Trust Property or in connection
with the exercise or purported exercise of the
rights, trusts, powers and discretions vested in the
Agent or any other such person by or pursuant to the
Security Documents or in respect of anything else
done or omitted to be done in any way relating to the
Security Documents; and
11.3.2 the Banks acknowledge that the Agent shall be under
no obligation to insure any property nor to require
any other person to insure any property and shall not
be responsible for any loss which may be suffered by
any person as a result of the lack or insufficiency
of any insurance; and
11.3.3 the Agent and the Banks agree that the perpetuity
period applicable to the trusts declared by this
Agreement shall be the period of eighty years from
the Execution Date.
11.4 LIMITATIONS ON AUTHORITY Except with the prior written
consent of each of the Banks, the Agent shall not be entitled
to:-
11.4.1 release or vary any security given for the Borrower's
obligations under this Agreement; nor
11.4.2 except as otherwise provided in this Agreement, agree
to waive the payment of any sum of money payable by
any of the Security Parties under the Security
Documents or waive, modify, vary or otherwise
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amend or excuse performance by any of the Security
Parties of any material provision of the Security
Documents; nor
11.4.3 change the meaning of the expression "INSTRUCTING
GROUP"; nor
11.4.4 exercise, or refrain from exercising, any discretion,
or give or withhold any consent, the exercise or
giving of which is, by the terms of this Agreement,
expressly reserved to the Banks; nor
11.4.5 extend the due date for the payment of any sum of
money payable by any of the Security Parties under
the Security Documents; nor
11.4.6 take or refrain from taking any step if the effect of
such action or inaction may lead to the increase of
the obligations of a Bank under any of the Security
Documents; nor
11.4.7 agree to change the currency in which any sum is
payable under the Security Documents (other than in
accordance with the terms of the Security Documents);
nor
11.4.8 agree to amend this Clause 11.4.
11.5 LIABILITY Neither the Agent nor any of its directors,
officers, employees or agents shall be liable to the Banks or
the Arrangers for anything done or omitted to be done by the
Agent under or in connection with the Security Documents
unless as a result of the Agent's wilful misconduct or gross
negligence.
11.6 ACKNOWLEDGMENT Each of the Banks and the Arrangers
acknowledges that:-
11.6.1 it has not relied on any representation made by the
Agent or any of the Agent's directors, officers,
employees or agents or by any other person acting
or purporting to act on behalf of the Agent to
induce it to enter into any of the Security
Documents;
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11.6.2 it has made and will continue to make without
reliance on the Agent, and based on such documents
and other evidence as it considers appropriate, its
own independent investigation of the financial
condition and affairs of the Security Parties in
connection with the making and continuation of the
Facility;
11.6.3 it has made its own appraisal of the creditworthiness
of the Security Parties;
11.6.4 the Agent shall not have any duty or responsibility
at any time to provide it with any credit or other
information relating to any of the Security Parties
unless that information is received by the Agent
pursuant to the express terms of the Security
Documents.
Each of the Banks and the Arrangers agrees that it will not
assert nor seek to assert against any director, officer,
employee or agent of the Agent or against any other person
acting or purporting to act on behalf of the Agent any claim
which it might have against them in respect of any of the
matters referred to in this Clause.
11.7 LIMITATIONS ON RESPONSIBILITY The Agent shall have no
responsibility to any of the Security Parties or to the Banks
or to the Arrangers on account of:-
11.7.1 the failure of a Bank or of any of the Security
Parties to perform any of their respective
obligations under the Security Documents;
11.7.2 the financial condition of any of the Security
Parties;
11.7.3 the completeness or accuracy of any statements,
representations or warranties made in or pursuant to
any of the Security Documents, or in or pursuant to
any document delivered pursuant to or in connection
with any of the Security Documents;
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11.7.4 the negotiation, execution, effectiveness,
genuineness, validity, enforceability, admissibility
in evidence or sufficiency of any of the Security
Documents or of any document executed or delivered
pursuant to or in connection with any of the Security
Documents.
11.8 THE AGENT'S RIGHTS The Agent may:-
11.8.1 assume that all representations or warranties made or
deemed repeated by any of the Security Parties in or
pursuant to any of the Security Documents are true
and complete, unless, in its capacity as the Agent,
it has acquired actual knowledge to the contrary; and
11.8.2 assume that no Event of Default or Potential Event of
Default has occurred unless, in its capacity as the
Agent, it has acquired actual knowledge to the
contrary; and
11.8.3 rely on any document or Communication believed by it
to be genuine; and
11.8.4 rely as to legal or other professional matters on
opinions and statements of any legal or other
professional advisers selected or approved by it; and
11.8.5 rely as to any factual matters which might reasonably
be expected to be within the knowledge of any of the
Security Parties on a certificate signed by or on
behalf of that Security Party; and
11.8.6 refrain from exercising any right, power, discretion
or remedy unless and until instructed to exercise
that right, power, discretion or remedy and as to the
manner of its exercise by the Banks (or, where
applicable, by an Instructing Group) and unless and
until the Agent has received from the Banks any
payment which the Agent may require on account of, or
any security which the Agent may require for, any
costs, claims, expenses (including legal and other
professional fees)
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and liabilities which it considers it may incur or
sustain in complying with those instructions.
11.9 THE AGENT'S DUTIES The Agent shall:-
11.9.1 if requested in writing to do so by a Bank, make
enquiry and advise the Banks as to the performance or
observance of any of the provisions of the Security
Documents by any of the Security Parties or as to the
existence of an Event of Default; and
11.9.2 inform the Banks promptly of any Event of Default of
which the Agent has actual knowledge; and
11.9.3 inform the Banks promptly of any disclosures in
writing received by the Agent pursuant to Clause 4.7.
11.10 NO DEEMED KNOWLEDGE The Agent shall not be deemed to have
actual knowledge of the falsehood or incompleteness of any
representation or warranty made or deemed repeated by any of
the Security Parties or actual knowledge of the occurrence of
any Event of Default or Potential Event of Default unless a
Bank or any of the Security Parties shall have given written
notice thereof to the Agent.
11.11 OTHER BUSINESS The Agent may, without any liability to account
to the Banks or the Arrangers, generally engage in any kind of
banking or trust business with any of the Security Parties or
any of their respective Subsidiaries or associated companies
or with a Bank as if it were not the Agent.
11.12 INDEMNITY The Banks shall, promptly on the Agent's request,
reimburse the Agent in their respective Proportionate Shares,
for, and keep the Agent fully indemnified in respect of:-
11.12.1 all amounts payable by the Borrower to the Agent
pursuant to Clause 19 to the extent that those
amounts are not paid by the Borrower;
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11.12.2 all liabilities, damages, costs and claims sustained
or incurred by the Agent in connection with the
Security Documents, or the performance of its duties
and obligations, or the exercise of its rights,
powers, discretions or remedies under or pursuant to
any of the Security Documents; or in connection with
any action taken or omitted by the Agent under or
pursuant to any of the Security Documents, unless in
any case those liabilities, damages, costs or claims
arise solely from the Agent's wilful misconduct or
gross negligence.
11.13 EMPLOYMENT OF AGENTS In performing its duties and exercising
its rights, powers, discretions and remedies under or pursuant
to the Security Documents, the Agent shall be entitled to
employ and pay agents to do anything which the Agent is
empowered to do under or pursuant to the Security Documents
(including the receipt of money and documents and the payment
of money) and to act or refrain from taking action in reliance
on the opinion of, or advice or information obtained from, any
lawyer, banker, broker, accountant, valuer or any other person
believed by the Agent in good faith to be competent to give
such opinion, advice or information.
11.14 DISTRIBUTION OF PAYMENTS The Agent shall pay promptly to the
order of each of the Banks that Bank's Proportionate Share of
every sum of money received by the Agent pursuant to the
Security Documents or the Mortgagees' Insurances (with the
exception of any amounts payable pursuant to Clause 9.1 and/or
the Fee Letters and any amounts which, by the terms of the
Security Documents, are paid to the Agent for the account of
the Agent or the Syndication Agent alone or specifically for
the account of one or more Banks or Arrangers) and until so
paid such amount shall be held by the Agent on trust
absolutely for that Bank, that Arranger or the Syndication
Agent (or as the case may be).
11.15 REIMBURSEMENT The Agent shall have no liability to pay any sum
to a Bank or to an Arranger or the Syndication Agent until it
has itself received payment of that sum. If, however, the
Agent does pay any sum to a Bank or to an Arranger or the
Syndication Agent on account of any amount prospectively due
to it
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pursuant to Clause 11.14 before it has itself received
payment of that amount, and the Agent does not in fact receive
payment within five Business Days after the date on which that
payment was required to be made by the terms of the Security
Documents or the Mortgagees' Insurances, the recipient will,
on demand by the Agent, refund to the Agent an amount equal to
the amount received by it, together with an amount sufficient
to reimburse the Agent for any amount which the Agent may
certify that it has been required to pay by way of interest on
money borrowed to fund the amount in question during the
period beginning on the date on which that amount was required
to be paid by the terms of the Security Documents or the
Mortgagees' Insurances and ending on the date on which the
Agent receives reimbursement.
11.16 REDISTRIBUTION OF PAYMENTS Unless otherwise agreed between the
Finance Parties, if at any time a Bank receives or recovers by
way of set-off, the exercise of any lien or otherwise (other
than from any assignee or transferee of or sub-participant in
that Bank's Commitment), an amount greater than that Bank's
Proportionate Share of any sum due from any of the Security
Parties under the Security Documents (the amount of the excess
being referred to in this Clause as the "EXCESS AMOUNT")
then:-
11.16.1 that Bank shall promptly notify the Agent (which
shall promptly notify each other Bank);
11.16.2 that Bank shall pay to the Agent an amount equal to
the Excess Amount within ten days of its receipt or
recovery of the Excess Amount; and
11.16.3 the Agent shall treat that payment as if it were a
payment by the Security Party in question on account
of the sum owed to the Banks as aforesaid and shall
account to the Banks in respect of the Excess Amount
in accordance with the provisions of this Clause.
However, if a Bank has commenced any Proceedings to recover
sums owing to it under the Security Documents and, as a result
of, or in connection with, those
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Proceedings has received an Excess Amount, the Agent shall not
distribute any of that Excess Amount to any other Bank which
had been notified of the Proceedings and had the legal right
to, but did not, join those Proceedings or commence and
diligently prosecute separate Proceedings to enforce its
rights in the same or another court.
11.17 RESCISSION OF EXCESS AMOUNT If all or any part of any Excess
Amount is rescinded or must otherwise be restored to any of
the Security Parties or to any other third party, the Banks
which have received any part of that Excess Amount by way of
distribution from the Agent pursuant to this Clause shall
repay to the Agent for the account of the Bank which
originally received or recovered the Excess Amount, the amount
which shall be necessary to ensure that the Banks share
rateably in accordance with their Proportionate Shares in the
amount of the receipt or payment retained, together with
interest on that amount at a rate equivalent to that (if any)
paid by the Bank receiving or recovering the Excess Amount to
the person to whom that Bank is liable to make payment in
respect of such amount, and Clause 11.16.3 shall apply only to
the retained amount.
11.18 PROCEEDINGS Each of the Finance Parties shall notify one
another of the proposed commencement of any Proceedings under
any of the Security Documents prior to their commencement. No
such Proceedings may be commenced without the prior written
consent of an Instructing Group.
11.19 INSTRUCTIONS Where the Agent is authorised or directed to act
or refrain from acting in accordance with the instructions of
the Banks or of an Instructing Group each of the Banks shall
provide the Agent with instructions within three Business Days
of the Agent's request (which request may be made orally or in
writing). If a Bank does not provide the Agent with
instructions within that period, that Bank shall be bound by
the decision of the Agent. Nothing in this Clause shall limit
the right of the Agent to take, or refrain from taking, any
action without obtaining the instructions of the Banks if the
Agent in its discretion considers it necessary or appropriate
to take, or refrain from taking, such action in order to
preserve the rights of the Banks under or in connection
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with the Security Documents. In that event, the Agent will
notify the Banks of the action taken by it as soon as
reasonably practicable, and the Banks agree to ratify any
action taken by the Agent pursuant to this Clause.
11.20 COMMUNICATIONS Any Communication under this Clause shall be
given, delivered, made or served, in the case of the Agent (in
its capacity as Agent or as one of the Banks), and in the case
of the other Banks, at the address indicated in Schedule 1.
11.21 PAYMENTS All amounts payable to a Bank under this Clause shall
be paid to such account at such bank as that Bank may from
time to time direct in writing to the Agent.
11.22 RETIREMENT Subject to a successor being appointed in
accordance with this Clause, the Agent may retire as agent
and/or security trustee at any time without assigning any
reason by giving to the Borrower and the other Finance Parties
notice of its intention to do so, in which event the following
shall apply:-
11.22.1 with the consent of the Borrower, not to be
unreasonably withheld, the other Finance Parties may
within thirty days after the date of the Agent's
notice appoint a successor to act as agent and/or
security trustee or, if they fail to do so with the
consent of the Borrower, not to be unreasonably
withheld, the Agent may appoint any other bank or
financial institution as its successor;
11.22.2 the resignation of the Agent shall take effect
simultaneously with the appointment of its successor
on written notice of that appointment being given to
the Borrower and the other Finance Parties;
11.22.3 the Agent shall thereupon be discharged from all
further obligations as agent and/or security trustee
but shall remain entitled to the benefit of the
provisions of this Clause;
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11.22.4 the Agent's successor and each of the other parties
to this Agreement shall have the same rights and
obligations amongst themselves as they would have had
if that successor had been a party to this Agreement.
11.23 NO FIDUCIARY RELATIONSHIP Except as provided in Clauses 11.3
and 11.14, the Agent shall not have any fiduciary relationship
with or be deemed to be a trustee of or for a Bank or an
Arranger and nothing contained in any of the Security
Documents shall constitute a partnership between any two or
more Banks or Arrangers or between the Agent and any Bank or
Arranger.
11.24 THE AGENT AS A BANK The expression "THE BANKS" when used in
the Security Documents includes the Agent in its capacity as
one of the Banks. The Agent shall be entitled to exercise its
rights, powers, discretions and remedies under or pursuant to
the Security Documents in its capacity as one of the Banks in
the same manner as any other Bank and as if it were not also
the Agent.
11.25 THE AGENT AS SECURITY TRUSTEE Unless the context otherwise
requires, the expression "THE Agent" when used in the Security
Documents includes the Agent acting in its capacities both as
agent and security trustee.
11.26 SYNDICATION AGENT Each of the Finance Parties agrees, for the
avoidance of doubt, that the Syndication Agent has no duties
in its capacity as Syndication Agent under the Security
Documents.
12 COVENANTS
Each of the Borrower and the Guarantor covenants with the Finance
Parties in the following terms.
12.1 NEGATIVE COVENANTS
Neither the Borrower nor the Guarantor, will:-
12.1.1 NO THIRD PARTY RIGHTS without the Banks' prior
written consent, save for Permitted Liens, secure any
debt or guarantee obligation on any
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Vessel or ROV or any other asset secured in favour
of the Finance Parties or any of them under the
Security Documents nor permit any Security Party or
any other member of the SCS Group to create or permit
to arise or subsist any Encumbrance of whatever
nature upon any amount due from time to time during
the Facility Period to that Security Party or any
other member of the SCS Group except any Encumbrance
existing on the date of this Agreement and notified
to the Agent and listed in Appendix D; nor
12.1.2 CHARTERING without the prior written consent of an
Instructing Group, charter any Vessel or permit any
Vessel to be chartered on any bareboat charter, or
otherwise for a period exceeding (or inclusive of any
extension options, capable or exceeding) twelve (12)
months) or following the occurrence and during the
continuation of an Event of Default, let any Vessel
on charter or renew or extend any charter or other
contract of employment of any Vessel (nor agree to do
so) provided that committing the use of a Vessel with
respect to any service shall not be regarded as a
charter within the meaning of this Clause unless such
Vessel is committed for a consecutive period of not
less than twelve (12) months on a time charter; nor
12.1.3 NO CHANGE IN MANAGEMENT without the prior written
consent of an Instructing Group, permit the
appointment of anyone other than the Managers as
commercial or technical managers of the Vessels, nor
terminate or materially vary the arrangements for the
commercial or technical management of the Vessels,
nor permit the Managers to sub-contract or delegate
the commercial or technical management of any Vessel
to any third party outside of the SCS Group; nor
12.1.4 MERGER OR AMALGAMATION without the prior written
consent of an Instructing Group, permit any merger or
amalgamation unless (i) the Guarantor, the Borrower
and each Shipowning Guarantor remains the surviving
entity following any such merger or amalgamation (or
if the merger or amalgamation involves more than one
of the Shipowning
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Guarantors, then one of the Shipowning Guarantors
remains the surviving entity) and (ii) such surviving
entity is not divested of any material part of the
assets or operations of such member of the SCS Group
and (iii) in the case of the Guarantor only, such
merger or amalgamation has been approved by a duly
passed resolution of the Guarantor's shareholders.
12.2 POSITIVE COVENANTS
12.2.1 REGISTRATION OF VESSELS Each of the Borrower and the
Guarantor undertakes to procure the maintenance of
the registration of the Vessels under the flags and
ownerships indicated in Schedule 3 for the duration
of the Facility Period unless otherwise approved by
the Agent.
12.2.2 ADDITIONAL SECURITY If and so often as the aggregate
of any Valuations of the Vessels and the ROVs plus
the value of any additional security (other than
cash) for the time being provided to the Banks (or to
the Agent on their behalf) pursuant to this Clause
shall be less than one hundred and twenty per centum
(120%) of the Original Dollar Amount (less the amount
of any cash deposited as additional security pursuant
to this Clause) the Borrower will, within thirty days
of the request of the Agent to do so, at the
Borrower's option:-
(a) pay to the Agent or to its nominee a cash
deposit in the amount of the shortfall to be
secured in favour of the Banks (or of the
Agent on their behalf) as additional
security for the payment of the
Indebtedness; or
(b) give to the Banks (or to the Agent on their
behalf) other additional security in amount
and form acceptable to the Banks in their
discretion; or
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(c) prepay the amount of the Indebtedness which
will ensure that the aggregate of the
Valuations of the Vessels and the ROVs plus
the value of any such additional security
(other than cash) is not less than one
hundred and twenty per centum (120%) of the
Original Dollar Amount (less the amount of
any cash deposited as additional security
pursuant to this Clause).
Clauses 6.3, 6.4 and 6.5 shall apply, mutatis
mutandis, to any prepayment made pursuant to this
Clause and the value of any additional security
provided pursuant to this Clause shall be determined
by the Agent in its discretion. Provided that, where
the Borrower has provided additional security
pursuant to this Clause, the Borrower may request
that the Agent obtain new Valuations on a date
falling not earlier than six months after the date
such additional security was provided. Where
requested by the Borrower to obtain new Valuations
pursuant to this Clause the Agent shall obtain such
new Valuations at the cost and expense of the
Borrower. If the aggregate of the new Valuations of
the Vessels and the ROV's plus the value of any
additional security (other than cash) (the "NEW
SECURITY AMOUNT") is greater than one hundred and
twenty per cent (120%) of the Original Dollar Amount
(less the amount of any cash deposited as additional
security pursuant to this Clause) (the "SECURITY
MAINTENANCE AMOUNT") the Agent (provided that the
Agent shall firstly release any cash collateral
deposited with it pursuant to this Clause) shall
release to the Borrower, upon the Borrower's written
request and at the Borrower's expense, any such
additional security as the Agent selects, such that
after its release the New Security Amount will be
equal to the Security Maintenance Amount, provided,
however, that the value of such security to be
released is not less than five hundred thousand
Dollars ($500,000). For the purposes of this Clause
the Borrower shall at its expense throughout the
Facility Period deliver to the Agent a Valuation in
respect of each Vessel and each ROV (i) at least
annually after the Execution Date and (ii) at any
time reasonably requested by the Agent.
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12.2.3 FINANCIAL STATEMENTS The Borrower will supply to the
Agent, without request:-
(a) its annual unaudited financial statements for
each financial year of the Borrower ending
during the Facility Period, containing
(amongst other things) the Borrower's profit
and loss account for, and balance sheet at
the end of, each such financial year,
prepared in accordance with generally
accepted accounting principles and practices
applicable to companies incorporated in the
Netherlands consistently applied, in each
case within one hundred and eighty days of
the end of the financial year to which they
relate and such financial statements shall
accurately and fairly represent the financial
condition of the Borrower; and
(b) on a consolidated basis:-
(i) the Guarantor's annual audited accounts
prepared in accordance with US GAAP
within one hundred and eighty days of
the end of the financial year to which
they relate and such financial
statements shall accurately and fairly
represent the financial condition of
the SCS Group; and
(ii) the Guarantor's unaudited quarterly
financial statements (including cash
flow analysis) not later than 90
days after the end of the relevant
fiscal quarter; and
(c) the SCS Group's consolidated budget; and
(d) any financial information delivered by the
Guarantor to its shareholders; and
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(e) on a non-consolidated basis and if reasonably
required by the Agent and the company
concerned is obliged by law or otherwise to
prepare accounts, the annual unaudited
accounts of each of the Shipowning Guarantors
within one hundred and eighty days of the end
of the financial year to which they relate;
(f) a statement of the aggregate amount due at
any time to the SCS Group at least once every
twelve months during the Facility Period; and
(g) a cash flow projection for the following five
years to be provided every six months during
the Facility Period; and
(h) a list and broad description of all contracts
with a value in excess of two million Dollars
($2,000,000) to be performed by any member of
the SCS Group, to be provided every six
months during the Facility Period, such
information to be in the form set forth in
Appendix C.
12.2.4 OTHER INFORMATION The Borrower will promptly supply
to the Agent copies of all financial and other
information from time to time given by the Guarantor
to its shareholders and such information and
explanations as the Agent may from time to time
reasonably require in connection with the operation
of the Vessels and the ROVs and the Borrower's and
the Guarantor's profit and liquidity, and will
procure that the Agent be given the like information
and explanations relating to all other Security
Parties.
12.2.5 EVIDENCE OF CURRENT COFR Without limiting the
Borrower's obligations under Clause 12.2.4, the
Borrower will from time to time on the request of the
Agent provide the Agent with such evidence as the
Agent may reasonably require that each Vessel
operating in the waters of the United States of
America has a valid and current
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Certificate of Financial Responsibility pursuant to
the United States Oil Pollution Act 1990.
12.2.6 ISM CODE COMPLIANCE In respect of each Vessel at any
time subject to the ISM Code the Borrower will:-
(a) procure that the Vessel remains for the
duration of the Facility Period subject to a
SMS;
(b) maintain a valid and current SMC for the
Vessel throughout the Facility Period;
(c) if it is not itself the Company, procure that
the Company maintains a valid and current DOC
throughout the Facility Period;
(d) promptly report to the Agent in writing of
any actual or threatened withdrawal,
suspension, cancellation or modification of
the Vessel's SMC or of the Company's DOC;
(e) promptly report to the Agent in writing (i)
any accident involving a Vessel which may
result in that Vessel's insurers making
payment directly to the Agent in accordance
with the relevant Security Documents or (ii)
any "MAJOR NON-CONFORMITY", as that term is
defined in the Guidelines on the
Implementation of the International Safety
Management Code by Administrations adopted by
the Assembly of the International Maritime
Organisation pursuant to Resolution
A.788(19), and of the steps being taken to
remedy the situation; and
(f) not without the prior written consent of the
Agent (which will not be unreasonably
withheld) change the identity of the Company.
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12.2.7 GUARANTOR'S PUBLIC LISTING Each of the Borrower and
the Guarantor shall ensure that throughout the
Facility Period the Guarantor shall remain a public
listed company unless it is owned by significant and
recognised corporate bodies approved by the Banks
with a corporate rating of at least BBB as defined by
Standard & Poor's or similar rating from a rating
agency acceptable to the Banks.
12.2.8 INSURANCES The Borrower shall ensure that each of the
Vessels and the ROVs is fully insured upon the terms
and conditions set forth in the Mortgages, Deed of
Covenant or the relevant General Security Agreement
(as the case may be). In addition, each of the
Borrower and the Guarantor shall ensure that its
property and assets are insured against such risks
and in such amounts as are customary for companies
engaged in similar businesses.
12.2.9 CLASSIFICATION The Borrower shall ensure that each
Vessel (other than a Non-Classified Vessel) is
classed and maintained with the highest applicable
class necessary to properly operate such Vessel of
Lloyds Register of Shipping, Det norske Veritas, the
American Bureau of Shipping or such other
classification society acceptable to the Agent and
that such classification is not changed or impaired
in any way during the Facility Period.
12.2.10 CERTIFICATE OF COMPLIANCE The Borrower and the
Guarantor shall deliver to the Agent a duly executed
Certificate of Compliance ninety (90) days after the
end of each fiscal quarter occurring during the
Facility Period.
12.2.11 INSPECTION OF RECORDS The Borrower and the Guarantor
will each permit the inspection of its financial
records and accounts from time to time during
business hours by the Agent or its nominee.
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12.2.12 MILLENNIUM COMPLIANCE Each of the Borrower and the
Guarantor will:-
(a) use all reasonable endeavours to ensure that
the performance and functionality of its
Systems and each Vessel's and ROV's Systems
are, by no later than 30 November 1999, and
remain Millennium Compliant;
(b) notify the Agent immediately if at any time
either the Borrower or the Guarantor knows or
reasonably suspects that the performance or
functionality of any of its Systems or any of
Vessels' or ROV's Systems is, or will not be,
Millennium Compliant, in a manner which will
materially adversely affect the SCS Group as
a whole.
12.2.13 NOTIFICATION OF EVENT OF DEFAULT Each of the Borrower
and the Guarantor will immediately notify the Agent
in writing of the occurrence of any Event of Default
or Potential Event of Default or any event which will
materially adversely affect the Borrower's or the
Guarantor's ability to perform its obligations under
this Agreement or the ability of any of the other
Security Parties or any Principal Subsidiary to
perform any of their obligations under any of the
Security Documents to which they are a party or may
become a party to.
12.2.14 ADDITIONAL FILINGS/NOTIFICATION Each of the Borrower
and the Guarantor shall ensure that (i) any and all
additional filings referred to in the proviso to
Clause 4.5 will be made and/or effected promptly and
within any applicable time limits imposed by law and
(ii) the Agent is immediately notified if any of the
Security Parties (a) has an established place of
business in the United Kingdom or the United States
of America at any time during the Facility Period or
(b) changes the place of US Chief Executive office or
principal place of business in the United States of
America.
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12.2.15 PARI PASSU Each of the Borrower and the Guarantor
shall ensure that their respective obligations under
this Agreement shall at all times rank at least pari
passu with all of their other present and future
unsecured and unsubordinated indebtedness with the
exception of any obligations which are mandatorily
preferred by any applicable laws to companies
generally and not by contract.
12.2.16 CORPORATE EXISTENCE Save as permitted by Clause
12.1.4, each of the Borrower and the Guarantor shall
ensure that throughout the Facility Period each of
the Security Parties shall (i) remain duly formed and
validly existing under the laws of its respective
jurisdiction of incorporation (ii) remain authorised
to do business in the jurisdiction in which it
transacts its business (iii) continue to have the
power to carry on its business as it is now being
conducted and to enter into and perform its
obligations under the Security Documents to which it
is a party and (iv) continue to comply with all
statutory, regulatory and other requirements relative
to its business which could reasonably be expected to
have a material adverse effect on its business,
assets or operations, financial or otherwise.
12.2.17 ADMISSIBILITY IN EVIDENCE Each of the Borrowers and
the Guarantor shall on the request of the Agent
obtain all necessary authorisations, consents,
approvals, licences, exemptions, filings,
registrations, recordings and notarisations required
or advisable in connection with the admissibility in
evidence of the Security Documents or any of them in
Proceedings in England or any other jurisdiction in
which Proceedings have been commenced.
12.2.18 US COAST GUARD CERTIFICATES The Borrower shall ensure
that each US Coast Guard Inspected Vessel has a valid
and current certificate of inspection issued by the
U.S. Coast Guard, throughout the Facility Period.
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12.2.19 FINANCE COMPANY STATUS The Borrower will ensure that
throughout the Facility Period the Borrower will
comply with the regulations of the Netherlands
Ministry of Finance dated 4 February 1993 with
respect to finance companies to ensure that the
Borrower remains a finance company in accordance with
these regulations. The Borrower will also ensure that
throughout the Facility Period all notice
requirements to the Dutch Central Bank pursuant to
the Foreign Financial Relations Act ("Wet Financiele
Betrekkingen Buitenland") 1994, are complied with.
12.3 GUARANTOR'S FINANCIAL COVENANTS
12.3.1 Throughout the Facility Period the Guarantor shall:-
(a) maintain a Consolidated Tangible Net Worth of
not less than $250,000,000 PLUS 50% of
consolidated net income (to the extent
positive) for each fiscal year from and after
30 November 1999;
(b) maintain a Consolidated Debt to Consolidated
Tangible Net worth ratio of a maximum of
1.25:1 as calculated at the end of each
fiscal quarter ending 31 August and a maximum
of 1.0:1 as calculated quarterly at the end
of each fiscal quarter ending on the last day
of February, May and November;
(c) on a rolling four fiscal quarter basis,
maintain a D/EBITDA ratio of a maximum of
3.5:1 during the first three (3) years of the
Facility Period, reducing to a maximum of
3.25:1 on the third anniversary of the
Execution Date and a maximum of 3.0:1 on the
fourth anniversary of the Execution Date; and
(d) ensure that any inter-company debt due from
SNSA or any of its Subsidiaries (not
including the SCS Group) to the SCS Group
does not at any one time exceed thirty
million Dollars
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($30,000,000) in aggregate or
its equivalent amount in another currency.
12.3.2 Immediately on any Inter-Company Indebtedness coming
into effect the Guarantor shall duly authorise,
execute and deliver to the Agent an Inter-Company
Indebtedness Assignment.
12.3.3 The Guarantor shall apply at least up to fifty per
cent (50%) of the net proceeds of any Guarantor's
Capital Markets Issue towards prepayment of the
Facility Outstandings where required in accordance
with Clause 2.4.3.
13 EARNINGS
13.1 REMITTANCE OF EARNINGS Immediately upon the occurrence of an
Event of Default, the Borrower shall procure that all Earnings
are paid to such account(s) as the Agent shall from time to
time specify by notice in writing to the Borrower.
14 EVENTS OF DEFAULT
14.1 THE AGENT'S RIGHTS If any of the events set out in Clause 14.2
occurs, and such event remains unremedied for fourteen (14)
days after notice thereof has been given by the Agent to the
Borrower (except in relation to any of the events described in
Clauses 14.2.1, 14.2.2, 14.2.4, 14.2.6 and 14.2.18 where such
remedy period shall not apply) the Agent may at its discretion
by notice to the Borrower declare the Banks to be under no
further obligation to the Borrower under or pursuant to this
Agreement and may declare all or any part of the Indebtedness
(including such unpaid interest as shall have accrued) to be
immediately payable, whereupon the Indebtedness (or the part
of the Indebtedness referred to in the Agent's notice) shall
immediately become due and payable without any further demand
or notice of any kind.
14.2 EVENTS OF DEFAULT The events referred to in Clause 14.1 are:-
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14.2.1 PAYMENT DEFAULT if the Borrower defaults in the
payment of any part of the Indebtedness when due; or
14.2.2 OTHER DEFAULT if any of the Security Parties fails to
observe or perform any of the covenants, conditions,
undertakings, agreements or obligations on its part
contained in any of the Security Documents or shall
in any other way be in breach of or do or cause to be
done any act repudiating or evidencing an intention
to repudiate any of the Security Documents and such
default (if in the reasonable opinion of the
Instructing Group capable of remedy) is not remedied
within fourteen (14) days after notice of the default
has been given to the Borrower; or
14.2.3 MISREPRESENTATION OR BREACH OF WARRANTY if any
representation, warranty or statement made, deemed to
be made, or repeated under any of the Security
Documents or in any accounts, certificate, notice
instrument, written statement or opinion delivered by
a Security Party under or in connection with any
Security Document is incorrect in any material
respect when made, deemed to be made or repeated; or
14.2.4 EXECUTION if a distress or execution or other process
of a court or authority is levied on any of the
property of any of the Security Parties or any of the
Principal Subsidiaries before or after final judgment
or by order of any competent court or authority for
an amount in excess of ten million Dollars
($10,000,000) or, its equivalent in any other
currency and is not satisfied or stayed (with a view
to being contested in good faith) within fourteen
days of levy; or
14.2.5 INSOLVENCY EVENTS if any of the Security Parties or
any of the Principal Subsidiaries:-
(a) resolves to appoint, or applies for, or
consents to the appointment of, a receiver,
administrative receiver, trustee,
administrator or liquidator of itself or of
all or part of its assets
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other than for the purposes of a merger or
amalgamation pursuant to Clause 12.1.4; or
(b) is unable or admits its inability to pay its
debts as they fall due; or
(c) makes a general assignment for the benefit of
creditors; or
(d) ceases trading or threatens to cease trading;
or
(e) has appointed an Inspector under the
Companies Act 1985 or any statutory provision
which the Agent in its discretion considers
analogous thereto; or
14.2.6 INSOLVENCY PROCEEDINGS if any proceedings are
commenced or threatened, or any order or judgment is
given by any court, for the bankruptcy, liquidation,
winding up, administration or re-organisation of any
of the Security Parties or any of the Principal
Subsidiaries or for the appointment of a receiver,
administrative receiver, administrator, liquidator or
trustee of any of the Security Parties or any of the
Principal Subsidiaries or of all or part of the
assets of any of the Security Parties or any of the
Principal Subsidiaries, or if any person appoints or
purports to appoint such receiver, administrative
receiver, administrator, liquidator or trustee which
proceeding is not discharged within thirty (30) days
of its commencement; or
14.2.7 IMPOSSIBILITY OR ILLEGALITY unless covered by Clause
17.7, if any event occurs which would, or would with
the passage of time, render performance of any of the
Security Documents impossible, unlawful or
unenforceable by the Banks or the Agent; or
14.2.8 CONDITIONS SUBSEQUENT if any of the conditions set
out in Clause 3.2 is not satisfied within the time
reasonably required by the Agent with respect to the
conditions referred to at Clauses 3.2.1-3.2.5
inclusive
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and within twelve (12) months with respect
to the condition referred to at Clause 3.2.6 except
where such condition has not been satisfied due to an
act or omission on the part of a Finance Party; or
14.2.9 REVOCATION OR MODIFICATION OF CONSENTS ETC. if any
consent, licence, approval or authorisation which is
now or which at any time during the Facility Period
becomes necessary to enable any of the Security
Parties to comply with any of their obligations in or
pursuant to any of the Security Documents is revoked,
withdrawn or withheld, or modified in a manner which
the Agent reasonably considers is, or may be,
prejudicial to the interests of the Banks in a
material manner, or any material consent, licence,
approval or authorisation ceases to remain in full
force and effect; or
14.2.10 CURTAILMENT OF BUSINESS if the business of any of the
Security Parties is wholly or partially curtailed by
any intervention by or under authority of any
government, or if all or a substantial part of the
undertaking, property or assets of any of the
Security Parties is seized, nationalised,
expropriated or compulsorily acquired by or under
authority of any government or any Security Party
disposes or threatens to dispose of a substantial
part of its business or assets; or
14.2.11 LOSS OF VESSEL if any Vessel, or any such other
vessel which may from time to time be mortgaged to
the Banks (or to the Agent on their behalf) as
security for the repayment of all or any part of the
Indebtedness is destroyed, abandoned, confiscated,
forfeited, condemned as prize or becomes a Total
Loss, except that a Total Loss shall not be an Event
of Default if:-
(a) such Vessel or such other vessel (as the case
may be) is insured in accordance with the
Security Documents; and
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(b) no insurer has refused to meet or has
disputed the claim for Total Loss and it is
not apparent to the Agent in its discretion
that any such refusal or dispute is likely to
occur; and
(c) payment of all insurance proceeds in respect
of the Total Loss (as required by Clause
6.6.) is made in full to the Agent on behalf
of the Banks in accordance with Clause 6.6;
or
14.2.12 ACCELERATION OF OTHER INDEBTEDNESS if any other
indebtedness or obligation for borrowed money of any
of the Security Parties or any Principal Subsidiary
becomes due or capable of being declared due prior to
its stated maturity by reason of default on the part
of that Security Party or Principal Subsidiary (as
the case may be), or is not repaid or satisfied at
maturity save for amounts of less than two million
five hundred thousand Dollars ($2,500,000), or its
equivalent in any other currency, and claims
contested in good faith; or
14.2.13 REDUCTION OF CAPITAL if any of the Security Parties
except the Guarantor reduces its authorised or issued
or subscribed capital except reductions effected in
compliance with Clause 12.1.4; or
14.2.14 CHALLENGE TO REGISTRATION if the registration of any
Vessel or any ROV or any Mortgage or any General
Security Assignment becomes void or voidable or
liable to cancellation or termination; or
14.2.15 WAR if the country of registration of any Vessel or
ROV becomes involved in war (whether or not declared)
or civil war or is occupied by any other power and
the Agent reasonably considers that, as a result, the
security conferred by the Security Documents is
materially prejudiced; or
14.2.16 NOTICE OF TERMINATION if the Guarantor or any
Shipowning Guarantor gives notice to the Agent to
determine its obligations under the Guarantee or the
Shipowner's Guarantee, as appropriate; or
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14.2.17 CLAIM AGAINST THE GUARANTOR'S ASSETS except for
Permitted Liens, if a maritime or other lien, arrest
distress or similar charge is levied upon or against
any Vessel or any substantial part of the assets of
the Guarantor (on a consolidated basis) and such is
not discharged within fourteen (14) Business Days
after any Security Party or Principal Subsidiary (as
the case may be) has become aware of the same; or
14.2.18 GUARANTOR'S BUSINESS if all or a substantial part of
the Guarantor's business is destroyed, abandoned,
seized, appropriated or forfeited for any reason; or
14.2.19 OWNERSHIP if the Borrower ceases to be 100% directly
owned by Stolt Comex Seaway A/S and/or indirectly
owned by the Guarantor; or
14.2.20 FINAL JUDGEMENTS if any of the Security Parties fails
to comply with any non appealable court order or
fails to pay a final unappealable judgement against
it in excess of ten million Dollars ($10,000,000).
15 SET-OFF AND LIEN
15.1 SET-OFF Each of the Borrower and the Guarantor irrevocably
authorises the Finance Parties at any time after all or any
part of the Indebtedness shall have become due and payable to
set off without notice any liability of the Borrower or the
Guarantor (as the case may be) to any of the Finance Parties
(whether present or future, actual or contingent, and
irrespective of the branch or office, currency or place of
payment) against any credit balance from time to time standing
on any account of the Borrower or the Guarantor (as the case
may be) (whether current or otherwise and whether or not
subject to notice) with any branch of any of the Finance
Parties in or towards satisfaction of the Indebtedness and, in
the name of that Finance Party, the Borrower or the Guarantor
(as the case may be), to do all acts (including, without
limitation, converting or exchanging any currency) and execute
all documents which may be required to effect such
application.
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15.2 LIEN If an Event of Default has occurred and is continuing,
each Finance Party shall have a lien on and be entitled to
retain and realise as additional security for the repayment of
the Indebtedness any cheques, drafts, bills, notes or
negotiable or non-negotiable instruments and any stocks,
shares or marketable or other securities and property of any
kind of the Borrower or the Guarantor (or of that Finance
Party as agent or nominee of the Borrower or the Guarantor)
from time to time held by that Finance Party, whether for safe
custody or otherwise.
15.3 RESTRICTIONS ON WITHDRAWAL Despite any term to the contrary in
relation to any deposit or credit balance at any time on any
account of the Borrower or the Guarantor (as the case may be)
with any of the Finance Parties, no such deposit or balance
shall be repayable or capable of being assigned, mortgaged,
charged or otherwise disposed of or dealt with by the Borrower
or the Guarantor (as the case may be) after an Event of
Default has occurred and while such Event of Default is
continuing, but any Finance Party may from time to time permit
the withdrawal of all or any part of any such deposit or
balance without affecting the continued application of this
Clause.
15.4 APPLICATION Whilst an Event of Default is continuing, each of
the Borrower and the Guarantor irrevocably authorises the
Agent to apply all sums which the Agent may receive:-
15.4.1 pursuant to a sale or other disposition of a Vessel
or any right, title or interest in a Vessel; or
15.4.2 by way of payment to the Agent of any sum in respect
of the Insurances, Earnings or Requisition
Compensation of a Vessel or ROV (as the case may be);
or
15.4.3 otherwise arising under or in connection with any of
the Security Documents
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in or towards satisfaction, or by way of retention on
account, of the Indebtedness, in such manner as the
Agent may in its discretion determine.
16 ASSIGNMENT AND SUB-PARTICIPATION
16.1 RIGHT TO ASSIGN Each of the Banks may assign or transfer all
or any of its rights under or pursuant to the Security
Documents to any other branch of that Bank or to any other
bank or financial institution, and may grant
sub-participations in all or any part of its Commitment
provided that the Borrower and the Agent consent to such
assignment or transfer (such consent not to be unreasonably
withheld or delayed) and such assignment or transfer does not
result in the Borrower being subject to any additional Tax or
other financial or legal obligations other than those
contemplated by the terms of this Agreement.
16.2 BORROWER'S CO-OPERATION Each of the Borrower and the Guarantor
will co-operate fully with the Banks in connection with any
assignment, transfer or sub-participation pursuant to Clause
16.1; will execute and procure the execution of such documents
as the Banks may require in connection therewith; and
irrevocably authorises each of the Finance Parties to disclose
to any proposed assignee, transferee or sub-participant
(whether before or after any assignment, transfer or
sub-participation and whether or not any assignment, transfer
or sub-participation shall take place) all information
relating to the Security Parties, the Facility or the Security
Documents which the each such Finance Party may in its
discretion consider necessary or desirable.
16.3 RIGHTS OF ASSIGNEE Any assignee, transferee or sub-participant
of a Bank shall (unless limited by the express terms of the
assignment, transfer or sub-participation) take the full
benefit of every provision of the Security Documents
benefitting that Bank.
16.4 TRANSFER CERTIFICATES If any Bank wishes to transfer all or
any of its Commitment as contemplated in Clause 16.1 then such
transfer may be effected by the delivery to the Agent of a
duly completed and duly executed Transfer Certificate in which
event, on the later of the Transfer Date specified in such
Transfer Certificate and
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the fifth Business Day after the date
of delivery of such Transfer Certificate to the Agent:
16.4.1 to the extent that in such Transfer Certificate the
Bank which is a party thereto seeks to transfer its
Commitment, the Borrower and such Bank shall be
released from further obligations towards each other
under this Agreement and their respective rights
against each other shall be cancelled (such rights,
benefits and obligations being referred to in this
Clause 16.4 as "DISCHARGED RIGHTS AND OBLIGATIONS");
16.4.2 the Borrower and the Transferee which is a party
thereto shall assume obligations towards one another
and/or acquire rights against one another which
differ from such discharged rights and obligations
only insofar as the Borrower and such Transferee have
assumed and/or acquired the same in place of the
Borrower and such Bank; and
16.4.3 the Agent, the Arrangers, the Syndication Agent, the
Transferee and the other Banks shall acquire the same
rights and benefits and assume the same obligations
between themselves as they would have acquired and
assumed had such Transferee been an original party to
this Agreement as a Bank with the rights, benefits
and/or obligations acquired or assumed by it as a
result of such transfer.
16.5 POWER OF ATTORNEY In order to give effect to each Transfer
Certificate the Finance Parties and the Borrower each hereby
irrevocably and unconditionally appoint the Agent as its true
and lawful attorney with full power to execute on their
respective behalves each Transfer Certificate delivered to the
Agent pursuant to Clause 16.4 without the Agent being under
any obligation to take any further instructions from or give
any prior notice to, any of the Finance Parties or, subject to
the Borrower's rights under Clause 16.1, the Borrower before
doing so and the Agent shall so execute each such Transfer
Certificate on behalf of the other Finance Parties and the
Borrower immediately on its receipt of the same pursuant to
Clause 16.4.
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16.6 NOTIFICATION The Agent shall promptly notify the other Finance
Parties, the Transferee and the Borrower on the execution by
it of any Transfer Certificate together with details of the
amount transferred, the Transfer Date and the parties to such
transfer.
17 PAYMENTS, MANDATORY PREPAYMENT, RESERVE REQUIREMENTS AND ILLEGALITY
17.1 PAYMENTS All amounts payable by the Borrower and the Guarantor
under or pursuant to any of the Security Documents shall be
paid to such accounts at such banks as the Agent may from time
to time direct to the Borrower or the Guarantor (as the case
may be), and (unless payable in any other Currency of Account)
shall be paid in Dollars in same day funds (or such funds as
are required by the authorities in the United States of
America for settlement of international payments for immediate
value). Payments shall be deemed to have been received by the
Agent on the date on which the Agent receives authenticated
advice of receipt, unless that advice is received by the Agent
on a day other than a Business Day or at a time of day
(whether on a Business Day or not) when the Agent in its
discretion considers that it is impossible or impracticable
for the Agent to utilise the amount received for value that
same day, in which event the payment in question shall be
deemed to have been received by the Agent on the Business Day
next following the date of receipt of advice by the Agent.
17.2 NO DEDUCTIONS OR WITHHOLDINGS All payments (whether of
principal or interest or otherwise) to be made by the Borrower
and/or the Guarantor pursuant to the Security Documents shall,
subject only to Clause 17.3, be made free and clear of and
without deduction for or on account of any Taxes or other
deductions, withholdings, restrictions, conditions or
counterclaims of any nature, and neither the Borrower nor the
Guarantor will claim any equity in respect of any payment due
from it to the Banks or to the Agent under or in relation to
any of the Security Documents.
17.3 GROSSING-UP If at any time any law requires (or is interpreted
to require) the Borrower or the Guarantor to make any
deduction or withholding from any payment, or to change the
rate or manner in which any required deduction or
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withholding is made, the Borrower or the Guarantor (as the
case may be) will promptly notify the Agent and,
simultaneously with making that payment, will pay to the Agent
whatever additional amount (after taking into account any
additional Taxes on, or deductions or withholdings from, or
restrictions or conditions on, that additional amount) is
necessary to ensure that, after making the deduction or
withholding, the Agent and the Banks receive a net sum equal
to the sum which they would have received had no deduction or
withholding been made.
17.4 EVIDENCE OF DEDUCTIONS If at any time either the Borrower or
the Guarantor is required by law to make any deduction or
withholding from any payment to be made by it pursuant to any
of the Security Documents, the Borrower or the Guarantor (as
the case may be) will pay the amount required to be deducted
or withheld to the relevant authority within the time allowed
under the applicable law and will, no later than thirty days
after making that payment, deliver to the Agent an original
receipt issued by the relevant authority, or other evidence
acceptable to the Agent, evidencing the payment to that
authority of all amounts required to be deducted or withheld.
If the Borrower makes any deduction or withholding from any
payment under or pursuant to any of the Security Documents,
and the Agent subsequently receives a refund or allowance from
any tax authority which the Agent identifies as being
referable to that deduction or withholding, the Agent shall,
as soon as reasonably practicable, pay to the Borrower an
amount equal to the amount of the refund or allowance
received, if and to the extent that it may do so without
prejudicing its right to retain that refund or allowance and
without putting itself in any worse financial position than
that in which it would have been had the deduction or
withholding not been required to have been made. Nothing in
this Clause shall be interpreted as imposing any obligation on
the Agent unless requested by the Borrower to apply for any
refund or allowance nor as restricting in any way the manner
in which the Agent organises its tax affairs, nor as imposing
on the Agent any obligation to disclose to the Borrower any
information regarding its tax affairs or tax computations. All
costs and expenses incurred by the Agent in obtaining or
seeking to obtain a refund or allowance from any tax authority
pursuant to this Clause shall for the Borrower's account.
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17.5 ADJUSTMENT OF DUE DATES If any payment to be made under any of
the Security Documents, other than a payment of interest on
the Facility, shall be due on a day which is not a Business
Day, that payment shall be made on the next succeeding
Business Day (unless the next succeeding Business Day falls in
the next calendar month in which event the payment shall be
made on the next preceding Business Day). Any such variation
of time shall be taken into account in computing any interest
in respect of that payment.
17.6 CHANGE IN LAW If, by reason of the introduction of any law, or
any change in any law, or the interpretation or administration
of any law, or in compliance with any request or requirement
from any central bank or any fiscal, monetary or other
authority:-
17.6.1 any Finance Party (or the holding company of any
Finance Party) shall be subject to any Tax with
respect to payments of all or any part of the
Indebtedness; or
17.6.2 the basis of Taxation of payments to any Finance
Party in respect of all or any part of the
Indebtedness shall be changed; or
17.6.3 any reserve requirements shall be imposed, modified
or deemed applicable against assets held by or
deposits in or for the account of or loans by any
branch of any Finance Party; or
17.6.4 any ratio (whether cash, capital adequacy, liquidity
or otherwise) which any Finance Party is required or
requested to maintain shall be affected; or
17.6.5 there is imposed on any Finance Party (or on the
holding company of any Finance Party) any other
condition in relation to the Indebtedness or the
Security Documents;
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and the result of any of the above shall be to increase the
cost to any Bank (or to the holding company of any Bank) of
that Bank making or maintaining its Commitment, or to cause
any Finance Party to suffer (in its opinion) a material
reduction in the rate of return on its overall capital below
the level which it reasonably anticipated at the date of this
Agreement and which it would have been able to achieve but for
its entering into this Agreement and/or performing its
obligations under this Agreement the Finance Party affected
shall notify the Agent and, on demand to the Borrower by the
Agent, the Borrower shall from time to time pay to the Agent
for the account of the Finance Party affected the amount which
shall compensate that Finance Party or the Agent (or the
relevant holding company) for such additional cost or reduced
return. A certificate signed by an authorised signatory of the
Agent or of the Finance Party affected setting out the amount
of that payment and the basis of its calculation shall be
submitted to the Borrower and shall be conclusive evidence of
such amount save for manifest error or on any question of law.
17.7 ILLEGALITY AND IMPRACTICALITY Notwithstanding anything
contained in the Security Documents, the obligations of a Bank
to advance or maintain the Facility shall terminate in the
event that a change in any law or in the interpretation of any
law by any authority charged with its administration shall
make it unlawful for that Bank to advance or maintain its
Commitment. In such event the Bank affected shall notify the
Agent and the Agent shall, by written notice to the Borrower,
declare the Banks' obligations to be immediately terminated.
If all or any part of the Facility shall have been advanced by
the Banks to the Borrower, the Indebtedness (including all
accrued interest) shall be prepaid within thirty days from the
date of such notice. Clause 6.3 shall apply to that prepayment
if it is made on a day other than the last day of an Interest
Period. During that period, the affected Bank shall negotiate
in good faith with the Borrower to find an alternative method
or lending base in order to maintain the Facility.
17.8 CHANGES IN MARKET CIRCUMSTANCES If at any time a Bank
determines (which determination shall be final and conclusive
and binding on the Borrower) that, by reason of changes
affecting the London Interbank market, adequate and fair
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means do not exist for ascertaining the rate of interest on
the Facility or any part thereof pursuant to this Agreement:-
17.8.1 that Bank shall give notice to the Agent and the
Agent shall give notice to the Borrower of the
occurrence of such event; and
17.8.2 the Agent shall as soon as reasonably practicable
certify to the Borrower in writing the effective cost
to that Bank of maintaining its Commitment for such
further period as shall be selected by that Bank and
the rate of interest payable by the Borrower for that
period; or, if that is not acceptable to the
Borrower,
17.8.3 the Agent in accordance with instructions from that
Bank and subject to that Bank's approval of any
agreement between the Agent and the Borrower, will
negotiate with the Borrower in good faith with a view
to modifying this Agreement to provide a substitute
basis for that Bank's Commitment which is financially
a substantial equivalent to the basis provided for in
this Agreement.
If, within thirty days of the giving of the notice referred to
in Clause 17.8.1, the Borrower and the Agent fail to agree in
writing on a substitute basis for such Bank's Commitment the
Borrower will immediately prepay in the relevant Permitted
Currency or Currencies the amount of such Bank's Commitment
and the Maximum Facility Amount will automatically decrease by
the amount of such Commitment and such decrease shall not be
reversed. Clause 6.3 shall apply to that prepayment if it is
made on a day other than the last day of an Interest Period.
17.9 NON-AVAILABILITY OF CURRENCY Subject to the procedure set
forth in Clause 5.3, if a Bank is for any reason unable to
obtain Dollars or any other Permitted Currency in the London
Interbank market and is, as a result, or as a result of any
other contingency affecting the London Interbank market,
unable to advance or maintain its Commitment in Dollars or in
any other Permitted Currency, that Bank shall give notice to
the Agent and the Agent shall give notice to the
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Borrower and that Bank's obligations to make the Facility
available shall immediately cease. In that event, if all or
any part of the Facility shall have been advanced by that Bank
to the Borrower, the Agent in accordance with instructions
from that Bank and subject to that Bank's approval of any
agreement between the Agent and the Borrower, will negotiate
with the Borrower in good faith with a view to establishing a
mutually acceptable basis for funding the Facility or relevant
part thereof from an alternative source and/or in an
alternative Permitted Currency. If the Agent and the Borrower
have failed to agree in writing on a basis for funding the
Facility or relevant part thereof from an alternative source
and/or in an alternative Permitted Currency by 11.00 a.m. on
the second Business Day prior to the end of the then current
relevant Interest Period, the Borrower will (without prejudice
to its other obligations under or pursuant to this Agreement,
including, without limitation, its obligation to pay interest
on the Facility, arising on the expiry of the then relevant
Interest Period) prepay the Indebtedness to the Agent on
behalf of that Bank on the expiry of the then current relevant
Interest Period.
18 COMMUNICATIONS
18.1 METHOD Except for Communications pursuant to Clause 11, which
shall be made or given in accordance with Clause 11.20, any
Communication may be given, delivered, made or served (as the
case may be) under or in relation to this Agreement by letter
or fax and shall be in the English language and sent
addressed:-
18.1.1 in the case of any of the Finance Parties to the
Agent at its address at the head of this Agreement
(fax no: +(212) 681-3900) marked for the attention
of: Shipping Department; and
18.1.2 in the case of the Borrower and/or the Guarantor to
the Communications Address;
or to such other address or fax number as the Finance Parties,
the Borrower or the Guarantor may designate for themselves by
written notice to the others.
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18.2 TIMING A Communication shall be deemed to have been duly
given, delivered, made or served to or on, and received by a
party to this Agreement:-
18.2.1 in the case of a fax when the sender receives one or
more transmission reports showing the whole of the
Communication to have been transmitted to the correct
fax number;
18.2.2 if delivered to an officer of the relevant party or
(in the case of the Borrower and/or the Guarantor)
left at the Communications Address at the time of
delivery or leaving; or
18.2.3 if posted, at 9.00 a.m. on the third Business Day
after posting by prepaid first class post.
Any Communication by fax shall be promptly confirmed in
writing by post or hand delivery.
19 GENERAL INDEMNITIES
19.1 CURRENCY In the event of any Finance Party receiving or
recovering any amount payable under any of the Security
Documents in a currency other than the Currency of Account,
and if the amount received or recovered is insufficient when
converted into the Currency of Account at the date of receipt
to satisfy in full the amount due, the Borrower and/or the
Guarantor (as the case may be) shall, on the Agent's written
demand, pay to the Agent such further amount in the Currency
of Account as is sufficient to satisfy in full the amount due
and that further amount shall be due to the Agent on behalf of
the Finance Parties as a separate debt under this Agreement.
19.2 COSTS AND EXPENSES Each of the Borrower and the Guarantor
will, within fourteen days of the Agent's written demand,
reimburse the Agent (on behalf of each of the Finance Parties)
for all reasonable out of pocket expenses including internal
and external legal costs (including Value Added Tax or any
similar or replacement tax if applicable) of and incidental
to:-
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19.2.1 the negotiation, syndication, preparation, execution
and registration of the Security Documents (whether
or not any of the Security Documents are actually
executed or registered and whether or not all or any
part of the Facility is advanced);
19.2.2 any amendments, addenda or supplements to any of the
Security Documents (whether or not completed);
19.2.3 any other documents which may at any time be required
by any Finance Party to give effect to any of the
Security Documents or which any Finance Party is
entitled to call for or obtain pursuant to any of the
Security Documents (including, without limitation,
all premiums and other sums from time to time payable
by the Agent in relation to the Mortgagees'
Insurances); and
19.2.4 the exercise of the rights, powers, discretions and
remedies of the Finance Parties under or pursuant to
the Security Documents.
19.3 EVENTS OF DEFAULT Each of the Borrower and the Guarantor shall
indemnify the Finance Parties from time to time on demand
against all losses and costs incurred or sustained by any
Finance Party as a consequence of any Event of Default,
including (without limitation) any Break Costs.
19.4 FUNDING COSTS Each of the Borrower and the Guarantor shall
indemnify the Finance Parties from time to time on demand
against all losses and costs incurred or sustained by any
Finance Party if, for any reason due to a default or other
action by the Borrower, any Drawing is not advanced to the
Borrower after the relevant Drawdown Notice has been given to
the Agent, or is advanced on a date other than that requested
in the Drawdown Notice, including (without limitation) any
Break Costs.
19.5 PROTECTION AND ENFORCEMENT Each of the Borrower and the
Guarantor shall indemnify the Finance Parties from time to
time on demand against all losses,
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costs and liabilities which any Finance Party may from time to
time sustain, incur or become liable for in or about the
protection, maintenance or enforcement of the rights conferred
on the Finance Parties by the Security Documents or in or
about the exercise or purported exercise by the Finance
Parties of any of the rights, powers, discretions or remedies
vested in them under or arising out of the Security Documents,
including (without limitation) any losses, costs and
liabilities which any Finance Party may from time to time
sustain, incur or become liable for by reason of any Finance
Party being mortgagees of any Vessel and/or a lender to the
Borrower, or by reason of any Finance Party being deemed by
any court or authority to be an operator or controller, or in
any way concerned in the operation or control, of any Vessel.
19.6 LIABILITIES OF FINANCE PARTIES Each of the Borrower and the
Guarantor will from time to time reimburse the Finance Parties
on demand for all sums which any Finance Party may pay on
account of any of the Security Parties or in connection with
any Vessel (whether alone or jointly or jointly and severally
with any other person) including (without limitation) all sums
which any Finance Party may pay or guarantees which any
Finance Party may give in respect of the Insurances, any
expenses incurred by any Finance Party in connection with the
maintenance or repair of any Vessel or in discharging any
lien, bond or other claim relating in any way to any Vessel,
and any sums which any Finance Party may pay or guarantees
which they may give to procure the release of any Vessel from
arrest or detention.
19.7 TAXES Each of the Borrower and the Guarantor shall pay all
Taxes to which all or any part of the Indebtedness or any of
the Security Documents may be at any time subject and shall
indemnify the Finance Parties on demand against all
liabilities, costs, claims and expenses resulting from any
omission to pay or delay in paying any such Taxes.
20 MISCELLANEOUS
20.1 WAIVERS No failure or delay on the part of the any Finance
Party in exercising any right, power, discretion or remedy
under or pursuant to any of the Security Documents, nor any
actual or alleged course of dealing between any Finance
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Party and any of the Security Parties, shall operate as a
waiver of, or acquiescence in, any default on the part of any
Security Party, unless expressly agreed to do so in writing by
the Agent, nor shall any single or partial exercise by any
Finance Party of any right, power, discretion or remedy
preclude any other or further exercise of that right, power,
discretion or remedy, or the exercise by a Finance Party of
any other right, power, discretion or remedy.
20.2 NO ORAL VARIATIONS No variation or amendment of any of the
Security Documents shall be valid unless in writing and signed
on behalf of the Finance Parties and the relevant Security
Party.
20.3 SEVERABILITY If at any time any provision of any of the
Security Documents is invalid, illegal or unenforceable in any
respect that provision shall be severed from the remainder and
the validity, legality and enforceability of the remaining
provisions shall not be affected or impaired in any way.
20.4 SUCCESSORS ETC. The Security Documents shall be binding on the
Security Parties and on their successors and permitted
transferees and assignees, and shall inure to the benefit of
the Finance Parties and their respective successors,
transferees and assignees. Neither the Borrower nor the
Guarantor may assign or transfer any of its rights under or
pursuant to any of the Security Documents without the prior
written consent of the Agent.
20.5 FURTHER ASSURANCE If any provision of the Security Documents
shall be invalid or unenforceable in whole or in part by
reason of any present or future law or any decision of any
court, or if the documents at any time held by the Finance
Parties on their behalf are considered by the Banks for any
reason insufficient to carry out the terms of this Agreement,
then from time to time the Borrower and/or the Guarantor (as
the case may be) will promptly, on demand by the Agent,
execute or procure the execution of such further documents as
in the reasonable opinion of the Banks are necessary to
provide adequate security for the repayment of the
Indebtedness.
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20.6 OTHER ARRANGEMENTS The Finance Parties may, without prejudice
to their rights under or pursuant to the Security Documents,
at any time and from time to time, on such terms and
conditions as they may in their discretion determine, and
without notice to either the Borrower or the Guarantor, grant
time or other indulgence to, or compound with, any other
person liable (actually or contingently) to the Finance
Parties or any of them in respect of all or any part of the
Indebtedness, and may release or renew negotiable instruments
and take and release securities and hold funds on realisation
or suspense account without affecting the liabilities of the
Borrower and/or the Guarantor (as the case may be) or the
rights of the Finance Parties under or pursuant to the
Security Documents.
20.7 ADVISERS The Borrowers and the Guarantor irrevocably authorise
the Agent, at any time and from time to time during the
Facility Period, to consult insurance advisers on any matters
relating to the Insurances, including, without limitation, the
collection of insurance claims, and from time to time to
consult or retain advisers or consultants to monitor or advise
on any other claims relating to the Vessels and/or ROVs. The
Borrower and the Guarantor will provide such advisers and
consultants with all information and documents which they may
from time to time reasonably require and will reimburse the
Agent on demand for all reasonable costs and expenses incurred
by the Agent in connection with the consultation or retention
of such advisers or consultants.
20.8 DELEGATION The Finance Parties may at any time and from time
to time delegate to any person any of their rights, powers,
discretions and remedies pursuant to the Security Documents,
other than rights relating to actions to be taken by an
Instructing Group or the Banks as a group on such terms as
they may consider appropriate (including the power to
sub-delegate).
20.9 RIGHTS ETC. CUMULATIVE Every right, power, discretion and
remedy conferred on the Finance Parties under or pursuant to
the Security Documents shall be cumulative and in addition to
every other right, power, discretion or remedy to which they
may at any time be entitled by law or in equity. The Finance
Parties may exercise each of their rights, powers, discretions
and remedies as often and
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in such order as they deem appropriate subject to obtaining
the prior written consent of an Instructing Group. The
exercise or the beginning of the exercise of any right, power,
discretion or remedy shall not be interpreted as a waiver of
the right to exercise any other right, power, discretion or
remedy either simultaneously or subsequently.
20.10 NO ENQUIRY The Finance Parties shall not be concerned to
enquire into the powers of the Security Parties or of any
person purporting to act on behalf of any of the Security
Parties, even if any of the Security Parties or any such
person shall have acted in excess of their powers or if their
actions shall have been irregular, defective or informal,
whether or not any Finance Parties had notice thereof.
20.11 CONTINUING SECURITY The security constituted by the Security
Documents shall be continuing and shall not be satisfied by
any intermediate payment or satisfaction until the
Indebtedness shall have been repaid in full and none of the
Finance Parties shall be under any further actual or
contingent liability to any third party in relation to the
Vessels and/or the ROVs, the Insurances, Earnings or
Requisition Compensation or any other matter referred to in
the Security Documents.
20.12 SECURITY CUMULATIVE The security constituted by the Security
Documents shall be in addition to any other security now or in
the future held by the Finance Parties or any of them for or
in respect of all or any part of the Indebtedness, and shall
not merge with or prejudice or be prejudiced by any such
security or any other contractual or legal rights of any of
the Finance Parties, nor affected by any irregularity, defect
or informality, or by any release, exchange or variation of
any such security. Section 93 of the Law of Property Act 1925
and all provisions which the Agent considers analogous thereto
under the law of any other relevant jurisdiction shall not
apply to the security constituted by the Security Documents.
20.13 RE-INSTATEMENT If any Finance Party takes any steps to
exercise any of its rights, powers, remedies or discretions
pursuant to the Security Documents and
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the result shall be adverse to the Finance Parties, the
Borrower, the Guarantor and the Finance Parties shall be
restored to their former positions as if no such steps had
been taken.
20.14 NO LIABILITY None of the Finance Parties, nor any agent or
employee of any Finance Party, nor any receiver and/or manager
appointed by the Agent, shall be liable for any losses which
may be incurred in or about the exercise of any of the rights,
powers, discretions or remedies of the Finance Parties under
or pursuant to the Security Documents nor liable as mortgagee
in possession for any loss on realisation or for any neglect
or default of any nature for which a mortgagee in possession
might otherwise be liable unless such Finance Party's action
constitutes gross negligence or wilful misconduct.
20.15 RESCISSION OF PAYMENTS ETC. Any discharge, release or
reassignment by any of the Finance Parties of any of the
security constituted by, or any of the obligations of any
Security Party contained in, any of the Security Documents
shall be (and be deemed always to have been) void if any act
(including, without limitation, any payment) as a result of
which such discharge, release or reassignment was given or
made is subsequently wholly or partially rescinded or avoided
by operation of any law, unless such Finance Party's action
constitutes gross negligence or wilful misconduct.
20.16 SUBSEQUENT ENCUMBRANCES If the Agent receives notice of any
subsequent Encumbrance affecting any Vessel, any ROV or all or
any part of the Insurances, Earnings or Requisition
Compensation or the Earnings Account, the Agent may open a new
account in its books for the Borrower. If the Agent does not
open a new account, then (unless the Agent gives written
notice to the contrary to the Borrower) as from the time of
receipt by the Agent of notice of such subsequent Encumbrance,
all payments made to the Agent shall be treated as having been
credited to a new account of the Borrower and not as having
been applied in reduction of the Indebtedness.
20.17 RELEASES If any Finance Party shall at any time in its
discretion release any party from all or any part of any of
the Security Documents or from any term,
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covenant, clause, condition or obligation contained in any of
the Security Documents, the liability of any other party to
the Security Documents shall not be varied or diminished.
20.18 CERTIFICATES Any certificate or statement signed by an
authorised signatory of the Agent purporting to show the
amount of the Indebtedness (or any part of the Indebtedness)
or any other amount referred to in any of the Security
Documents shall, save for manifest error or on any question of
law, be conclusive evidence as against the Borrower or the
Guarantor (as the case may be) of that amount.
20.19 SURVIVAL OF REPRESENTATIONS AND WARRANTIES The representations
and warranties on the part of each of the Borrower and the
Guarantor contained in this Agreement shall survive the
execution of this Agreement and the advance of the facility or
any part thereof.
20.20 COUNTERPARTS This Agreement may be executed in any number of
counterparts each of which shall be original but which shall
together constitute the same
21 LAW AND JURISDICTION
21.1 GOVERNING LAW This Agreement shall in all respects be governed
by and interpreted in accordance with English law.
21.2 JURISDICTION For the exclusive benefit of the Finance Parties,
the parties to this Agreement irrevocably agree that the
courts of England are to have jurisdiction to settle any
disputes which may arise out of or in connection with this
Agreement and that any Proceedings may be brought in those
courts. Each of the Borrower and the Guarantor irrevocably
waives any objection which it may now or in the future have to
the laying of the venue of any Proceedings in any court
referred to in this Clause, and any claim that those
Proceedings have been brought in an inconvenient or
inappropriate forum.
21.3 ALTERNATIVE JURISDICTIONS Nothing contained in this Clause
shall limit the right of the Finance Parties to commence any
Proceedings against either the Borrower or the Guarantor in
any other court of competent jurisdiction nor shall the
89
<PAGE>
commencement of any Proceedings against either the Borrower or
the Guarantor in one or more jurisdictions preclude the
commencement of any Proceedings in any other jurisdiction,
whether concurrently or not.
21.4 SERVICE OF PROCESS Without prejudice to the right of the
Finance Parties to use any other method of service permitted
by law, each of the Borrower and the Guarantor irrevocably
agrees that any writ, notice, judgment or other legal process
shall be sufficiently served on it if addressed to it and left
at or sent by post to the Address for Service, and in that
event shall be conclusively deemed to have been served at the
time of leaving or, if posted, at 9.00 a.m. on the third
Business Day after posting by prepaid first class registered
post.
IN WITNESS of which the parties to this Agreement have executed this Agreement
the day and year first before written.
90
<PAGE>
SCHEDULE 1
THE BANKS, THE COMMITMENTS AND THE PROPORTIONATE SHARES
<TABLE>
<CAPTION>
THE BANKS THE COMMITMENTS THE PROPORTIONATE SHARES
<S> <C> <C>
Den norske Bank ASA $20,000,000 13.3%
200 Park Avenue
New York
New York 10166-0396
Fax no: +(212) 681-3900
Attention: Barbara Gronquist
Bank of America National Trust $20,000,000 13.3%
And Savings Association
1850 Gateway Boulevard, 3rd floor
Concord, CA 94520
Fax no: +(925) 675-7531
Attention: Suzanne Sameron
(and for Communication purposes
copy to:-
3 Allen Center
333 Clay Street
Suite 4550
Houston
Texas, 77002
USA
Fax no: +(713) 651-4807
Attention: Claire Liu)
Midland Bank Plc $20,000,000 13.3%
27-32 Poultry
London EC2P 2BX
Fax no: +(44) 171-260-4381
Attention: Mr Mark Heptinstall
ASLK - CGER Bank nv/sa $15,000,000 10%
Frankrijkle 81-83
2000 Antwerp
Belgium
Fax no: +(32) 3 231 3895
Attention: Mr Jose Crombez
</TABLE>
91
<PAGE>
<TABLE>
<S> <C> <C>
The Chase Manhattan Bank $15,000,000 10%
125 London Wall
London, England
Fax No: +(44) 171-777-1598
Attention: Elizabeth J Nelson
CIBC, Inc $15,000,000 10%
2 Paces West
2727 Paces Ferry Road
Suite 1200
Atlanta, Georgia
USA 30339
Fax: +(770) 319-4950
Attention: Kathryn McGovern
(and for Communication purposes
copy to:- CIBC, Inc.
1600 Smith Street
Suite 3100
Houston, TX 77002
Fax: +(713) 650 7670
Attention: Mark Wolf)
Citibank N.A., London Branch $15,000,000 0%
336 Strand,
London WC3R 1HB
(and for Communication purposes
Citibank N.A.
2 Penns Way
Suite 200, New Castle
Delaware 19720, USA
Fax: +(302) 894 6144/6139
Attention: William Gross)
The First National Bank $15,000,000 10%
of Chicago
One First National Plaza
Mail Suite IL I-0362
Chicago, IL 60670
Fax: +(312) 732 3055
Attention: Kenneth J Fatur
ING (U.S.) Capital LLC $15,000,000 10%
55 East 52nd Street
New York, NY 10055
Fax: +(212) 309 8900
Attention: William Redmond
</TABLE>
92
<PAGE>
SCHEDULE 2
LEAD ARRANGERS
1 Den norske Bank ASA
200 Park Avenue
New York
New York 10166-0396
Fax no: +(212) 681-3900
Attention: Barbara Gronquist
2 NationsBanc Montgomery Securities LLC
901 Main Street
66th floor
Dallas
Texas 75206
USA
Fax no: (214) 508-2881
Attention: Stephanie Pendleton
3 Midland Bank Plc
27-32 Poultry
London EC2P 2BX
Fax no: +(44) 171-260-4381
Attention: Mr Mark Heptinstall
93
<PAGE>
SCHEDULE 3
THE SHIPOWNING GUARANTORS AND THE VESSELS
<TABLE>
<CAPTION>
NAME OF COUNTRY OF REGISTERED PRINCIPAL PLACE NAME OF FLAG OF
SHIPOWNING GUARANTOR INCORPORATION OFFICE OF BUSINESS VESSEL VESSEL
<S> <C> <C> <C> <C> <C>
American Marine Delaware, USA 1313 North Market (a) 900 Town & Country
Construction, Inc. Street, Wilmington Lane, Suite 400 No vessels
Delaware 19801 Houston, Texas
USA 77024, USA
(b) 1902 Diver Drive
New Iberia
Louisiana
70560, USA
Big Inch Marine Delaware, USA 1209 Orange Street Northwoods Industrial
Systems Inc Wilmington Park West, 12235 No vessels
Delaware 19801 FM 529, Houston
USA Texas 77041 -
2806, USA
S&H Diving LLC Louisiana, USA 804 St. John Street (a) 900 Town & Country American Defender Panama
Lafayette Lane, Suite 400
Lousiana 70501 Houston, Texas
USA 77024, USA
(b) 1902 Diver Drive
New Iberia
Louisiana
70560, USA
</TABLE>
94
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
(c) 137 A.J. Estay Road
Golden Meadows
Louisiana 70357
USA
S&H Diving LLC American Victory USA
S&H Diving LLC American Pioneer Panama
S&H Diving LLC American Recovery USA
S&H Diving LLC American Star USA
S&H Diving LLC
S&H Diving LLC American Triumph USA
S&H Diving LLC American Independence USA
S&H Diving LLC American Pride USA
S&H Diving LLC American Constitution Panama
S&H Diving LLC American Eagle Honduras
S&H Diving LLC Seaway Legend USA
SCS Holdings Limited England/Wales Aldwych House Bucksburn House No vessels
71-91 Aldwych Howes Road
London WC2B 4HN Bucksburn
Aberdeen AB21 9RQ
Scotland
SCS Holdings NV The Netherlands, De Ruyterkade 62 No vessels
Antilles Curacao
The Netherlands,
Antilles
</TABLE>
95
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SCS Shipping Corporatio Liberia 80 Broad Street (in so far as it may 1 Work Class ROV
Monrovia have a principal place
Liberia of business in the USA
this would be
900 Town & Country Lane
Suite 400, Houston
Texas 77024 USA)
SCS Shipping Limited Isle of Man 31/37 North Quay Bucksburn House 3 Work Class ROVs
Douglas Howes Road
Isle of Man Bucksburn
IM1 4LB Aberdeen AB21 9RQ
Scotland
Stolt Comex Seaway A/S Norway Stoltenberggt 1 Seaway Falcon Isle of Man
5527 Haugesund
Norway
Stolt Comex Seaway B.V. The Netherlands Abel Tasmanstraat No vessels
81, 3165
Albrandswaard AM
Rotterdam
The Netherlands
Stolt Comex Seaway Inc Louisiana, USA 804 St John Street 900 Town & Country 12 Work Class ROVs
Lafayette 70501 Lane, Suite 400 (and 1 Work Class
Louisiana, USA Houston, Texas ROV to be delivered)
77024, USA
(b) 1902 Diver Drive
New Iberia
</TABLE>
96
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Louisiana
70560, USA
(c) 137 A.J. Estay Road
Golden Meadows
Louisiana 70357
USA
1340 Polydras Street
Suite 1850
New Orleans
Louisiana 70112
Stolt Comex Seaway Delaware, USA 100 West Tenth Street 900 Town & Country No vessels
Holdings Inc Wilmington Lane, Suite 400
Delaware, USA Houston, Texas
77024, USA
Stolt Comex Seaway Scotland Bucksburn House 25 Work Class ROVs
Limited Howes Road
Bucksburn
Aberdeen AB21 9RQ
Stolt Comex Seaway Delaware, USA 1313 North Market (a) 900 Town & Country American Patriot
West Coast Inc. Street, Wilmington Lane, Suite 400
Delaware 19801 Houston, Texas
USA 77024, USA
(b) 741 East Arcturus
Avenue, Oxnard
California 93033
USA
</TABLE>
97
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Stoltenberg A/S Norway Stoltenberggt 1 No vessels
5527 Haugesund
Norway
</TABLE>
98
<PAGE>
SCHEDULE 4
STOLT COMEX SEAWAY S.A. AND SUBSIDIARIES
Certificate of Compliance
as of and for the period ended [ ]
figures in USD thousands
<TABLE>
<S> <C> <C> <C>
12.2.2. ADDITIONAL SECURITY
Valuation (of the Vessels)
Original Dollar Amount
--------------------------------------------------------
COLLATERAL COVERAGE RATIO
Covenant 120%
--------------------------------------------------------
12.3.1. (a) CONSOLIDATED TANGIBLE NET WORTH
Capital stock
Paid-in surplus
Retained earnings
Less: Treasury stock
Less: Intangible assets
-------------
Consolidated Tangible Net Worth -
At closing 250,000
50% of consolidated net income FY1999 (if>0)
50% of consolidated net income FY2000 (if>0)
50% of consolidated net income FY2001 (if>0)
50% of consolidated net income FY2002 (if>0)
50% of consolidated net income FY2003 (if>0)
Minimum Consolidated Tangible Net Worth 250,000
-------------------------------------------------------------------------------
CONSOLIDATED TANGIBLE NET WORTH -
Minimum Consolidated Tangible Net Worth 250,000
-------------------------------------------------------------------------------
12.3.1. (b) CONSOLIDATED DEBT TO CONSOLIDATED TANGIBLE NET WORTH
Notes payable
Current maturity of long-term debt & capital leases
Long-term debt
Long-term capital lease obligations
Guarantees of non-consolidated entity debt and capital lease
Subordinated debt
Less: restricted cash
-------------
-------------------------------------------------------------------------------
CONSOLIDATED DEBT -
CONSOLIDATED TANGIBLE NET WORTH -
CONSOLIDATED DEBT TO CONSOLIDATED TANGIBLE NET WORTH
-------------------------------------------------------------------------------
At the end of each fiscal quarter ending the last day of
August Maximum 1.25:1
November Maximum 1.00:1
February Maximum 1.00:1
May Maximum 1.00:1
12.3.1. (c) CONSOLIDATED DEBT/EBITDA (ROLLING FOUR FISCAL QUARTER BASIS, ADJUSTED FOR ACQUISITIONS)
Consolidated Debt
EBITDA
-------------------------------------------------------------------------------
Net Income -
Interest -
Tax -
Depreciation & amortization -
-------------------------------------------------------------------------------
EBITDA - - - - -
-------------------------------------------------------------------------------
CONSOLIDATED DEBT: EBITDA
Maximum Consolidated Debt: EBITDA, first three years of Facility Period: 3.50
Maximum Consolidated Debt: EBITDA, starting on the third anniversary of Execution Date: 3.25
Maximum Consolidated Debt: EBITDA, starting on the fourth anniversary of Execution Date: 3.00
-------------------------------------------------------------------------------
12.3.1. (d) INTER-COMPANY INDEBTEDNESS
</TABLE>
99
<PAGE>
---------------------------------------------------------------
Inter-Company Indebtedness
Maximum Inter-Company indebtedness 30,000
---------------------------------------------------------------
1.1.58. MARGIN
<TABLE>
<S> <C> <C> <C>
(a) for the first three (3) years of the Facility Period: (b) for the fourth year of the Facility Period until the end
of the Facility Period:
</TABLE>
<TABLE>
<S> <C> <C> <C>
CONSOLIDATED DEBT: EBITDA MARGIN CONSOLIDATED DEBT: EBITDA MARGIN
------------------------- ------ ------------------------- ------
3 or greater 1.25% 3 or greater 1.40%
2 or greater, but less than 3 1.10% 2 or greater, but less than 3 1.25%
1 or greater, but less than 2 0.95% 1 or greater, but less than 2 1.10%
Less than 1 0.85% Less than 1 1.00%
</TABLE>
----------------------------------------------------------------
Current consolidated Debt/EBITDA ratio is:
Accordingly, the Margin for the period to is:
----------------------------------------------------------------
I hereby certify that, as of the latest Margin Review Date, to the best of my
knowledge, no Event of Default (as defined in the Multi-Currency Revolving Loan
Facility Agreement referred to below) has occurred and all Representations and
Warranties of the Borrower and Guarantor set forth in the Multi-Currency
Revolving Loan Facility Agreement between Adviesburo Energietechniek van de Pol
B.V. (also referred to as and trading under the name of Stolt Comex Seaway
Finance), Stolt Comex Seaway S.A., Den norske Bank ASA and others signed, [ ]
March 1999 are true and correct.
STOLT COMEX SEAWAY M.S. LIMITED as agent for STOLT COMEX SEAWAY S.A.
By:
-------------------------------------
Title: Director/Chief Financial Officer
Date:
-------------------------------------
100
<PAGE>
SCHEDULE 5
FORM OF TRANSFER CERTIFICATE
To: Den norske Bank ASA as agent (the "Agent")
TRANSFER CERTIFICATE
This transfer certificate relates to a loan facility agreement (as the same
may be from time to time amended, varied, novated or supplemented, the
"FACILITY AGREEMENT") dated 1999 whereby a revolving credit
facility of up to $150,000,000 was made available to Adviesburo
Energietechniek Van de Pol B.V. (also referred to as and trading under the
name Stolt Comex Seaway Finance) as borrower by a group of banks on whose
behalf the Agent acts as agent and security trustee.
1 Terms defined in the Facility Agreement shall, subject to any contrary
indication, have the same meanings herein. The terms "Bank" and
"Transferee" are defined in the schedule to this transfer certificate .
2 The Bank (i) confirms that the details in the Schedule hereto under the
heading "BANK'S COMMITMENT" accurately summarises its Commitment in the
Facility Agreement and (ii) requests the Transferee to accept and
procure the transfer to the Transferee of the portion of such
Commitment specified in the Schedule hereto by counter-signing and
delivering the Transfer Certificate to the Agent at its address for the
service of Communications specified in the Facility Agreement.
3 The Transferee requests the Agent to accept this Transfer Certificate
as being delivered to the Agent pursuant to and for the purposes of
clause 16.4 of the Facility Agreement so as to take effect in
accordance with the terms thereof on the Transfer Date or on such later
date as may be determined in accordance with the terms thereof.
4 The Transferee confirms that it has received a copy of the Facility
Agreement together with such other information as it has required in
connection with this transaction and that it has not relied and will
not in the future rely on the Bank or any other party to the Facility
Agreement to check or enquire on its behalf into the legality,
validity, effectiveness, adequacy, accuracy or completeness of any such
information and further agrees that it has not relied and will not rely
on the Bank or any other party to the Facility Agreement to access or
keep under review on its behalf the financial condition,
creditworthiness, condition, affairs, status or nature of the Borrower
or any other party to the Facility Agreement.
5 Execution of this Transfer Certificate by the Transferee constitutes
its representation to the Transferor and all other parties to the
Facility Agreement that it has power to become a party to the Facility
Agreement as a Bank on the terms herein and therein set out and has
taken all steps to authorise execution and delivery of this Transfer
Certificate.
101
<PAGE>
6 The Transferee undertakes with the Bank and each of the other parties
to the Facility Agreement that it will perform in accordance with their
terms all those obligations which by the terms of the Facility
Agreement will be assumed by it after delivery of this Transfer
Certificate to the Agent and satisfaction of the conditions (if any)
subject to which the Transfer Certificate is expressed to take effect.
7 The Bank makes no representation or warranty and assumes no
responsibility with respect to the legality, validity, effectiveness,
adequacy or enforceability of the Facility Agreement or any document
relating thereto and assumes no responsibility for the financial
condition of the Borrower or for the performance and observance by the
Borrower of any of its obligations under the Facility Agreement or any
document relating thereto and any and all such conditions and
warranties, whether express or implied by law or otherwise, are hereby
excluded.
8 The Bank gives notice that nothing in this transfer certificate or in
the Facility Agreement (or any document relating thereto) shall oblige
the Bank to (i) accept a re-transfer from the Transferee of the whole
or any part of its rights, benefits and/or obligations under the
Facility Agreement transferred pursuant hereto or (ii) support any
losses directly or indirectly sustained or incurred by the Transferee
for any reason whatsoever including, without limitation, the
non-performance by the Borrower or any other party to the Facility
Agreement (or any document relating thereto) of its obligations under
any such document. The Transferee acknowledges the absence of any such
obligation as is referred to in (i) or (ii) above.
9 This Transfer Certificate and the rights and obligations of the parties
hereunder shall be governed by and interpreted in accordance with
English law.
THE SCHEDULE
1 Bank:
2 Transferee:
3 Transfer Date:
4 Commitment(1): Portion Transferred
[Transferor Bank] [Transferee Bank]
By: By:
Date: Date:
Den norske Bank ASA
- ---------------------------------
(1) Details of the Bank's Commitment should not be completed after the
Termination Date.
102
<PAGE>
As agent for and on behalf of itself
The Borrower and the other Finance Parties in the presence of:-
By:
--------------------------------
Date: [ ]
103
<PAGE>
SIGNED by )
duly authorised for and on behalf )
of ADVIESBURO ENERGIETECHNIEK )
VAN DE POL B.V. )
(also referred to as and trading under )
the name Stolt Comex Seaway Finance) )
in the presence of:- )
SIGNED by )
duly authorised for and on behalf )
of STOLT COMEX SEAWAY S.A. )
in the presence of:- )
SIGNED by )
duly authorised for and on behalf )
of DEN NORSKE BANK ASA )
(as a Bank) )
in the presence of:- )
SIGNED by )
duly authorised for and on behalf )
of BANK OF AMERICA NATIONAL )
TRUST AND SAVINGS )
ASSOCIATION (as a Bank) )
in the presence of:- )
SIGNED by )
duly authorised for and on behalf )
of MIDLAND BANK PLC )
(as a Bank) )
in the presence of:- )
104
<PAGE>
SIGNED by )
duly authorised for and on behalf )
of ASKL-CGER BANK NV/SA )
(as a Bank) )
in the presence of:- )
SIGNED by )
duly authorised for and on behalf )
of THE CHASE MANHATTAN BANK )
(as a Bank) )
in the presence of:- )
SIGNED by )
duly authorised for and on behalf )
of CIBC, INC. )
(as a Bank) )
in the presence of:- )
SIGNED by )
duly authorised for and on behalf )
of CITIBANK N.A. )
(as a Bank) )
in the presence of:- )
SIGNED by )
duly authorised for and on behalf )
of ING (U.S.) CAPITAL LLC )
(as a Bank) )
in the presence of:- )
SIGNED by )
duly authorised for and on behalf )
of FIRST NATIONAL BANK )
OF CHICAGO )
(as a Bank) )
in the presence of:- )
105
<PAGE>
SIGNED by )
duly authorised for and on behalf )
of DEN NORSKE BANK ASA )
(as the Agent and Security Trustee) )
in the presence of:- )
SIGNED by )
duly authorised for and on behalf )
of DEN NORSKE BANK ASA )
(as an Arranger) )
in the presence of:- )
SIGNED by )
duly authorised for and on behalf )
of NATIONSBANC MONTGOMERY )
SECURITIES LLC )
(as an Arranger) )
in the presence of:- )
SIGNED by )
duly authorised for and on behalf )
of MIDLAND BANK PLC )
(as an Arranger) )
in the presence of:- )
SIGNED by )
duly authorised for and on behalf )
of BANK OF AMERICA )
NATIONAL TRUST AND )
SAVINGS ASSOCIATION )
(as Syndication Agent) )
in the presence of:- )
106
<PAGE>
For the purposes of Article 1 of the Protocol annexed to the Convention on
jurisdictions and enforcement of judgements on civil and commercial matters
signed at Brussels on 27 September 1968, the following party expressly and
specifically agrees to the provisions of Clause 21.2 of the Agreement:-
SIGNED by
-----------------------------
duly authorised for and on behalf of
STOLT COMEX SEAWAY SA
107
<PAGE>
APPENDIX A
To: DEN NORSKE BANK ASA
From: ADVIESBURO ENERGIETECHNIEK VAN DE POL B.V.
(also referred to as and trading under the name Stolt Comex Seaway
Finance)
[Date]
Dear Sirs,
DRAWDOWN NOTICE
We refer to the Loan Facility Agreement dated 1999 made between, amongst
others, ourselves and yourselves ("THE AGREEMENT").
Words and phrases defined in the Agreement have the same meaning when
used in this Drawdown Notice.
Pursuant to Clause 2.3 of the Agreement, we irrevocably request that you
advance a Drawing of [ ] to us on 199 , which is a Business Day, by paying the
amount of the Drawing to [ ].
We warrant that the representations and warranties contained in
Clause 4 of the Agreement are true and correct at the date of this Drawdown
Notice and will be true and correct on 199 ; that no Event of
Default nor Potential Event of Default has occurred and is continuing, and
that no Event of Default or Potential Event of Default will result from the
advance of the Drawing requested in this Drawdown Notice.
We select the period of [ ] months as the [first] Interest Period in
respect of the Drawing.
We select [ ] as the Permitted Currency in which the Drawing is to be
denominated.
Yours faithfully
--------------------
For and on behalf of
ADVIESBURO ENERGIETECHNIEK VAN DE POL B.V.
(also referred to as and trading under the name Stolt Comex Seaway Finance)
108
<PAGE>
APPENDIX B
FORM OF ASSIGNMENT OF INTER-COMPANY INDEBTEDNESS
109
<PAGE>
APPENDIX C
FORM OF STATEMENT TO BE PRODUCED PURSUANT TO CLAUSE 12.2.3(H) OF THE AGREEMENT
SCS BACKLOG OVER 2 MUSD INCLUDING TOTAL TURNOVER FOR CURRENT YEAR
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
PROJECT (VALUE IN MILLIONS) 1999 2000 2001 2002 2003 2004 TOTAL
CLIENT TOTAL VALUE $ $ $ $ $ $ $
Project Details
Project Details
Project Details
Project Details
CLIENT TOTAL VALUE $ $ $ $ $ $ $
Project Details
Project Details
Project Details
Project Details
CLIENT TOTAL VALUE $ $ $ $ $ $ $
Project Details
Project Details
Project Details
Project Details
CLIENT TOTAL VALUE $ $ $ $ $ $ $
Project Details
Project Details
Project Details
Project Details
CLIENT TOTAL VALUE $ $ $ $ $ $ $
Project Details
Project Details
Project Details
Project Details
</TABLE>
110
<PAGE>
APPENDIX D
LIST OF ENCUMBRANCES NOTIFIED TO THE AGENT PURSUANT TO CLAUSE 12.1.1 OF
THE AGREEMENT
NONE
111
<PAGE>
APPENDIX E
ADDITIONAL RATE FORMULA
(a) The Additional Rate for a Drawing for each of its Interest Period(s) is
the rate determined by the Agent to be equal to the arithmetic mean
(rounded upward, if necessary, to four decimal places) of the
respective rates notified by each of the Reference Banks to the Agent
and calculated in accordance with the following formulae:
in relation to a Drawing denominated in Pounds Sterling:
BY + S(Y-Z) + F X 0.01 % per annum = Additional Rate
----------------------
100- (B+S)
in relation to any other Drawing:
F X 0.01 % per annum = Additional Rate
---------
300
where on the day of application of the formula:
B is the percentage of the Reference Bank's eligible liabilities
(in excess of any stated minimum) which the Bank of England
requires the Reference Bank to hold on a non-interest-bearing
deposit account in accordance with its cash ratio
requirements;
Y is the rate at which Pounds Sterling deposits are offered by
the Reference Bank to leading banks in the London interbank
market at or about 11.00 am on that day for relevant period;
S is the percentage of the Reference Bank's eligible liabilities
which the Bank of England requires the Reference Bank to place
as a special deposit;
Z is the interest rate per annum allowed by the Bank of England
on special deposits; and
F is the charge payable by the Reference Bank to the Financial
Services Authority under paragraph 2.02 or 2.03 (as
appropriate, or such succeeding provisions) of the Fees
Regulations but where for this purpose, the figure for the
minimum amount in paragraph 2.02b (or such succeeding
provisions) will be deemed to be zero expressed in pounds per
(pound)1 million of the fee base of the Reference Bank.
(b) For the purposes of this Schedule 3:
(i) "ELIGIBLE LIABILITIES" and "SPECIAL DEPOSITS" have the
meanings given to them at the time of application of the
formula by the Bank of England; and
(ii) "FEE BASE" has the meaning given to it in the Fees Regulations
(iii) "FEES REGULATIONS" means
112
<PAGE>
(1) prior to 31 March 1999, the Banking Supervision
(Fees) Regulations 1998; and
(2) on and after 31 March 1999, any regulations
governing the payment of fees for banking
supervision.
(iv) "RELEVANT PERIOD" in relation to each Interest Period, means
(A) if it is three months or less, that Interest Period;
or
(B) if it is more than three months, three months.
(c) In the application of the formula B, Y, S and Z are included in the
formula as figures and not as percentages, e.g. if B = .05% and Y =
15%, BY is calculated as 0.5. x 15.
(d) If a Reference Bank does not supply a rate to the Agent, the applicable
Additional Rate will be determined on the basis of the rate(s) supplied
by the remaining Reference Banks.
(e)
(i) The formula is applied on the first day of each relevant
period comprised in the relevant Interest Period.
(ii) Each rate calculated in accordance with the formula is, if
necessary, rounded upward to four decimal places.
(f) If a change in circumstances has rendered, or will render, the formula
inappropriate, the Agent (after consultation with the Banks and the
Borrower) shall notify the Borrower of the manner in which the
Additional Rate will subsequently be calculated. The manner of
calculation so notified by the Agent shall, in the absence of manifest
error, be binding on all the parties to this Agreement.
113
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STOLT COMEX
SEAWAY S.A. CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<CASH> 9,375
<SECURITIES> 0
<RECEIVABLES> 239,069
<ALLOWANCES> 4,705
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0
0
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</TABLE>
